Brokerage Firm Anand Rathi Bullish on Sudarshan Chemicals, Sees Target Price of Rs 1350

Sudarshan Chemical Industries Posts Strong Q4FY26 Results Amid Global Market Turbulence

Sudarshan Chemical Industries has reported a significant improvement in its earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fourth quarter of fiscal year 2026, driven by a strong recovery in volumes and improved operating leverage on its high-cost Heubach platform. The company's topline witnessed a 33% sequential jump across both pigment platforms, primarily due to the recovery of volumes as key global accounts resumed purchases, and cost pass-through.

The Heubach/Legacy business contributed significantly to the revenue growth, with Rs 19.5 billion in revenue in Q4FY26, a 32% quarter-over-quarter increase and a 30% year-over-year growth. The adjusted EBITDA for the quarter stood at Rs 2 billion, a substantial improvement from Rs 409 million in the previous quarter. The Heubach business reported an EBITDA of Rs 730 million, with a margin of 3.7%, compared to a margin of -2.6% in the previous quarter. The Legacy pigment business recorded an EBITDA of Rs 1.3 billion, with a margin of 16.3%.

Management Guidance and Outlook

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Despite near-term volume hiccups due to the West Asia crisis, the management has expressed confidence in the demand recovery and has guided the Heubach sales and EBITDA to €700 million and €35 million, respectively, in fiscal year 2027. The company has reiterated its target of €90-100 million by fiscal year 2028/29e, as synergies begin to materialize. The successful execution of the acquired Pigment platform will be a key monitorable, with incremental synergy benefits and balance sheet strengthening offering potential for earnings rerating.

Revised Estimates and Rating

We have trimmed our EBITDA estimate by 6% and 2% for fiscal year 2027 and 2028e, respectively, primarily due to near-term volume hiccups. However, we remain constructive on the combined platform and maintain a BUY rating on the stock with a revised SOTP-based target price of Rs 1,350 (from Rs 1,400 earlier), implying 11x fiscal year 2028e consolidated EV/EBITDA.