Shares of Sharda Cropchem have given tremendous returns to its investors since March 2020, rising around 600 percent in this period. The stock has jumped from ₹103 on March 30, 2020, to currently trade at ₹695.95, rallying as much as 575 percent in this time.
Just in the last 1 year, the stock has doubled investor wealth, rising 103 percent as against a 7.5 percent rise in benchmark Nifty. In May, the stock has advanced over 12 percent on the back of strong March quarter results.
Sharda Cropchem is an agrochemical company engaged in the marketing and distribution of a range of formulations and generic active ingredients around the globe.
The company reported a 32 percent YoY jump in profit at ₹177 crore in the March quarter as against ₹134 crore in the same quarter last year. Revenues also rose to ₹1,434 crore from ₹1,088 crore YoY.
The company deals in two segments - agrochemical and non-agrochemical. It derived 87 percent of its Q4 revenues from the agrochemical segment, which mainly includes herbicides and fungicides, followed by insecticides. The segment posted a 24 percent growth in revenues for the March quarter.
Europe accounted for nearly half of agrochemical revenues, followed by the NAFTA region (another 40 percent).
According to market experts, the firm recorded strong volume growth during FY22, which was further assisted by better product mix and price realisations, resulting in robust topline growth.
"Aided by healthy traction across the product range, the company’s business continues to be driven by identification of new product registration opportunities, expansion and strengthening of distribution reach, and cost management with an eye to improving margins. Management has guided 15-20 percent sales growth going forward and an EBITDA margin of 20-22 percent in FY23, which is expected to be maintained in the medium term," Khambatta Securities said in a recent report.
It believes the robust FY22 numbers and healthy guidance make a strong case for re-rating. The brokerage maintained a 'buy' rating on the stock and upwardly-revised price target of ₹836, indicating an upside of 22 percent.
Meanwhile, Prabhudas Lilladher also has a 'buy' call on the stock with a target at ₹750. It believes that the risk-reward remains favorable for the stock.
"Citing positive growth momentum across regions, management remains confident of achieving 15-20 percent YoY revenue growth for FY23E, while maintaining margins at current levels aided by better geographical mix and higher contribution from recently received new registrations. That said, factoring in better FY22 performance and positive demand momentum we increase our EPS estimates for FY23/24E by 8 percent/3 percent respectively," noted Prabhudas.
Meanwhile, Edelweiss also remains positive on favourable agri-commodity cycle. "We reckon Sharda Cropchem would report 15–20 percent volume growth in FY23. With capex (mainly registrations) of ₹413 crore in FY23, we expect free cash flow to remain healthy along with debt-free balance sheet and expansion in RoCE," said the brokerage.