Sumitomo Chemi. (SUMICHEM)

FairStock Score: 61/100 — STEADY

Score breakdown: P/E: 0/3 · ROCE: 2/2 · Growth: 1/2 · Dividend: 0/1

Key Financials

Strengths

• Promoter holding of 75% and Sumitomo parentage provide strategic backing and product credibility.
• High capital efficiency: ROE 18.33% and ROCE 25.14%.
• Very low leverage with D/E of 0.02 and Altman Z-score of 5.13.
• Positive free cash flow of ₹61 Cr and Piotroski F-score of 7/9 reflect operational discipline.

Concerns

• Growth is meager: sales +2.88%, profit +3.54%, and 5-year revenue CAGR of only 3.55%.
• Valuation is stretched: P/E 36.92, P/B 7.71, EV/EBITDA 29.42, with Graham Number at ₹117.81 and DCF value at ₹11.99 far below the price.
• Free cash flow yield and dividend yield are both only about 0.30%, offering a thin reward while waiting.
• Margin of safety is deeply negative at -240.5%, leaving little room for error.

AI Analysis

As a value investor, I search for a fair price on a wonderful business. Sumitomo Chemi has some wonderful traits. The 75% Sumitomo parentage gives strategic backing and product credibility, and the financials confirm discipline: return on equity of 18.33%, return on capital employed of 25.14%, and a debt-equity ratio of 0.02. The Altman Z-score of 5.13 and Piotroski score of 7 out of 9 indicate a healthy, conservatively run company. Yet I must not confuse a good business with a good investment. The price is ₹447.60, which means 36.92 times trailing earnings and 7.71 times book value. Meanwhile, the company is hardly growing: sales are up only 2.88%, profit up 3.54%, and the five-year revenue CAGR is 3.55%. This is a slow grower, not a compounding gem. Benjamin Graham taught me to use margin of safety. Here, the Graham number is ₹117.81 and the DCF value is ₹11.99, implying a margin of safety of negative 240.5%. Even the EV/EBITDA of 29.42 leaves no cushion. Free cash flow of ₹61 Cr against a ₹20,023 Cr market cap is a 0.3% cash yield, and the 0.30% dividend adds little reward for waiting. The balance sheet protects me from bankruptcy risk, but it does not protect me from paying too much. If I pay 36 times earnings for 3.5% growth, my returns will be poor for years. I would wait for a meaningful discount to intrinsic value, or for proof that growth has genuinely accelerated. Until then, this is a quality business trading as an expensive promise.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer