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Shares of agrochemical company Sharda Cropchem Ltd (NSE: SHARDACROP) surged over 6% to Rs 455.55 on the NSE today after the company reported strong Q2 FY2023 results.
Key Highlights of Sharda Cropchem’s Q2 Performance
- Consolidated revenue rose 18.2% YoY to Rs 598 crore compared to Rs 506 crore in Q2 FY2022.
- EBITDA jumped 30.5% YoY to Rs 143 crore versus Rs 110 crore in Q2 FY2022. EBITDA margin improved to 23.9% from 21.7% in Q2 FY2022.
- Net profit increased by 15.2% YoY to Rs 92 crore compared to Rs 80 crore in Q2 FY2022.
- EPS climbed to Rs 18.92 in Q2 FY2023 as against Rs 16.42 in Q2 FY2022.
What’s Driving Sharda Cropchem’s Growth?
Sharda Cropchem’s growth was driven by strong volume growth in the domestic as well as export markets.
- In the domestic market, volume growth was 19% YoY, supported by normal monsoon and healthy reservoir levels.
- Exports volume increased by 15% YoY led by higher demand from Europe and Latin America.
- The company gained market share across various products like cypermethrin, lambda cyhalothrin, and azoxystrobin.
- Operating margins improved due to better capacity utilization, an improved product mix and lower raw material costs.
Positive Industry Outlook
The outlook for the agrochemical industry remains positive supported by factors like:
- Increasing food demand owing to population growth and reducing arable land. This will drive demand for crop protection chemicals.
- Growth in horticulture and floriculture crops which require higher agrochemical usage.
- Increasing adoption of agrochemicals by farmers to improve farm productivity.
- Government initiatives like increasing MSPs, higher agri-credit and subsidies supporting farm income and agri input spending.
Valuations and Recommendations
- Sharda Cropchem is currently trading at a P/E ratio of 19.83, lower than the industry average of 16.72.
- The company has a healthy balance sheet with a debt/equity ratio of just 0.01.
- Of the 6 analysts tracking the stock, 1 has a strong buy rating and 2 have buy ratings indicating positive sentiment.
- The company has consistently paid dividends of around 0.7% dividend yield.
- The promoters hold 74.82% stake while FIIs own 2.01% and mutual funds have 0.02% stake.
Technical Outlook
- The stock has strong support at Rs 425 and resistance at Rs 460. It has been trading in this range over the last few weeks.
- The breakout above Rs 460 could lead to further upside towards Rs 500-520 levels in the near term.
- The relative strength index (RSI) is at 65 indicating strong momentum in the uptrend.
Conclusion
Sharda Cropchem’s Q2 results and outlook reaffirm its position as one of the leading agrochemical companies in India.
The uptrend in agrochemical demand, market share gains, margin expansion and reasonable valuations make it an attractive investment bet in the long run.
Investors can consider buying the stock on dips for a price target of Rs 500 in the next 6-12 months.
