ICICI Securities Recommends Buying Sumitomo Chemicals, Targets Rs 580

ICICI Securities Maintains Buy Rating for Sumitomo Chemicals

Sumitomo Chemicals (SCIL) has reported its financial performance for the quarter and year, with Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) and Profit After Tax (PAT) of INR 1.3 billion and INR 1.1 billion, respectively. This represents a year-over-year (YoY) increase of 12% each, with a quarterly-on-quarter (QoQ) growth of 35% and 47%, respectively. These figures outshine the street's estimate of INR 1.1 billion and INR 0.97 billion.

The company's growth can be attributed to a 200 basis points (bps) rise in gross margins. Despite adverse agro-climatic conditions, Sumitomo Chemicals' domestic business has grown 4% YoY in both Q4FY26 and FY26, driven by new product launches. The company's access to global parent-innovator (SSC) technology, aggressive capital expenditure, well-diversified portfolio, new product launches, and regulatory clearance for bio-stimulant and SSC's plans to expand semiconductor chemicals in India are expected to support its long-term growth.

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ICICI Securities has revised its estimates for Sumitomo Chemicals, cutting its FY27E earnings to factor in a softer margin environment and upgrading FY28E by 2.8% to reflect higher margins and revenue. The research firm maintains its BUY rating for the company with a revised target price (TP) of INR 580, up from INR 515.

The valuation of Sumitomo Chemicals is based on a combination of FY28E Price-to-Earnings Ratio (PER) and Enterprise Value-to-EBITDA (EV/EBITDA) multiples, as well as an analysis of the historical Price-to-Earnings Growth (PEG) range. This provides a fair value range that allows for negative surprises. The derived price of INR 580 implies a 17% upside from the current price.