CRISIL assigns valuation grade of 3/5 to Insecticides India

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CRISIL assigns valuation grade of 3/5 to Insecticides India

CRISIL Research has come out with its report on Insecticides India. The research firm has maintained the fundamental grade of 3/5 to the company in its February 16, 2012 report.

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CRISIL Research has come out with its report on Insecticides India . The research firm has maintained the fundamental grade of 3/5 to the company in its February 16, 2012 report.

Insecticides (India) Ltd's (Insecticides') Q3FY12 results were below CRISIL Research's expectations. While revenues underperformed our projections due to deficient monsoons, which affected pesticides demand in key markets (Andhra Pradesh, Maharashtra and Karnataka), profitability was adversely impacted primarily due to foreign exchange loss of Rs 49 mn incurred on account of raw material imports. We have lowered our earnings estimates for FY12 in light of Insecticides' 9MFY12 performance. We have largely maintained our revenue estimates for FY13 on expectations of normal monsoons. We maintain the fundamental grade of 3/5.

Q3FY12 result analysis
• Revenues grew by 7.5% y-o-y to Rs 1,055 mn. Revenues from the formulations business grew by 14% while the technical segment's revenues declined by 33% (excluding inter-segment sales) over Q3FY11 as the company used higher proportion of technical grade pesticides inhouse. Overall, the technical segment's revenue growth was flat on a y-oy basis.

• EBITDA margin was 7.5%, lower by 315 bps over Q3FY11 primarily due to forex loss of Rs 49 mn (included in other expenses) which was on account of import of raw materials. Due to subdued demand environment, the company was unable to pass on the increase in costs to its customers.

• The company reported EPS of Rs 3.8 mn against Rs 5.5 mn in Q3FY11, down by 30.8% y-o-y due to lower operating profits. PAT margin also contracted by 252 bps y-o-y to 4.6% compared to Q3FY11.

Key developments
Insecticides recently announced its exclusive marketing tie-up with Nissan Chemical Industries, Japan for 'Pulser' which is a thifluzamide-based fungicide for rice. According to the management, Pulser has a Rs 2 bn market in India, of which it expects to capture 33% share over the next three years. The product has already been introduced in countries such as Japan, Brazil, Mexico, China, Vietnam and some other countries.

Valuations: Current market price is aligned
We continue to use the discounted cash flow method to value Insecticides. We maintain the fair value of Rs 385 per share and the valuation grade of 3/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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