Sudarshan Chemical and Industries stock, a company backed by ace investor Vijay Kedia has a potential to grow up to 24 per cent, opine top brokerages ICICI Securities and ShareKhan. The reason behind this optimism is strong March quarter results led by good margin performance and lower tax rate.

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Kedia holds 1,000,000 equity shares, which accounts for 1.4 per cent equity in Sudarshan Chemical, as per the latest BSE shareholding pattern of the company. 

Sudarshan Chemical consolidated revenue increased by nearly 9 per cent year-on-year Rs 627 crore, as revenue from the pigment division was flat sequentially due to some impact of the third wave of Covid-19 in the domestic market and overall capacity utilization declined, ShareKhan said in its report.

Kedia holds around 15 stocks in his portfolio with a net worth of Rs 417.8 crore, according to trendlyne.com. 

 The operating profit margin was above ShareKhan’s estimates with lower-than-expected operating cost, partially offset by a miss in gross margin. Even profit grew sequentially and was above estimates mainly driven by a beat in the margin, lower depreciation, and tax rate. 

Negatives in terms of margin are largely priced-in and gradual ramp-up of new capacities would help the company to grow above industry rates, ShareKhan said in its report. The company gets a strong support in the form of dominant market share, which is 35% share in the Indian pigment market and third-largest player globally). Exit of global players from the space will also likely help the company. It maintained a Buy rating with a target of Rs 550 apiece (24% upside). 

The company is hopeful of consistent growth in new products and HPP (high purity products), which will be further aided by industry consolidation, similarly, it is also mindful of net debt, and the focus now will be to ramp-up capacities in FY24 and deleverage balance sheet, ICICI Securities said 

It further added that the fresh capex spending including backward integration has been pushed to future years, and the brokerage slashes EPS estimates to 6-10 per cent over FY23-24E, and revised target price to Rs 550 from Rs 683 apiece (upside 24 per cent), maintaining a Buy stance.  

The stock on Monday surged almost 5 per cent to touch a day’s high level of Rs 467 per cent on the BSE intraday, as compared to a 1.88 per cent rise in the S&P BSE Sensex at around 03:20 PM.