Buy Chemplast Sanmar, target price Rs 800: ICICI Securities

has buy call on Chemplast Sanmar with a target price of Rs 800. The current market price of is Rs 523.95. Time period given by analyst is one year when . price can reach defined target.

Sanmar Ltd., incorporated in the year 1985, is a Small Cap company (having a market cap of Rs 1187.55 Crore) operating in General sector.

Chemplast Sanmar Ltd. key Products/Revenue Segments include Sale of Products, Export Incentives, Scrap, Lease Rentals and Other Services for the year ending 31-Mar-2021.

Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 1815.70 Crore, up 23.96 % from last quarter Total Income of Rs 1464.73 Crore and up 34.45 % from last year same quarter Total Income of Rs 1350.42 Crore. Company reported net profit after tax of Rs 231.64 Crore in latest quarter.

Investment Rationale
Chemplast Sanmar’s (Chemplast) Q4FY22 spreads were impacted by high-cost inventory carried over from Q3FY22 and sold in its entirety in Q4FY22. This kept EBITDA flattish QoQ. Chemplast has sold most capacity in FY22, and in FY23 it has only 10% more capacity coming in S-PVC segment. Large expansion in paste-PVC and custom manufacturing will commence only in FY24. Company plans to do more capex with good scope for large FCF generation and has not announced dividend in FY22 pending assessment of fund requirement. It expects big capacity announcement in S-PVC where the company already has environmental clearance to double its capacity to 600kpta. This will provide the much-required visibility on volume growth while more capex in custom manufacturing will be welcome. The brokerage has tweaked estimates marginally, but cut target price to Rs800 (from Rs910) as it cuts the P/E multiple to 18x (from 20x) on near-term low volume growth.

Promoter/FII Holdings
Promoters held 54.99 per cent stake in the company as of 31-Mar-2022, while FIIs owned 10.3 per cent, DIIs 25.21 per cent.