Anand Rathi
Sharda Cropchem (Buy)
Target: ₹480
CMP: ₹353.45
Powered by its focus on registering formulations and active ingredient across regions, Sharda’s strong growth would continue. A strong pipeline and distribution network would add to growth. Internally-funded capex and FCF generation would strengthen its balance sheet, resulting in higher return ratios.
The company focuses only on registering formulations and active ingredients for regions, globally. Its revenue has clocked a 15.1 per cent CAGR from FY13 to FY21. We estimate revenue from new and existing registrations to register a 16.6 per cent CAGR over FY22-24. We estimate 16 per cent and 10 per cent revenue CAGRs over FY22-24 in its agrochemicals and non-agrochemical businesses, respectively.
With 2,610 registrations by 30th Sep’21, its registrations have recorded a 12 per cent CAGR over FY14-FY21. We expect an 10 per cent CAGR over FY22-FY24, primarily from its strong pipeline. Its identification of off-patent high-demand molecules, high registration cost and a long gestation period in registering formulations and active ingredients are high entry barriers.
The company is virtually debt-free. We expect return ratios to improve supported by topline growth and stable margins.