Expect agrochem cos' revenue to grow 14.6% in Q2: Dolat Cap

Dolat Capital has come with its September quarterly earning estimates for Agrochemical sector. According to the research firm, agrochemical companies are expected to deliver 14.6% YoY revenue growth which shall be primarily volume driven.

Dolat Capital Q2FY13 result preview for Agrochemical sector:

Monsoon picked up in the second half of the Kharif season. As of 23rd September 2012, rainfall for the country as a whole is well inside the normal range at -5% as opposed to being deficient by 22% in mid-July.

Consequently, area under sowing also caught up significantly, standing at only 4% less than last year compared to a shortfall of 19% in Mid-July. So far 996 lakh hectares of the total 1052 lakh hectares of land has already been sown (i.e., 93.5% of the average for the whole season).

Moreover, and most importantly, our interaction with agrochem distributors across different regions indicated of more-than-normal pest incidence witnessed this year. There has been an increase in demand for pesticides compared to last year and volume off-take of herbicides continues to remain healthy.

We believe that benefit from price increases implemented during Q1FY13 will accrue in this quarter and the next. This will further add to the growth momentum.

We expect companies in our agrochemical universe to deliver 14.6% YoY revenue growth which shall be primarily volume driven.

Amongst the companies under coverage, we anticipate PI Industries (PII) to deliver 16% revenue growth led by healthy growth in custom synthesis division, while Rallis and Dhanuka are expected to grow at a moderate pace of 14.9% and 12.1%, respectively.

While this year’s rainfall can be characterized as uneven and erratic, the outlook for Rabi seems promising as water-levels are normal in most reservoirs in key regions. Revival of monsoon has also improved soil moisture, adding to the optimism.