80% Dividends; 81-Year Old Agro Chemical Firm Has 49% Potential Upside In 5 Months; To Pay Reward Soon

Sukhjit Starch & Chemicals, a smallcap trading below Rs 600 levels, turned ex-dividend on January 15. However, on the ex-dividend day, the stock price nosedived by nearly 6% to even slip below Rs 560 levels. The stock will remain in focus ahead of its Q3 earnings and dividend payout.

The dividend payment in focus is at a staggering Rs 8 per share.

On January 15, Sukhjit's share price ended at Rs 569 apiece, down by 3.7% with a market cap of Rs 888.89 crore. Overall, in the day, the stock slipped by 5.6% to hit an intraday low of Rs 558.50 apiece.

Nonetheless, Sukhjit's share price is still up by 58.09% from its 52-week low of Rs 359.90 apiece on BSE. Even in 16 days of January 24, the stock has zoomed 17%. In a year, the upside is over 26.5%. While a 5-year gain is 141.30%.

The 81-year-old company has a good track record of paying hefty dividends for the past five years. In 2022 alone, the company paid two interim dividends of Rs 8 per share for FY23 and Rs 10 per share. Since 2022, the company has been paying huge dividends compared to the dividend payout of Rs 3 per share and Rs 2 per share in 2021 and 2020 respectively in the post-pandemic era.

Sebi-registered analyst VLA Ambala of SMT believes there is an opportunity for fresh buying of Sukhjit's share in the range of Rs 565 to 580. The analyst has set a target price of Rs 610 to 850 on the smallcap with a stop loss of Rs 515. She suggested the holding time of the stock to be from 3 weeks to 5 months.

From the current market price, the new target price implies a potential upside of 7% to over 49% in 5 months.

There are five positive factors for Sukhjit's share price as per Trendlyne data. They are:

- Debt to Equity Ratio of 0.69 is less than 1 and healthy. This implies that its assets are financed mainly through equity.

- Promoter Share Holding increased by 0.01% in the most recent quarter to 66.24%.

- Promoter Pledges are zero.

- Price to Earning Ratio is 17, lower than its sector PE ratio of 49.59.

- Return on Equity(ROE) for the last financial year was 13.61%, in the normal range of 10% to 20%.

- Interest Coverage Ratio is 5.31, higher than 1.5. This means that it can meet its interest payments comfortably with its earnings (EBIT).

Also, as per Trendlye, the stock price's weekly average delivery volume is 37.63%. It is currently trading above 7 out of 8 SMAs, and above 5 out of 9 Oscillators in the bullish zone. The RSI (14) is 67.2, which is steady since an RSI below 30 is considered oversold and above 70 is overbought. However, the stock's MFI is at 79.1 which is considered overbought, and hence few hiccups are likely.

It will be keenly watched how Sukhjit touches new levels ahead.

Earlier, Sukhjit stated that it will persist in its endeavours to enhance its product portfolio, with a focus on advancing its operating margins in the upcoming quarters.

Incorporated in 1943, Sukhjit is an agro‐processing company that specializes in the production of starch and its derivatives. Since its inception, Sukhjit has had a strong track record of operations. It has a maize grinding capacity of 1,600 tonnes per day (TPD) and approximately 10% share in the domestic market based on installed capacity.

The company offers a wide range of starch products, including. Native Starches, Modified Starches and value-added Products
like Sorbitol, Monohydrate Dextrose, Anhydrous Dextrose, Maize Gluten, Maize Oil, Cattle/Poultry Feeds etc. It caters r to diverse sectors like Paper, Packaging,
Pharmaceuticals, Personal Care, FMCG and Food & Beverages Industries.

Also, the company's customer profile includes reputed brands such as Dabur India Ltd, Zydus Wellness, Nestle India Ltd, Mars
Wrigley, Mondelez, Abbott India Ltd, Marico Ltd etc.

Sukhjit has not carried any stock split on face value since inception. However, the company did announce 2 bonuses of 1:1 each since November 2006. The last bonus issue of 1:1 was in March 2019.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.