Please shares views on Sudarshan Chemicals stock.
Ans: Hello Yogesh,
Please find my below comments on Sudarshan Chemical Limited:
1) SCIL is yet to capitalise Rs1.3bn of capex, which should be complete by end-FY23. It has capitalised Rs6.2bn by Dec’22. New capacity utilisation is low despite product approvals from clients due to underlying demand challenges.
2) SCIL expects new capacity to achieve peak utilisation in 3-4 years with incremental revenue potential of Rs15bn.
3) SCIL’s market share in India was stable due to decline in the ink segment; it has improved its market share in coatings. New players entering the coating market also add to the opportunity for SCIL to cement its position;
4) Pune land sale will help deleverage the balance sheet. FY24 will have only maintenance capex of Rs400mn. Debt repayment of Rs1.5bn is likely in FY24.
5) SCIL’s gross profit margin expanded by 210bps QoQ to 40.8% on softening raw material prices, but the benefit was restricted due to 1) high-cost inventory, and 2) the company’s cautious approach to price correction to avoid demand disruption. Gross profit declined 11.7% YoY (rose 5.2% QoQ) to Rs2.2bn, EBITDA dipped 43.6% YoY to Rs416mn, and EBITDA margin was just 7.9%. Forex loss was Rs100mn. SCIL anticipates EBITDA margin to improve with rise in revenues (operating leverage), reducing power and freight costs, and more cost optimisation measures to reduce fixed costs. Net profit fell 98.4% YoY to Rs6mn.
I hope this will help you to take informed decision in Sudarshan Chemicals Limited.
Happy Investing...
Disclaimer: This is just for educational purpose and should not be taken as buy or sell recommendation.
