Why Sigachi Industries Share Price is Rising

Investors often turn to defensive sectors such as pharma or fast-moving consumer goods (FMCG) because these sectors tend to remain resilient, irrespective of the broader economic conditions.

The consistent demand for their products is what makes them attractive.

Take, for instance, the one-year performance of Nifty Pharma index. It has delivered a solid return of 20.2%, outperforming the Nifty 50 index return of 7.5%.

Within the pharma sector, one player that has surpassed its industry peers within just two years of listing is Sigachi Industries.

The company is currently the talk of the town due to its 13% returns over the past five trading sessions.

So, the question is: What is fuelling this sudden surge in Sigachi Industries?

Let's find out...

#1 Strong Q2 Results

The recent surge in Sigachi Industries share price is due to the company's strong financial performance in the September 2023 quarter.

The company achieved an operating income of Rs 992 million (m), marking a 20.2% growth compared to the same quarter last year.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins also witnessed an improvement, rising to 13.2% year on year (YoY) while EBITDA reach Rs 214 m.

The company's net profit experienced a jump of 11% YoY, reaching Rs 151 m.

Sigachi Industries is a prominent manufacturer of Micro Crystalline Cellulose (MCC). It plays a vital role in various industries. MCC is a refined wood pulp used in pharmaceuticals, food, cosmetics, and chemicals sectors as a substitute for fat, thickener, and binder.

The company reported a modest YoY increase in the price of MCC, growing by 1.1%, from Rs 208.55 per kilogram (kg) to Rs 210.8 per kg in the first half of the financial year 2024 compared to the same period last year.

#2 Global Expansion and Joint Venture

Sigachi Industries has a strong global presence and it currently exports around 60% of its products to international markets. More than 70% of its revenue comes from exports.

With a view on further expansion, on 19 October 2023, Sigachi Industries' subsidiary, Sigachi MENA FZCO, announced a strategic joint venture with Saudi National Projects Investment Ltd (SNP).

This company is an advisory investment firm well-versed in the local market and regulatory landscape. Together, they formed Sigachi Arabia which is focused on positioning the company strategically in the rapidly growing Saudi Arabian market.

Sigachi Arabia aims to optimise its operations by creating separate entities for Sigachi's core verticals, including pharma, food, and operations and management (O&M).

Looking forward, the company plans to establish a manufacturing facility in Riyadh over the next three years. The plan is to initially serve the local market and later extend its reach to cover the Gulf Cooperation Council (GCC) countries.

Second, an acquisition was done by Sigachi Industries in August 2023, where the company acquired an 80% stake in Trimax Biosciences for Rs 1 billion (bn).

The acquired company has a well-equipped API unit which can help Sigachi Industries to deliver superior healthcare solutions globally.

What's Next?

Moving ahead, the company's management is aiming to focus on its core business. This involves broadening the grades of manufactured MCC to meet the diverse needs of various industries.

They also aim to introduce innovative and value-added products, positioning the company at the forefront of industry advancements.

Simultaneously, the management is aiming to expand the company's global footprint. The recent entry into the Saudi Arabian market is another step to this approach.

There aren't many MCC manufacturers that are listed on the Indian stock markets so that gives Sigachi an edge.

How Shares of Sigachi Industries have Performed

Over the past one month, Sigachi Industries share price has surged by a whopping 40.9%. In 2023 so far, the shares have rallied over 100%.

The company touched its 52-week high of Rs 55.90 on 15 November 2023 and its 52-week low of Rs 22 on 29 March 2023.

The company came up with its IPO two years back in November 2021 and got listed 250% above its issue price.

If you were allotted Sigachi Industries' shares during the IPO, you could have more than tripled your investment on the listing day itself. The company had the second-best IPO debut ever.

Here's a table comparing Sigachi Industries with its peers.

Company	Sigachi Industries	Chemfab Alkalis	DMCC Speciality Chem
ROE (%)	17.6	19.7	3.5
ROCE (%)	20.5	27.0	7.2
Latest EPS (Rs)	1.3	30.9	1.5
TTM PE (x)	41.2	11.9	191.4
Price to book (x)	4.2	1.4	3.7
Dividend yield (%)	0.0	0.3	0.0
Industry PE	31.1
Industry PB	2.9

Data Source: Ace Equity

In the recent quarter, the promoters of the company sold 2.41% of their stake whereas, FIIs have added 2.46% stake in the company.

Click here to check out the latest shareholding pattern of Sigachi Industries.

About Sigachi Industries

Sigachi Industries has 30 years of experience in manufacturing and distributing MCC which makes it a leading player in this space.

It offers its products to some big names in the pharma industry such as Dr. Reddy's Laboratories, Lupin Ltd, Cipla, Wockhardt, Ipca Laboratories, and many more.

The company generates 75% of its revenue from the pharmaceutical segment, 20% from food and nutraceutical segment and the remaining 5% from the cosmetic segment.

For more details about the company, you can have a look at the Sigachi Industries fact sheet and quarterly results on our website.

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