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Akshay Rajawat    


Surat, India

I am CA student and along side perusing the CFA (U.S.). I have a 6 month experience in Equity Research where i have done my internship programme in the same. I am keen to write an articles on Equity.

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Contributor since: 2022

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SUMICHEM

Comments: 0 | Likes: 0 | Current Price: ₹ 492.5


Sumitomo Chemical India Limited

Sumitomo Chemical India Ltd. (SCIL) is one of the leading players in the industry which has a balanced portfolio of technical as well as formulation products along with backward integration for some products. The Company is known for domestic marketing of proprietary products of its Japanese parent -Sumitomo Chemical Company Limited in agrochemicals, animal nutrition, and environmental health business segments. With the integration of Excel Crop Care Limited, the Company now has a strong portfolio of generics in addition to specialty products and a strong combined marketing network. With this integration, the Company has moved up several notches in the pecking order of the Indian crop protection industry. SCIL has also marked its presence in Africa and several other geographies of the world.


About Company

Sumitomo Chemical India Ltd. (SCIL) is one of the leading players in the industry which has a balanced portfolio of technical as well as formulation products along with backward integration for some products. The Company is known for domestic marketing of proprietary products of its Japanese parent -Sumitomo Chemical Company Limited in agrochemicals, animal nutrition, and environmental health business segments. With the integration of Excel Crop Care Limited, the Company now has a strong portfolio of generics in addition to specialty products and a strong combined marketing network. With this integration, the Company has moved up several notches in the pecking order of the Indian crop protection industry. SCIL has also marked its presence in Africa and several other geographies of the world.

Company Overview

Journery so far

 

Mnaufacturing Details & Other Highlights

Product Portfolio

1. Insecticides

2. Herbicides

3. PGR

4. Metal Phosphides

5. Fungicides

6. AND & EHD

Product 

SCIL has a diverse range of product basket reducing product concentration risk. Plabt growth regulator is a high margin segment for SCIL which range from 8-10% of overall revenue for SCIL vs industry having 5% of overall revenue.

SCIL Key product basket

SCIL has very diverse product portfolio no single portfolio contributing more than 16% of the revenue thereby reducing product concentration risk. It's key product Glyphosate in the range of ~11-12% of overall revenue. Company is also expected to double its tebuconazole product capacity in the next few years. SCIL has more than 200+ brands with 700+ SKUs creating strong stikiness with farmers and dealers. Top 10 product contributes less than 45% ot total revenue. Also revenue is diversified across key crops.

Geographic Segment

Segment Breakup

Over the years Sumitomo Chemicals has realised to scale speciality portfolio one needs to have strong generic basket to cross sell speciality products along with robust distribution network from where farmer procures products on routine basis. Excel Crop care was largely a generic product company with wide dictribution network and strong stickiness which was essential to market high end speciality products. Over the year SCIL has been able to expand margins by leveraging the 

Sumitomo Chemical Company Limited (Japan)

Overview of parent company:

About Sumitomo

  • Sumitomo started business in Japan in early 16th Century (400 years+).
  • Currently several Sumitomo founded companies operate as independent listed companies with widespread shareholding and run by its professional boards.
  • Even today, all Sumitomo companies continue to follow basic business philosophy and ethical practices of Sumitomo.

About Sumitomo Chemical Company Limited, Japan (SCC)

SCC was founded in 1913 and undertakes several chemical related businesses as an independent listed company
SCC is a leading Japanese research driven diversified chemical company listed on the Tokyo Stock Exchange with consolidated sales revenue of more than US$ 22.5 bn
Offers diverse range of products globally in 5 business sectors: petrochemicals, energy and functional materials, IT-related chemicals and materials, pharmaceuticals and health and
crop sciences sector;
Follow principles of ‘JIRI – RITA’ which means balance between society benefits and corporate profits; Sustainability is very high priority and SCC received Ecovadis Gold rating
SCC holds 12,600+ Patents of which ~34% are in Health & Crop Science

Capex Plan

Focus on R&D and process innovation 

3 fully equipped, DSIR approved R&D labs located at Mumbai, Bhavnagar and Gajod capable of synthesis, technical product and formulation development

R&D Team comprises of 75+ qualified and dedicated engineers & scientists of which 10+ are PhDs with more than 15 years of Experience
25+ patents granted across various geographies; 9 applications filed
Product Pipeline
▪ Multiple products coming from initiatives
▪ Global Speciality Proprietary products to be launched in India
▪ New combination products / pre-mixtures currently under
development for domestic and exports
▪ Off-patent products under development for domestic and exports
▪ Technical products approved for manufacturing and exports
✓ R&D facilities to gain capability for creating new processes and new
combinations using SCC Japan’s chemistries which would help improve
production processes and efficiency

Management Profile

Business Performance

Profit & Loss

Balance Sheet

Investment Thesis

Revenue in the first 9 months of fiscal 2022 grew at a healthy 14% y/y supported by better demand across industry. Profitability benefitted from improved operating leverage, better product mix, cost optimization and synergistic benefits with the parent. Rising input prices have not impacted the margins, as company was able to largely pass on the prices to its customer though with lag of 30-40 days. Operating margin in the first 9 months of fiscal 2022 remained healthy at 20.5% as against 19.7% in the corresponding period of previous fiscal. Over the near to medium-term, revenue growth is expected to be healthy at 15% supported by steady domestic demand and healthy growth in exports, while operating margins are expected to sustain around 20%.

The rating continue to reflect SCIL’s established market position in the domestic crop protection business supported by its diversified product portfolio including insecticides, weedicides, fungicides, fumigants and rodenticides as well as plant growth nutrition products, bio-rationals and plant growth regulators, and access to the proprietary products of its Japanese parent, Sumitomo Chemical Company Limited (SCCL). Business risk profile should steadily improve over the medium term, supported by the healthy demand for crop-protection products, and as the company leverages its balanced presence across key sub segments of crop protection and the strong brand and chemistry skills of its parent, strengthening its agrochemicals business in India and abroad.

SCIL’s healthy business risk profile is complemented by its strong financial risk profile and liquidity. Reliance on external debt is expected to remain nil as company’s annual cash accrual should be sufficient to meet modest capex and incremental working capital requirements. These rating strengths are partially offset by company’s large working capital requirement and risks associated with the crop protection industry.

Risk

  • Complexity of rural marketing
  • MSP realization
  • Farmer support policy implementation
  • Low land holding
  • Lack of irrigation facility

 

 

 

Disclosure:

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure:

Sources - Company website, Company presentation, brokerage report and Crisil report Disc - Written article is not an recommendation as it's only for knowledge purpose. Pls consult your investment advisor for any position.

Disclosure legality:

I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.

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