SUMICHEM - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 3.4
| Stock Code | SUMICHEM | Market Cap | 21,424 Cr. | Current Price | 429 ₹ | High / Low | 665 ₹ |
| Stock P/E | 39.5 | Book Value | 64.0 ₹ | Dividend Yield | 0.28 % | ROCE | 25.1 % |
| ROE | 18.8 % | Face Value | 10.0 ₹ | DMA 50 | 447 ₹ | DMA 200 | 495 ₹ |
| Chg in FII Hold | -0.28 % | Chg in DII Hold | 0.18 % | PAT Qtr | 86.2 Cr. | PAT Prev Qtr | 178 Cr. |
| RSI | 48.4 | MACD | -9.97 | Volume | 2,70,145 | Avg Vol 1Wk | 3,83,956 |
| Low price | 396 ₹ | High price | 665 ₹ | PEG Ratio | 7.88 | Debt to equity | 0.02 |
| 52w Index | 12.2 % | Qtr Profit Var | 2.27 % | EPS | 10.6 ₹ | Industry PE | 30.9 |
📊 Analysis: SUMICHEM shows strong operational efficiency with ROCE at 25.1% and ROE at 18.8%, indicating solid return metrics. However, the high P/E of 39.5 compared to industry P/E of 30.9 suggests overvaluation. The PEG ratio of 7.88 highlights expensive growth prospects. Dividend yield at 0.28% is negligible, limiting passive returns. Technicals show support near 396–420 ₹, with resistance around 450–495 ₹ (DMA levels). The ideal entry zone is 400–420 ₹ for margin of safety. If already holding, a medium-to-long horizon is viable, but partial exit near 480–500 ₹ resistance is prudent unless earnings growth accelerates.
✅ Positive
- Strong ROCE (25.1%) and ROE (18.8%) support efficient capital use.
- Low debt-to-equity ratio (0.02) ensures financial stability.
- Book value of 64 ₹ provides valuation support.
- DII holdings increased by 0.18%, showing domestic confidence.
⚠️ Limitation
- High P/E (39.5) compared to industry average (30.9).
- PEG ratio of 7.88 indicates expensive growth valuation.
- Dividend yield of 0.28% is negligible.
- FII holdings decreased by -0.28%, showing reduced foreign confidence.
📉 Company Negative News
- Sequential decline in quarterly PAT (86.2 Cr. vs 178 Cr.).
- Weak EPS (10.6 ₹) relative to valuation.
📈 Company Positive News
- Quarterly profit variation (+2.27%) shows marginal improvement.
- Strong operational efficiency reflected in ROCE and ROE.
- Debt-free balance sheet enhances resilience.
🏭 Industry
- Chemicals sector has long-term demand drivers in agriculture and specialty chemicals.
- Industry P/E at 30.9 suggests SUMICHEM trades at a premium.
- Structural drivers: rising agrochemical demand, global supply chain diversification.
🔎 Conclusion
SUMICHEM earns a rating of 3.4 due to strong ROE/ROCE but expensive valuations and weak dividend yield. Long-term investors should only consider entry in the 400–420 ₹ zone for margin of safety. Current holders may adopt a medium-to-long horizon, with partial profit booking near 480–500 ₹ resistance unless earnings growth improves. The stock remains a growth play but requires caution due to valuation risks.