Expect agrochem cos' revenue to grow 14% in Q1: Dolat Cap

Dolat Capital Q1FY13 Result Preview for Agrochemical sector:

Typically, Q1 is an important indicator of the underlying trend that shall play out during the following Kharif season.

India’s monsoon rains picked up pace in the week ending June 20 and were merely 5% below average. So far only 2.24 lakh hectares of the total 132.34 lakh hectares of land have been sown.

Recently the CCEA has approved and increase in MSP, ranging from 15.7% to 53%, in sync with the sharp increase in the production cost.

We expect companies in our agrochemical universe to deliver 14% YoY revenue growth which shall be primarily volume driven.

We observe most companies increasing their product prices (by 5%-10% on an average) in order to pass on the impact of higher input cost culminating from the rupee depreciation. However, we expect the benefit to reflect in subsequent quarters.

Amongst the companies under coverage, we anticipate PI Industries (PII) to deliver 16.3% revenue growth led by healthy growth in custom synthesis division, while Rallis and Dhanuka are expected to grow at a moderate pace of 12.8% each.

Erratic distribution of / delay in monsoon showers could impact industry growth and put our earnings for FY13E at risk.