Sudarshan posts good topline growth but lower GPM remains key concernSUDARSCHEM - 476 Change: 4.90 (1.04 %)
News: Sudarshan Chemical reported revenues growth of 18.8% YoY to Rs.601.8 crore (I-direct estimate: Rs.552.9 crore) led by 17.4% growth from the pigments and 42.9% growth from other segment comprising engineering business. We expect the pigments revenue growth is driven by both volumes and realizations. EBITDA margins contracted 340 bps YoY to 12.3% due to higher COGS (+23% YoY). EBITDA was at Rs.73.9 crore (-7.2% YoY) against I-direct estimates of Rs.71.9 crore. Net profit declined 7.1% YoY to Rs.36.4 crore (I-direct estimate: Rs.36 crore).
Views: The company has been struggling with input price inflation due to higher prices such as S acid, caustic soda and other crude based derivatives. Despite the company has resorted hike in finish product prices last quarter, there has been lower GPM on QoQ (-180 bps), which, we believe, remains the key concern for the business. We expect part impact could also be due to unfavourable product mix but the same can be explained only during the conference call. We expect the normalisation of margins to take around two to three quarters at least. In the long term, the story remains intake given that the company had already increased its capacity for some speciality pigments, which would eventually lift GPM due to favourable product mix and thereby better group performance.