According to Astha Jain of Hem Securities, a listing premium of over 20 percent warrants taking some profits off the table. With that said, she remains bullish on India Pesticides’ long term growth story.
Sunil Shankar Matkar
July 05, 2021 / 11:54 AM IST
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Shares of agrochemicals company India Pesticides jumped as much as 24 percent on July 5, the listing day, against the issue price of Rs 296.
The stellar debut on bourses was on expected lines given the reasonable valuations of the issue which attracted strong investor interest, say experts. They advise investors to stay put for the long term citing the strong fundamentals of the company and general bullishness around the agrochemicals space.
“Considering its competitive strength like diversified product portfolio with specialized products, domestic and strong export market presence, high margins, a healthy return on net worth (RONW) and almost zero debt business, we advise investors to be invested in India Pesticides for long term wealth creating business,” Prashanth Tapse, VP Research at Mehta Equities told Moneycontrol.
Incorporated in 1984, India Pesticides is an R&D-driven agrochemical manufacturer of Technicals (contributed around 79 percent to total FY21 revenue) with a growing Formulations business. It has two manufacturing facilities in UP with a combined installed capacity of 26,000 million tonnes (MT).
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According to Astha Jain of Hem Securities, a listing premium of over 20 percent warrants taking some profits off the table. With that said, she remains bullish on India Pesticides’ long term growth story.
“As 19 Technicals are expected to go off-patent between 2019 and 2026 and an opportunity size of over $ 4.2 billion is expected due to this by 2026 which company is well poised to cater,” she explained as the reason for holding the stock.
“The company is globally cost-competitive which helps it post superior margins. And with a focus on increasing its product portfolio, expanding geographical presence and plans to onboard more customers for newer molecules, future prospects of the company look strong,” she said.
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India Pesticides has a strong product portfolio with registrations & licenses for 22 agrochemical Technicals, 125 formulations for sale in India, 27 agrochemical Technicals & 35 formulations for exports.
Its revenue & PAT grew at a CAGR of around 38 percent and 75 percent over FY19-FY21 led by an increase in exports, higher demand for agrochemical technical products & better operating performance.
The company saw superior EBITDA margins (28 percent) & PAT margins (27 percent) in FY21 led by economies of scale, competitive pricing and higher yield from strong research & development (R&D).
The company has a healthy balance sheet with a debt to equity ratio of 0.02x, as of FY21. Moreover, its return on equity (RoE) and return on capital employed (RoCE) remain healthy at around 28 percent & around 17 percent (3-year average).
According to Tapse, investors looking to make a fresh entry in the stock can do so at around Rs 350 levels.
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