Prabhudas Lilladher's research report on Bayer Cropscience
We broadly keep our FY24/25E estimates unchanged. BYRCS reported decent set of numbers with revenue growth of 2% YoY, mainly driven by strong sales in Crop Protection (CP) and consistent performance in corn hybrid seeds. We believe, strong growth in corn hybrid seeds was largely led by better acreages in rabi season (up 16% YoY), supported by remunerative corn prices (up 7% YoY to Rs2,180/quintal as on March’23). Also better product mix inturn led to 830bps sequential improvement in gross margin, despite a deflationary RM cost scenario (provisions of high cost inventory). Better gross margins (up 50bps YoY) coupled with lower opex (-100bps YoY) partially offset by higher employee cost (+150bpsYoY) ensuedmuted EBITDA margins (+10bps YoY) to 20.9%. Still BYRCS reported exceptional gains of Rs1.38bn in FY23 (4Q’23 at Rs31mn) towards sale of environmental science business, as against gains of Rs585mnin FY22 (4Q’22 NIL) (towards sale of part of seeds distribution business to Crystal crop protection). Additionally, net cash balance of Rs8.7bn translates into Rs193/share in FY23 as against Rs175/share in FY22.
We believe that near term weather challenges in domestic market coupled with pricing pressure in Glyphosate will likely keep stock performance under check. That said, we maintain ‘Accumulate’ rating on the stock with revised TP of Rs4,720 (earlier Rs5,390) based on 25xFY25 EPS (earlier 30X September 24 EPS).
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