Sudarshan Chemicals

While many frontline names in Spec chem have become extremely rich on forward valuations, largely on account of rerating in the last 1.5 years, Sudarshan is on the lower side here (vs its own last 5-6 years traded valuations). Stock is flat from a 3-4 year pov(touched a high of 585 in April 2018 and currently 582).

1 Year Fw PE:

Trailing P/B:

Good levels to look at Sudarshan.

The co has already incurred a decent chunk of its capex plan, which will continue in FY22 & FY23. The resulting sales from the expanded capacities are yet to materialize. Given the international restrictions on travel, inability for clients to visit plants and give supplier approvals, I think, has held back stronger revenue & led to their cautious commentary on near term revenue growth & slower ramp ups of expanded capacities. Nonetheless, from a structural long term pov, co continues to be well placed on scalability.

1 risk I feel is higher oil prices (from hereon) spoiling the earnings growth story, somewhat, given pigments have a much lower ability to get pass-throughs done. Scalability & growth are positives, but a more muted earnings growth picture can hit if this materializes in the medium term.

Disclosure: Invested.