Vijay Kedia’s Fav Mid-Cap Specialty Chem Stock Has More Upside: Edelweiss

Vijay Kedia’s favourite specialty chemicals stock is on a strong growth trajectory and has already delivered mammoth gains. Edelweiss has confidently asserted that the stock has more upside and that more hefty gains can be harvested from it

When Edelweiss made the grand announcement that Sudarshan Chemicals has 40% upside, Vijay Kedia laughed out loud.

“Edelweiss is being bearish about Sudarshan Chemicals with their 40% upside target” Vijay Kedia said with a chuckle, flashing his trademark toothy grin.

Vijay Kedia was right because soon thereafter, the suits at Morgan Stanley took a fancy for Sudarshan Chemicals and aggressively raided the counter.

Morgan Stanley has such deep pockets that nobody can stop them when they go on a buying rampage.

Sudarshan Chemicals shot up in a vertical trajectory and surged to a lifetime high of Rs. 332.

Thereafter, Sudarshan Chemicals reported blockbuster Q1FY17 results, justifying the trust that Vijay Kedia has reposed in it.

SUDARSHAN CHEMICAL INDUSTRIES LTD – Q1FY17 FINANCIAL RESULTS
PARTICULARS (Rs CR)	JUN 2016	JUN 2015	% CHG
NET SALES	336.76	294.23	14.45
OTHER INCOME	4.47	1.56	186.54
TOTAL INCOME	341.23	295.79	15.36
TOTAL EXPENSES	279.89	252.81	10.71
OPERATING PROFIT	61.34	42.98	42.72
NET PROFIT	31.51	18.21	73.04
EQUITY CAPITAL	13.85	13.85	–

(Source: Business Standard)

While the net sales surged 14.45%, the operating profit surged 42.72%. The net profit surged an eye-popping 73.04%.

This proves what Vijay Kedia has been saying throughout that the aggressive expansion plans that Sudarshan Chemicals implemented in the past has given it “operating leverage”. Even a slight increase in sales translates into a disproportionate increase in operating profit.

Predictably, the robust results have enthused the wizards at Edelweiss to recommend a buy of Sudarshan Chemicals with an increased target price of Rs. 366.

As usual, the logic is clear and succinct:

“Sudarshan Chemical Industries Ltd. (Sudarshan) reported standalone Q1FY17 sales at INR 337 cr, 1% below our estimates but up 14% YoY. EBITDA and PAT were higher than our estimates by ~12% and ~16% respectively on account of lower raw material costs, improved productivity and slightly lower effective tax rate. Key highlights of the quarter were: (i) 12% YoY revenue growth in the standalone pigments business coupled with a two year high EBIT margins of 19.8% (ii) Standalone agrochemical sales registered the highest quarterly sales over the past two years of INR 50 cr, registering an increase of ~28% YoY. We have upgraded our consolidated FY17/18 net profit estimates by 8-9% considering the robust growth outlook and the margin expansion exhibited by the company in the current quarter; we reiterate our ‘BUY’ rating on the stock with a revised target price of INR 366/share.”

Now, we will have to await an update from Vijay Kedia whether he still regards Edelweiss’ target price as “bearish”!

Click here to download Edelweiss’ research report on Sudarshan Chemicals

4 thoughts on “Vijay Kedia’s Fav Mid-Cap Specialty Chem Stock Has More Upside: Edelweiss”

If some one ( Self proclaimed “Intelligent” equity managers) degrade a sector or specific stock when it goes up we must sense a rotten egg smell because those managers downgrade the sector or stock because he really missed the bus.
For eg. i have seen a couple of so called intelligent managers recently downgraded NBFC sector and intersting thing is that these managers are not holding Nio. Might be because of jealous or desperate on thie actions

Correction to above comment
“For eg. i have seen a couple of so called intelligent managers recently downgraded NBFC sector and intersting thing is that these managers are not holding Nio”
READ AS
For eg. i have seen a couple of so called intelligent managers recently downgraded NBFC sector and interesting thing is that these managers are not holding No NBFC in their portfolio