Sudarshan Chemical Q1 Results Review - Core Business On Steady Growth Path: Dolat Capital

Dolat Capital Report

Sudarshan Chemical Industries Ltd.’s Q1 FY25 pigments performance was marginally ahead of our estimates, though subsidiary RIECO Industries’ Ebitda loss impacted consolidated performance.

Pigment gross margin came at 47.2% (+430 basis points YoY/ +320 bps QoQ) on improved spreads and rampup in specialty pigments (+11% YoY).

Management hinted at being able to achieve full capacity utilization in three years (versus four years earlier) for pigments given increased enquiries/ engagement from customers, accelerated by industry consolidation.

It alluded that, ~47% gross margin for pigment can be sustained while Ebitda margin increases on operating leverage benefits.

We continue to be positive on Sudarshan Chemicals and revise our earnings per share estimates upwards by 5%/10% for FY25/26 as we factor-

1. better pigment volume and margin and

2. weaker RIECO profitability in the near term.

Maintain ‘Buy’ rating with revised target price of Rs 1105 at 26 times FY26E EPS (from Rs 1000 earlier).

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