Stock to buy: Anand Rathi recommends Sumitomo Chemical as its stock pick for the month

Sumitomo Chemical India share price traded over a percent higher on Wednesday around ₹418 apiece on the BSE, extending gains for the third straight session. Sumitomo Chemical shares have gained 7% in one week, while the stock has rallied 12% in the past three months.

Brokerage firm Anand Rathi has recommended Sumitomo Chemical India shares as its stock pick of the month. The brokerage believes the Sumitomo Chemical shares are technically placed to see a decent upward momentum with an upside potential of 16% within a timeframe of 1 month.

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“Sumitomo Chemical India has recently experienced a significant decline and is currently trading around ₹418, near its 200- day Exponential Moving Average (DEMA). This proximity suggests a potential support level. Furthermore, the daily MACD indicator has formed a bullish crossover, and a bullish Bat pattern has emerged on the weekly chart, both indicating a potentially favourable opportunity for investors,” Anand Rathi said in a note.

Given these developments, the brokerage firm recommends traders and investors to consider entering long positions in Sumitomo Chemical shares within the ₹410 - ₹420 range. 

“Our target for this trade is ₹485, aiming to capture potential gains from the anticipated upward movement. To manage risks effectively, we suggest setting a stop-loss at ₹380 based on daily closing prices, ensuring prudent risk management throughout the trade,” said the brokerage firm.

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Sumitomo Chemicals is also Anand Rathi’s top pick in the Agrochemical sector.

In a research note in January 2024, the brokerage said it believed the company was poised to post 4% and 7% revenue and PAT CAGRs over FY23-26. The company had a healthy 28% RoE, 23% pre-tax RoCE and net cash balance sheet in FY23.

Sumitomo Chemicals’ strong parental support from Sumitomo Chemical Corporation (SCC) gives it unique advantages such as access to SCC’s portfolio; technical and R&D expertise to develop proprietary products and financial strength and a wider market reach. 

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Sumitomo Chemicals is the only technical and generic grade manufacturing site of the SCC group outside Japan. It intends to enhance exports by leveraging SCC's global supply chain and marketing network. 

The brokerage expects Sumitomo Chemicals’ export revenue to record a 35% CAGR over FY24-FY26 on the back of SCC's intent to maximise synergies from the integration of Nufarm's distribution business in LATAM and Sumitomo India's exports.

At 12:55 pm, Sumitomo Chemicals shares were trading 1.16% higher at ₹417.90 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.