Sharda Cropchem slips 7%, hits 3-month low on disappointing Q1 results

The company's revenues during the quarter declined 22.7 per cent YoY to Rs 638 crore due to lower sales in Europe and The North American Free Trade Agreement (NAFTA) Region.

Shares of Sharda Cropchem hit a three-month low of Rs 447.75, down 7 per cent on the BSE in Tuesday’s intra-day trade after the company reported loss of Rs 89 crore in June quarter (Q1FY24), due to weak operational performance. The company had posted profit after tax of Rs 23 crore in a year ago quarter.

The company said raw material and finished goods sales price have reduced substantially. This has led to a stock revaluation as per Accounting Policy and has impacted the gross profit and profitability to the tune of Rs 71 crore.

The stock of pesticides & agrochemicals was down 13 per cent in past two trading days. It was quoting at its lowest level since April 2023.

The company’s revenue during the quarter declined 22.7 per cent year-on-year (YoY) to Rs 638 crore due to lower sales in Europe and the North American Free Trade Agreement (NAFTA) Region. The company said lower volumes in Europe and LATAM regions were on account of high inflation, ongoing recession and adverse weather conditions. It experienced significant decrease in product price realizations, especially in the US.

Gross margins contracted by 1670 bps YoY to 8.7 per cent largely led by immense pressure on price realizations (particularly in the NAFTA region) coupled with provisioning of high cost inventory (Rs 71 crore impact) and higher sales return of Rs 135 crore in 1QFY24, analyst at Prabhudas Lilladher said.

The brokerage firm trimmed its FY24/25E estimates by 27 per cent/16 per cent and downgraded the rating to ‘Accumulate’ (Earlier Buy) citing near term pressure on both revenues and margins, led by adverse weather conditions in key geographies and high inventory concerns both at manufacturer and distributor levels which in turn exerts pressure on revenue growth and margins.

Citing cautious near term growth outlook, management has revised downward their FY24E revenue growth guidance to 8-10 per cent (earlier ~15 per cent) thereby putting pressure on margins (EBITDA margins guided earlier at 18-20 per cent for FY24E). Accordingly, we downgrade our rating to ‘ACCUMULATE’ from Buy earlier with revised TP of Rs 540 (earlier Rs 640) based on 14XFY25 EPS, analyst said in result update.