Sharda Cropchem hits new high on strong business outlook; stock surges 10%

Analysts expect the company to show high growth momentum, strong balance sheet, free cash-flows and strong return ratios over FY22-24.

Shares of Sharda Cropchem hit a new high of Rs 768, after rallying 10 per cent on the BSE in Tuesday’s intra-day trade in an otherwise subdued market, on strong business outlook. The stock of pesticides and agro-chemicals company surpassed its previous high of Rs 740.40 that it had touched on April 11, 2022.

For the quarter that ended in March 2022 (Q4FY22), Sharda Cropchem reported 32 per cent year on year (YoY) growth in profit after tax (PAT) of Rs 177 crore, whereas, revenue increased 32 per cent YoY to Rs 1,434 crore, led by better product mix and price realization.

Meanwhile, earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 29 per cent YoY to Rs 317 crore, while margin contracted 50 basis points to 22.1 per cent from 22.6 per cent in Q4FY21.

Given this, the growth in EBITDA was driven by higher revenues, effective cost management, marginally settled off by higher freight cost. Though gross margins were marginally impacted by higher freight costs, EBITDA margin was buoyed by strong global agri-demand.

That apart, the management was confident of positive traction witnessed in old and new products. "The company is expanding its range of products in each region for future growth. We see revenue growth of 15-20 per cent with ~30-32 per cent gross margins and ~20-22 per cent EBITDA margins in FY23," the management added.

Analysts at Anand Rathi Share and Stock Brokers remain positive about Sharda’s future performance, considering its focus on registrations, rising share of high margin products and deeper penetration in markets.

“We expect high growth momentum, a strong balance sheet, free cash-flows and strong return ratios over FY22-24,” the brokerage firm said, as it maintained a ‘buy’ rating on the stock with target price of Rs 835 per share.