Agrochem cos` likely to show de-growth in Q1: P Lilladher

Prabhudas Lilladher has come with its June quarterly earning estimates for Agri Products and Chemicals sector. According to the research firm, agri products and chemicals’ coverage universe is likely to show de-growth of 2.8% YoY (down 25.3% QoQ) in net sales during Q1FY13.

Prabhudas Lilladher Q1FY13 Result Preview for Agri Products and Chemicals sector:

Our ‘Agri Products and Chemicals’ coverage universe is likely to show de-growth of 2.8% YoY (down 25.3% QoQ) in net sales during Q1FY13. EBITDA and PAT are expected to show de-growth of 4.2% and 21.9% YoY, respectively.

Fertiliser players are likely to witness lower sales volume during the quarter because industry had pushed inventory in the market during Q4FY12 and inventory at distributor level is expected to get liquidate in H1FY13. Hence, it would result in lower dispatches for fertiliser players during H1FY13.

On account of higher working capital as on March 31, 2012, all fertiliser players had seen increased debt levels. We believe that finance cost of players would mount substantially in Q1FY13. We expect that it is a short-term (may be single quarter) phenomenon and working capital is expected to get released in H1FY13. Finance cost of fertiliser players under coverage are expected to go up by 51.4% YoY (2.7% QoQ) during Q1FY13.

Indian Fertilizer Industry is witnessing tough time on account of government inaction on the policy front. CCEA has deferred the decision on urea price hike and policy recently. Depreciating currency is exerting pressure on the margin of non-urea fertilizer players. It could lead to further price hike at the farmer level as government finances are in a tight condition. It may result in muted volume growth in non-urea fertilizer in the near term despite witnessed de-growth in FY12. We remain cautious on non-urea fertilizer players in the next six months and prefer urea players.

Indian Agrochemical Industry has witnessed a tough time in H2FY12. However, hike in minimum support price and uptick in agriculture commodity is a positive indicator for the industry in the near term. Industry has taken a price hike by 5- 10% to pass on higher cost led by rupee depreciation. We remain cautious in the short term (3 months) on the agro-chemical space. We remain positive on the space from a long-term perspective. Our interaction with Industry players suggest that Indian Agrochemical Industry is likely to grow by 12-15% CAGR in the next couple of years.

Government has announced an increase in the minimum support price by 15- 53% across the Kharif crop category which we believe that, is a positive indicator for the Agri Input industry because industry is witnessing pressure in farm income on account of increased input prices.

We remain positive on Chambal Fertilizer and Chemicals in the short term (6 months) and Rallis India from a long term perspective (12-24 months).

	Q1FY13E	Q1FY12	YoY gr. (%)
Tata Chemicals
Sales	28,137	29,540	-4.7
PAT	1,678	2,065	-18.7
Coromandel International
Sales	15,375	17,957	-14.4
PAT	859	1,589	-45.9
United Phosphorous
Sales	21,616	18,621	16.1
PAT	1,851	1,843	0.4
Jain Irrigation
Sales	9,925	9,513	4.3
PAT	721	960	-24.8
Chambal Fertilisers
Sales	9,350	11,838	-21
PAT	498	729	-31.7
Rallis India
Sales	3,305	2,977	11
PAT	296	232	27.7
Deepak Fertilizers
Sales	4,839	4,807	0.7
PAT	389	639	-39.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Rs in millions)