Sumitomo Chemicals - Lifting Clouds Post Recent Dip In Stock: Nirmal Bang
Glyphosate overhang has subsided as per Delhi High Court’s stay order.
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Nirmal Bang Report
Our optimism on Sumitomo Chemicals India Ltd. is premised on -
improved risk-reward at current valuation and
stay order issued by the Delhi High Court over domestic Glyphosate sales for three months following the Government’s notification last month for allowing the application of Glyphosate herbicide only by a pest control operator.
The stock is down 3% in three months and more than 8% from the closing price in the week ended October 21, 2022 – the week before the Government’s Oct 25 order on Glyphosate.
We have built in healthy earnings growth and also captured the positive outlook for the Indian crop protection chemicals sector (aided by healthy crop prices/farm incomes), besides Sumitomo Chemicals’ pricing power, which supports margin expansion of 190 bps/110 bps in FY24E/FY25E.
We have also built-in topline growth from the contract Sumitomo Chemicals has won from its parent Sumitomo Chemical Company, Japan to supply five molecules FY24E onwards.
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