Sharda Cropchem shares downgraded post 20% rally! Here's fresh target price
Despite the strong quarterly results, Nuvama expressed concerns over the stock's high valuations, stating that Sharda Cropchem's cyclical business model did not justify the current trading levels.
- Jul 28, 2025,
- Updated Jul 28, 2025 8:55 AM IST
Shares of Sharda Cropchem Ltd experienced a significant 20% surge on Friday following the company's robust Q1FY26 earnings. This surge prompted Nuvama Institutional Equities to downgrade the stock from 'BUY' to 'Hold'. The downgrade was driven by the assessment that Sharda's current valuations appear stretched.
In its report, Nuvama highlighted that Sharda Cropchem's Q1FY26 performance was bolstered by a gradual recovery in global demand and favourable pricing in key markets, particularly Europe. The company reported substantial year-on-year growth in sales, EBITDA, and PAT, surpassing initial estimates. This strong performance was a key factor in the recent rally.
Despite the strong quarterly results, Nuvama expressed concerns over the stock's high valuations, stating that Sharda Cropchem's cyclical business model did not justify the current trading levels. The stock is trading at 16x FY28E EPS and 18x FY27E EPS, which are considered high, especially given the risks associated with a cyclical business model.
The agrochemical segment showed promising results, with an 11% increase in volume year-on-year, driven by a 31.3% growth in Europe. The gross margin in Europe reached a peak of 43%, contributing to a blended gross margin of 35.5%. However, sustaining such margins remains a challenge, as market dynamics can quickly change. The company also expects its EBITDA margin to be within the range of 15–18%, which indicates a stable operational efficiency.
Sharda's non-agrochemical business also saw notable volume-led growth of 58.5% year-on-year, particularly in NAFTA, attributed to buying behaviour amid tariff concerns. The company maintains a healthy registration pipeline, with significant revenue contributions from its top ten products. Additionally, the appreciation of the euro against the dollar provided a 12% foreign exchange benefit, further boosting profitability.
Nuvama has revised its target price for Sharda Cropchem to Rs 935 per share against Rs 774 earlier. This reflects the sharp rally in stock price, which surpassed Nuvama's target in just one quarter. The rapid ascent in stock value indicates strong market confidence, yet it also suggests that future growth expectations are already factored into the current price.
The management's expectation for maintaining growth guidance despite the Q1FY26 surge suggests a need for moderation in quarterly earnings. The cyclical nature of Sharda’s business, influenced by global agriculture and currency fluctuations, warrants caution in future growth projections.
Investors are advised to hold off on increasing their positions in Sharda Cropchem until a more reasonable entry point is reached. The company's performance and stock price are closely tied to global market dynamics, necessitating a careful evaluation of future earnings potential. Strategic patience may provide better opportunities as market conditions evolve.
Shares of Sharda Cropchem Ltd experienced a significant 20% surge on Friday following the company's robust Q1FY26 earnings. This surge prompted Nuvama Institutional Equities to downgrade the stock from 'BUY' to 'Hold'. The downgrade was driven by the assessment that Sharda's current valuations appear stretched.
In its report, Nuvama highlighted that Sharda Cropchem's Q1FY26 performance was bolstered by a gradual recovery in global demand and favourable pricing in key markets, particularly Europe. The company reported substantial year-on-year growth in sales, EBITDA, and PAT, surpassing initial estimates. This strong performance was a key factor in the recent rally.
Despite the strong quarterly results, Nuvama expressed concerns over the stock's high valuations, stating that Sharda Cropchem's cyclical business model did not justify the current trading levels. The stock is trading at 16x FY28E EPS and 18x FY27E EPS, which are considered high, especially given the risks associated with a cyclical business model.
The agrochemical segment showed promising results, with an 11% increase in volume year-on-year, driven by a 31.3% growth in Europe. The gross margin in Europe reached a peak of 43%, contributing to a blended gross margin of 35.5%. However, sustaining such margins remains a challenge, as market dynamics can quickly change. The company also expects its EBITDA margin to be within the range of 15–18%, which indicates a stable operational efficiency.
Sharda's non-agrochemical business also saw notable volume-led growth of 58.5% year-on-year, particularly in NAFTA, attributed to buying behaviour amid tariff concerns. The company maintains a healthy registration pipeline, with significant revenue contributions from its top ten products. Additionally, the appreciation of the euro against the dollar provided a 12% foreign exchange benefit, further boosting profitability.
Nuvama has revised its target price for Sharda Cropchem to Rs 935 per share against Rs 774 earlier. This reflects the sharp rally in stock price, which surpassed Nuvama's target in just one quarter. The rapid ascent in stock value indicates strong market confidence, yet it also suggests that future growth expectations are already factored into the current price.
The management's expectation for maintaining growth guidance despite the Q1FY26 surge suggests a need for moderation in quarterly earnings. The cyclical nature of Sharda’s business, influenced by global agriculture and currency fluctuations, warrants caution in future growth projections.
Investors are advised to hold off on increasing their positions in Sharda Cropchem until a more reasonable entry point is reached. The company's performance and stock price are closely tied to global market dynamics, necessitating a careful evaluation of future earnings potential. Strategic patience may provide better opportunities as market conditions evolve.