Wednesday, June 2, 2021

Sudarshan Chemical Industries Ltd (506655) – Pigment Player

Sudarshan Chemical Industries Ltd (506655) closes   at 669.25  with  a   Fall  of   -0.20%%   on    01-June-2021  with formation of  a  Small  Red  Candle    on Daily  Price Chart.

About the Company : Sudarshan Chemical Industries manufactures and sells a wide range of Organic and Inorganic Pigments, Effect Pigments. The Group also manufactures Pollution Control Equipment, Size Reduction Equipment and Grinding Equipments for industrial applications

Strength :  Two major global players shifting away from the pigment business could act as a tailwind for  ndian pigment manufacturers

Financials : Sudarshan Chemical Industries Ltd has posted Net Sales / Revenue   of  1864.10 Cr & Net Profit  of  141.10Cr in FY2021 and expected to post Net Sales / Revenue   of 2163.10 Cr & Net Profit of 161.70 Cr in FY2022 & Net Sales / Revenue   of 2477.50 Cr & Net Profit of 201.80 Cr in FY2023

Valuations  : The Company is now Trading at X 2.0   of its  valuations of its FY2021 earnings with ~100% Premium and X1.72 of its FY2022 earnings with ~70% premium and X1.38 of its FY2023 earnings with ~38% premium.

Margin of Safety (1Yr Bond Yield: Value>1 ) is now  -0.8  which  makes is attractive after a ~20% fall in market price. The  Equity Value Per Share ( Enterprise Value Method ) is  665.80.

Latest Management Update : Exports accounted for 49 per cent of revenues for the pigment segment; Specialty pigments constituted 68 per cent of the revenues for pigment segment in Q4; The company’s Capex is planned to build and concentrate onincreasing specialty pigments in its mix; It is about to finish its Capex plan of ₹600 crore in FY22; Sales from the total Capex will ramp up gradually over 3­4 years. This Capex has a revenue potential ₹1,000­1,200 crore at full capacity. Additional Capex for FY22 is ₹135 crore, which will be used to build infrastructure; and raw material price inflation is about 2­2.5 per cent.

If We factor its FY2023 earnings/valuations, its Price arrives at 970.00

Disclaimer : We are / may going to take exposure shortly.

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