Sell Insecticides India; target of Rs 830: Kotak Securities
Kotak Securities is bearish on Insecticides India has recommended sell rating on the stock with a target price of Rs 830 in its research report dated October 09, 2017.
Kotak Securities's research report on Insecticides India
After a strong Q1FY18 with 15.9% yoy growth in revenue of Insecticides (India) Ltd (IIL), Q2FY18 is expected to be a flattish quarter due to weather concerns, high base of last year, etc. The monsoon weakened in the month of August 2017, after timely onset in the month of June 2017 followed by strong rainfall in July. The uneven rainfall in the season with rainfall deficit of 5% of long period average (LPA) may negatively impact farm output and has also affected the growth expectations of the agrochemicals sector for FY18. This has also increases risk of downgrade in revenue guidance of IIL which was earlier at 15-20% growth for FY18. However, the company is confident of increasing EBITDA margins by 200 bps led by improved product mix. Based on revenue downgrade risk and stock trading above our target price, we downgrade our rating on the stock to SELL from (Buy earlier) with unchanged target price of Rs 830.
The stock is trading at PE of 18.2x based on FY19E EPS of Rs 51.9. The stock has seen strong run-up post Q1FY18 results and is trading above our target price. Based on revenue downgrade risk and stock trading above our target price, we downgrade our rating on the stock to SELL from (Buy earlier) with unchanged target price of Rs 830.
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