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Sudarshan Chemical reports below expected operational numbers

News: Revenues grew 16.1% YoY to Rs.498 crore (I-direct estimate: Rs.512.8 crore) led by 85% growth from the other segment comprising engineering business. The pigment business recorded a growth of 11.5% YoY to Rs.448.2 crore (I-direct estimate: Rs.469.3 crore). EBITDA margins contracted by 520 bps YoY to 10.6% (I-direct estimate: 14.5%) due to higher COGS (+20% YoY). EBITDA stood at Rs.52.9 crore (-21.9% YoY) against I-direct estimates of | 74.4 crore. Net profit declined by 24.8% YoY to Rs.22.8 crore (I-direct estimate: Rs.35 crore). The lower growth in bottom-line is on account of  subdued operational performance.

Views: Higher COGS such as S acid, caustic soda and other crude based derivatives impacted gross margins for the business, which dragged operational performance. We believe the company had resorted price hike earlier. Further, speciality pigment was also witnessing decent demand traction and thus, 10% OPM was a key surprise. Since the contracts are settled on quarterly basis, we expect part input inflation would be passed on during this quarter.