Sharda came with good set of results, with sales growing by 16% and EPS by 6%. Margin pressure due to Euro vs USD is reversing and company’s notional loss reduced significantly this quarter. The one positive thing about this Euro vs USD fiasco was that it happened in lean quarters for Sharda, and now that we are getting into the better part of year this trend is reversing. Additionally, company has done exceptionally well to pivot the business towards US. Concall notes below
FY23Q3 concall
- Expect 15-20% in sales and profitability in FY23
- Capex: 300 cr. in 9M FY23
- For Q3, volume (+) 9%, price & product mix change (+) 6.7%
- Gross margin breakup: EU (35.5%), NAFTA (28%), LATAM (24%), ROW (27%)
- Entered biocide segment for disinfectants
- Have gained significant market share globally in last few years
- Working capital will come down
- Quality and timely servicing is the reason behind very good performance in non-agrochemical business. Their belts mostly go into material handling (ports, mining, etc.).
- Suppliers quoted very high prices for sourcing in Euro. So company kept on sourcing in USD and are now benefitting from Euro strengthening
One of the reasons that can explain Sharda doing so well over years is due to their supply chain sourcing and execution. The only Indian agchem companies that make more money than Sharda are UPL and PI Industries within listed universe (excluding MNCs). And all this growth has come from internal resources, without debt and consistent dividends, which have grown in line with business growth. Even during COVID year, their sales grew which is a testament to their execution. I have been surprised how good they actually are in terms of execution. And I keep on wondering why they trade at these multiples.
Disclosure: Invested (position size here, no transactions in last-30 days)