Sharda Cropchem margins strengthen as new-age molecules support Europe volume recovery

Investment View and Target Price

Anand Rathi Research maintains its BUY rating on Sharda Cropchem with an unchanged target price of Rs1,350, versus the report CMP of Rs820. The broker expects the current earnings-growth momentum to continue, supported by recovery in European volumes, the registration pipeline, market-share gains and operating efficiencies.

The report follows a strong start to FY27 despite a higher year-on-year base. The target price is based on 16 times FY28E EPS.

Q1 FY27 Financial Performance

Sharda Cropchem reported consolidated Q1 FY27 revenue of Rs10,738m, up 9.0 per cent year-on-year. Revenue growth reflected a 12.7 per cent favourable foreign-exchange impact, partly offset by a 1.6 per cent volume decline and a 2.1 per cent adverse price and product-mix impact.

Gross margin expanded to 36.7 per cent, helped by a favourable product mix. EBITDA rose 25.5 per cent year-on-year to Rs1,784m, materially ahead of Anand Rathi's Rs1,480m estimate, while EBITDA margin expanded to 16.6 per cent against the broker estimate of 14.6 per cent.

Reported PAT declined 38.4 per cent year-on-year to Rs880m because the forex gain fell sharply to Rs75m from Rs731m in Q1 FY26.

Segment Performance and European Recovery

The agrochemicals segment grew 8.0 per cent year-on-year in Q1 FY27 to Rs9,150m. Strong demand in NAFTA and Latin America offset temporary weakness in Europe.

Europe, Sharda Cropchem's highest-margin region, recorded a 10.7 per cent year-on-year decline in agrochemical sales to Rs4,670m because a regional heatwave discouraged dealer inventory restocking. Despite lower European revenue, contribution from new-age molecules supported margins.

Management said the European volume trend had started improving in July 2026 and expects normalisation through the remainder of the year. The non-agrochemicals segment grew 14.4 per cent to Rs1,590m, led by NAFTA.

FY27E Outlook and Growth Drivers

Management retained FY27E revenue-growth guidance of 10-15 per cent year-on-year while noting a volatile geopolitical environment. It expects around 10 per cent volume growth and potential, but unquantified, price increases.

The company expects investments in registrations to underpin sustainable growth. Management also cited market-share gains, operating efficiency and a debt-free balance sheet as supports for long-term growth.

Earnings Estimates and Valuation

Factoring in Q1 FY27 performance and the FY27E outlook, Anand Rathi raised its FY27E and FY28E EPS estimates by 3.5 per cent each, while cutting revenue estimates by 0.2 per cent for both years.

Key Risks

• An extended Middle East conflict.
• Delays in registrations causing revenue loss.
• Adverse foreign-exchange movements.
• Dependence on Chinese suppliers and local vendors for active ingredients and formulations.