Sumitomo Chemical India Q3 Results Review - Revenue, Ebitda Miss Hurts Profit After Tax: Nirmal Bang

Nirmal Bang Report

Sumitomo Chemical India Ltd.'s Q3 FY24 revenue at Rs 5.42 billion was a miss of 24.9%/14.6% versus our/street estimate. Gross margin at 39.8% was a beat of 90 basis points as center of goods sold was 26% below estimates, which compares with a lower miss in revenue.

Ebitda margin at 12.1% saw a miss of 488 basis points against our estimates. Ebidta at Rs 658 million was lower versus our/street estimate by 46.4%/37.5% profit after tax at Rs 548 million was a miss of 39.6%/27.3% versus our/street estimate.

The stock has corrected 13% YoY, which has partly priced in the pressure on revenue and earnings.

We maintain 'Accumulate' on Sumitomo chemical due to muted returns and near term headwinds in Rabi outlook as a result of low water levels, pain in the global chemical and petrochemical sector due to persistent destocking and excess supply from China.

We understand from some industry channels that the worst seems to be over for Indian chemical and petrochemical sector and the topline is likely to revive to FY23 levels in FY25. And based on this, Ebitda margins are also likely to edge up based on operating leverage over FY25/FY26, given that Sumitomo chemical has sustained healthy gross margins.

We see investor interest reviving based on potential recovery in volume/revenue growth in the next 12-18 months, especially on declines in the Sumitomo chemical stock.

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