Chemplast Sanmar - Long-Term Contract In Custom Manufacturing Provides Confidence: ICICI Securities

ICICI Securities Report

We met with the management of Chemplast Sanmar Ltd. Takeaways:

1. Custom manufacturing had challenging FY24, but it expects significant ramp-up of new products, and multi-purpose plant-3 in FY25. More capex in CM if it sells 60% of MPP-3 capacity.

2. PVC prices and spreads have been stable. This should drive improvement in profitability in coming quarters.

Further, the company sees global supplies to be limited which should repair industry. It believes non-tariff and tariff barriers may come into effect which should protect domestic PVC producers.

We have cut our Ebitda estimates by 15.6% for FY25E as we build gradual recovery across segments for Chemplast.

We revise our SOTP-based target price to Rs 550 (from Rs 520) on rollover of valuations to FY26E. Maintain Buy

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