Two Chemical Stocks to Add in Your Watch List

  • Stock Market Analysis
  • Editors Pick

In the week gone by, benchmark equity indices such as BSE Sensex and NSE Nifty 50 created new lifetime highs on a closing basis. However, Indian equity markets appear grossly overbought. Nifty remains in the overbought territory with 17,792 levels becoming a critical resistance level. The week ahead looks eventful with the scheduled US FOMC meeting. The US Federal Reserve’s commentary on tapering and interest rate timelines will likely decide the market direction next week. After going through the fundamentals and technicals of a couple of stocks, we came across two companies with the potential for better returns in the short to medium term.

1. Syngene International Ltd (NS: SYNN )

Syngene International is a contract research, development, and manufacturing organization that offers integrated scientific services from early discovery to commercial supply. It provides services to multiple sectors, including pharmaceutical, biotechnology, nutrition, animal health, consumer goods, and speciality chemical companies. Now let us take a look at the significant growth drivers for the stock. You should note that pharma players worldwide encounter structural issues from contracting product pipelines, impending patent cliffs, stiff competition, and increasing R&D costs. It has compelled them to outsource a significant portion of their R&D activities to keep intact the structural balance and grow profitability. The company foresees mid-teen revenue growth for FY2022 on new client additions, renewals of existing contracts, and increasing manufacturing and biological contributions. Syngene has also upped its CAPEX to Rs 750-900 crore for fiscal 2022 due to BMS extension till 2030 coupled with a growing order book. The company is well-placed to seize opportunities in worldwide CRO with niche client additions like Herbalife (NYSE: HLF ), GSK, Amgen (NASDAQ: AMGN ), and Zoetis.

Syngene International has more cash than debt on its balance sheet. In Q1FY2022, the company’s total income jumped 39.15% year-on-year to Rs 606 crore from Rs 435.5 crore. EBITDA grew 26.6% to Rs 176.7 crore in the quarter from Rs 139.5 crore in Q1FY2021. Profit after tax rose 33% to Rs 76.90 crore from Rs 57.80 crore during the comparison period. FIIs/FPIs marginally increased their holding in June 2021 quarter. The stock has a ‘buy’ indication based on RSI, MACD, and 20-day/50-day/100-day EMA.

2. Sharda Cropchem Ltd (NS: SHCR )

Sharda Cropchem is a fast-growing global agrochemicals company with a leadership position in the generic crop protection chemicals industry. The company has an asset-light business model that focuses on identifying generic molecules, preparing dossiers, seeking registrations, marketing, and distributing formulations through third-party distributors or its own sales force. The product portfolio in the non-agrochemical business comprises belts, general chemicals, dyes, and dye intermediates. Sharda Cropchem has a strong registration pipeline (1,128 products as of March 2021) at several registration stages across varied geographies. We believe that NAFTA and Europe regions should drive the company’s top-line growth ahead. A robust pipeline of registrations continues to push volume and revenue growth. SCL’s cash-rich balance sheet, asset-light model, and focus on registrations in niche geographies should fuel incremental volume growth.

Sharda Cropchem has issued guidance of 10%-15% revenue growth in FY2022. It has also guided an EBITDA margin in the wide range of 17.5%-19.5% in the medium term. The company’s 10-year revenue CAGR remained at 24%, while the same was 26% for profit after tax. It is almost debt-free with a 15% return on equity. Major technical indicators such as RSI, momentum, MACD, 20-day/50-day/100-day EMA signal a ‘buy on the stock.

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  • hito desai @hito desai
    infy now good trg 1800...result October is good buy any dips 1650 last dowan range
    Like 1
  • Niraj Brahmbhatt @Niraj Brahmbhatt
    on which level can I sell ?
    Like 0
  • Niraj Brahmbhatt @Niraj Brahmbhatt
    Sir I had purchase Biocon share on Rs.363/-
    Like 0
    • hito desai @hito desai
      373 intraday profit book
      Like 0
    • hito desai @hito desai
      only buy above 395 .... now biocon down trand
      Like 0
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      100
  • DARSHAN KHARIDIA @DARSHAN KHARIDIA
    Tuticorin alkaline
    Like 0

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