Sharda Cropchem (SCC) beat our estimates, delivering a robust set of Q3FY22 numbers. Revenue surged by 78.2% y-o-y, driven by strong volumetric growth of 51%.
SCC saw healthy demand scenarios across NAFTA and European markets and lower inventory in the system. However, Q3FY22 gross margin shrank by 60bps y-o-y to 33.9%, impacted marginally by higher freight costs and a change in product mix. Going ahead, we believe Q4FY22 will maintain a strong note. We believe SCC will benefit from better crop prices as well as pricing hikes taken during Q3FY22. Hence, we revise our estimates upwards by 56%/49%/33% for FY22/23/24e EPS. Maintain Buy with revised TP of Rs 615 (14x FY23e EPS).
Strong volumetric gains and healthy top-line growth: SCC delivered healthy 51% volumetric growth, supported by ~26% realisation gains. The company has been able to deliver high double-digit growth across the geographies it operates in: Europe – 123.5% y-o-y, NAFTA – 82.3% and LATAM by 27.1%. Going forward, SCC plans to deliver 20% volumetric growth, aided by a mix of newly registered products as well as improvement in demand for its existing set of products. As of December 2021, SCC has 2,645 registrations in place, while nearly 1,099 registrations are at different stages of approval.
SCC incurred capex of Rs 2.3 bn during 9MFY22. Mgmt expects top-line growth for Q4FY22 to remain in the 20% range, while Ebitda margins are likely to remain in 20-24% range.
Outlook: Buoyant demand scenario – SCC has delivered robust operational performance over 9MFY22 with impressive 64.1% y-o-y top-line growth. Factoring in lower inventory in the system, as well as higher crop prices, we expect Q4FY22 to remain bumper. Maintain Buy.