This Small Cap Chemical Stock Showing 20% Upside, Board Recommends 75% Dividend, Buy: ICICI Direct

ICICI Direct in its latest equity report assigned a "Buy" on Sudarshan Chemical Industries Ltd. with a target price of Rs. 555 apiece. With the given assigned target price, the brokerage claims a potential upside of up to 20% from its current level if the stock is purchased at its current market price. It is a small-cap stock that operates in the Chemicals sector. It has a market valuation of Rs. 3,208.68 crore.

The Board of Directors of the company in a meeting held on May 23, 2023, recommended a final dividend of Rs. 1.50/share i.e. 75% of the face value of Rs. 2 each for the financial year ended 31st March 2023.

75% Final Dividend

Company in an exchange filing said, "Recommended Final Dividend of Rs. 1.50/- (One Rupee Fifty Paise only) (i.e. 75%) per Equity Share of face value of Rs. 2/- each fully paid up, for the Financial Year ended 31st March, 2023, subject to approval of the members at ensuing Annual General Meeting, which will be paid / dispatched within 30 days of its declaration thereat."

Q4FY23 Results

Beat across the board driven by demand revival. Reported revenue growth of 10.2% YoY and 30.9% QoQ to Rs. 691.2 crore, led by growth from pigments (up 6.2% YoY, 23% QoQ) and decent growth in other segment (up 34% YoY, 106% QoQ). Gross margins increased 112 bps YoY and 120 bps to ~42% while EBITDA margins contracted 147 bps YoY and grew 437 bps QoQ to 12.3%. Absolute EBITDA came in at Rs. 84.7 crore. PAT was down 27.1% YoY to Rs. 32.6 crore.

Buy for a Target Price of Rs. 555/share

ICICI Direct said, "The stock appreciated at 6% CAGR in last three years. We upgrade our rating from HOLD to BUY on the back of 1) New product pipeline that caters to niche category to boost revenue growth, 2) gradual improvement in margins, 3) upbeat management guidance to cross Rs. 3000- 3300 crore topline on ramping up of new products in pigments."

It added, "We value Sudarshan Chemicals at 19x P/E FY25E EPS to arrive at a revised target price of Rs. 555/share (earlier Rs. 370/share)."

Stock Outlook

The stock closed at Rs. 463.50 apiece, up 2.45% from its previous close of Rs. 452.40 apiece. Its 52 week high is Rs. 495.85 apiece and 52 week low is Rs. 341 apiece, respectively. It jumped 5.34% in the past 1 week. It gave 12.34% positive return in 1 month and 25.3% in 3 months, respectively. In the past 1 year, it gave 1.41% positive return and in 3 years, it gave 19.14% positive return. It declined 1.63% in the past 5 years.

About - Sudarshan Chemical Industries Ltd.

Established in 1951, Sudarshan Chemical is a leading player in the Indian colour pigment industry with ~35% market share and is also among the top four players globally. It has a wide portfolio of 4,000+ varieties of products of Azos, blue and green, high-performance pigments (HPPs), effects, pigment preparations and inorganics. Among end users, coatings industries contribute highest followed by plastics, inks, cosmetics and other applications.

Disclaimer - The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.