Target: ₹605
CMP: ₹480.50
Sudarshan Chemicals (SCIL) is one of the largest pigment manufacturers with a 35 per cent market share in its home market and third-largest player globally.
We believe recent headwinds in the overall pigment industry will be transient and that shifting of global players away from pigment businesses (Top players like BASF & Clariant selling pigment biz), China +1 and sustained demand recovery will be some of the key tailwinds for the overall pigment industry and are likely to benefit SCIL as well.
We believe that challenges like consolidation in the pigment industry, high inflation in developed economies, weak geopolitical scenario, sharp volatility in commodity prices and supply chain disruptions are expected to hit mid-sized and small pigment players resulting in benefit to major players like SCIL.
Despite all challenges, the company has successfully completed its largest capex and is waiting for the demand scenario to turn and key tailwinds like fall in commodity prices, freight expenses, energy prices and cost efficiencies to aid its recovery ahead.