ICICI Securities has kept its 'Buy' rating on Sumitomo Chemical India but reduced its target price to 485. While recent earnings beat market expectations, the company faces significant pressure from a weak domestic agricultural season and declining export demand.
Sumitomo Chemical India has seen its target price revised downward to 485 by brokerage firm ICICI Securities. The firm maintained its outlook on the stock, citing long-term strategic advantages, even as earnings reflected the difficulties currently impacting the domestic agricultural sector.
In its recent financial update, the company reported an EBITDA of 1.86 billion and an adjusted profit after tax of 1.57 billion. While these figures represent a year-on-year decline of 15% and 11%, respectively, the results were higher than the brokerage’s initial projections of 1.6 billion in EBITDA and 1.3 billion in profit. Despite beating these estimates, the company faced significant operational hurdles.
The broader agricultural environment has weighed heavily on performance. The company dealt with a 13% rainfall deficit through the end of September, which in turn contributed to a 2% contraction in total kharif sowing acreage across India. Furthermore, international markets provided little relief, as export demand dropped by 22% compared to the previous year. These factors led the brokerage to adjust its earnings per share estimates for fiscal years 2027 and 2028, resulting in the lower price target.
Looking ahead, the company continues to leverage its relationship with its global parent, Sumitomo Chemical. This access to proprietary technologies is viewed as a significant long-term driver. Strategic focus areas, including the launch of new bio-stimulant products and the parent company’s plans to expand its semiconductor chemical business in India, remain central to the growth strategy. The brokerage view is that current valuations provide an entry point for long-term investors, provided the company can navigate current demand pressures.
Investors looking at the company may want to monitor several key factors in the coming quarters. These include the recovery of domestic agricultural demand, shifts in monsoon patterns that could influence future kharif and rabi seasons, and the pace of recovery in export markets. Additionally, the execution of planned expansions in specialty areas like semiconductor chemicals will be important to track as the company attempts to diversify its revenue streams beyond traditional agricultural inputs.