Buy Insecticides India; target of Rs 506: Prabhudas Lilladher

Prabhudas Lilladher's research report on Insecticides India

INST reported yet another quarter with subdued performance. Despite healthy topline growth of 14%, gross margins contracted by sharp 490 bps YoY (regardless of a weak base) due to inventory liquidation of Nuvan (banned from 1st Jan’21). The management is hopeful of business turnaround in the ensuing quarters driven by 1) its pipeline of new launches 2) commencement of new capacities and 3) backward integration projects. We increase our topline estimates by 5% for each FY21-23 but reduce our EBITDA/APAT estimates by 15%/16%, 7%/8%, 1%/1% to factor in weakening margin profile of INST.

Outlook

We roll over to FY23 and maintain BUY rating with target price of Rs 506 (unchanged) based on 9x FY23 EPS of Rs 67.4.

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