The Hindu Business Line : Value buying seen in Sudarshan Chem

IS Sudarshan Chemical Industries poised to achieve a new growth alchemy? Though the stock is on a drift-down mode of late, there are some market players who see value in it considering its growth prospects.

According to analysts who track chemicals stocks, in view of a growing trend in shifting capacities or reducing production in the developed countries on cost and ecological considerations, manufacturers of chemicals in the developing world are witnessing greater demand from overseas and are raising their capacity utilisation or expansions.

Industry sources suggest that Sudarshan has not only been hiking its capacity utilisation, but also looking for expanding its list of overseas buyers. A few big-time importers of organic and inorganic pigments are understood to be in the process of joining the list.

Dainippon Ink & Chemicals Inc of Japan (DIC), which holds around 8 per cent stake in Sudarshan, and Sun Chemicals of US, are major overseas buyers of the company. DIC also has distribution rights for Sudarshan's pigments for certain overseas markets. The company also has toll manufacturing and R&D agreements for specific pigments with the Japanese major.

Mr P.R. Rathi, Managing Director of Sudarshan, while declining to comment on the issue now merely said when such things are firmed up (new export deals), the company would make an official announcement. He further said the current pigment capacity utilisation of the company was reflected in the numbers growth in the Q1 of 2005-06.

In 2004-05, the company has witnessed a capacity utilisation of 77 per cent for both its businesses — pigments and pesticides.

Regarding the demand for pesticides in the domestic market after the initial setback owing to insufficient rains, he indicated that it has returned to "normal" like last year.

According to Mr Nandish Shah of Anagram Stockbroking, the company, backed by research and deep marketing network, has constantly been extending its range of agro-chemical products and has also been able to record a sustained growth.

It saw a 19 per cent net profit growth in Q1 of 2005-06 after recording a 55 per cent growth in 2004-05. At Wednesday's closing price Rs 240, the stock traded at 11 times its last quarter's annualised earning of Rs 22.

"The stock's current market capitalisation does not appear to reflect the company's quarter-on-quarter growth trend in profit and sales", a fund manager observed.

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