Target: ₹606.5

CMP: ₹572.30

Sharda Cropchem has presence in both agrochemicals and non-agrochemicals business segments. The company pursues a differentiated asset-light business model, whereby it completely outsources manufacturing of agrochem to China and focuses on product registrations.

It has 2,821 active registrations and a pipeline of 1,143 registrations mainly in the EU, the US and LatAm. The company derived 83 per cent of revenue from agrochemicals segment and the rest from the non-agrochem business in FY23. In terms of EBIT, agrochem contribution stood at 62 per cent for FY23. Total registrations have grown at a strong 9 per cent CAGR over FY15-23. The registration process is extremely stringent and costly, especially in Europe.

The company has guided for 15-18 per cent growth in revenue and margin at about 19 per cent in FY24. The product base is large and the marketing network is wide with a geographically-diversified clientele. The company is likely to maintain growth momentum due to rising wallet share in existing products, and new launches.

The company guided that total expenditure in new registrations would be around ₹350-400 crore for FY24. Most of the investments made in registrations are expected to be funded through internal accruals.

We are positive on the company, given its asset-light model, product registration-led growth, net cash balance sheet and healthy return.