04

COMPANY PROFILE

Sudarshan Chemical Industries Ltd started manufacturing pigments in the year 1952. The company has specialised in colours and chemicals for over 60 years and has acquired a strong position in pigments and agro chemicals in India and worldwide. The product range of the company includes: Colour product-plastics, Industrial coatings, Decorative paints, Powder castings, Liquid inks, Offset inks, Textile and Cosmetics. Effect product-Industrial coatings, Powder castings, Offset inks, Textile, Cosmetics, Architectural coatings, Automotive coatings, Leather coatings, Seed coatings and Bead coatings. Active in over 85 countries, Sudarshan employs 750 people and has two production facilities at Roha & Mahad in Maharashtra. 

CHEMICALS INDUSTRY IN INDIA

Covering more than 80,000 commercial products, India’s chemical industry is extremely diversified and can be generally classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers and fertilisers.

India accounts for 16% of the world production of dyestuffs and dye intermediates. Indian colorants industry has emerged as a key player with a global market share of 15%. (approximately)

India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, gives a cost advantage to the company.

The Indian chemicals industry stood at US$ 178 billion in 2019 and is expected to reach US$ 304 billion by 2025 registering a CAGR of 9.3%. The demand for chemicals is expected to expand by 9% per annum by 2025. (approximately)

In September 2020, the production of key chemicals was 8,36,435 MT (approximately) in India.

The specialty chemicals constitute 22% of the total chemicals and petrochemicals market in India. The demand for specialty chemicals is expected to rise at a 12% CAGR in 2019-22. The petrochemicals demand is expected to record a 7.5% CAGR between 2019 and 2023, with polymer demand increasing at 8%. The agrochemicals market is expected to witness an 8% CAGR to reach US$ 3.7 billion by FY22 and US$ 4.7 billion by FY25 (approximately).

In October 2020, exports of organic chemicals and inorganic chemicals increased by 2% on a y-o-y basis to reach US$ 1,812.22 million (approximately). 

The Indian government recognises chemical industry as a key growth element and forecasts to increase share of the chemical sector to 25% of the GDP in the manufacturing sector by 2025.

A 2034 vision for the chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector. 

The government plans to put into practice production-link incentive system with 10-20% output incentives for the agrochemical sector; to create an end-to-end manufacturing ecosystem through the growth of cluster.

100% FDI is allowed under the regular route in the chemicals sector with few exceptions that include hazardous chemicals. 

COMPANY PERSPECTIVE AND REVIEW

It is the market leader in the segment with over 35% market share (approximately) and is the largest supplier among both Indian and MNC peer companies.

Cash flow generated from Operations amounted to 26,315 lakhs .Turnover increased by 7%. EBITDA increased by 19% and Return on Capital Employed is at 15.9% (approximately).

Return on equity is 13 %. The company’s profit CAGR is around 13 percent in the last 5 years and sales growth CAGR is around 10 percent (approximately).

Sudarshan has earmarked an aggressive capex plan to largely spend on capacity addition for growth projects. 

Good fundamentals and bullish technical indicators make the stock a good buy for the investors.