Buy Insecticides (India); target of Rs 540: Sharekhan

Sharekhan's research report on Insecticides (India)

Strong revenue growth was led by a 22%/14% y-o-y revenue growth from the B2B/B2C business, while the export segment was muted (down 32% y-o-y). Revenue from high-margin Focused Maharatna products like Hachiman, Shinwa, and Torry increased during the quarter. EBITDA margin at 7.1% was 210 bps above our estimate of 5.0% but was down 329 bps y-o-y mainly due to liquidation of high-cost inventory from the previous year. Management maintained its guided revenue growth of 10-12% and EBITDA margin of 9-10% as high-cost inventory liquation would continue in Q2FY2024. Management is confident of Rs. 150 crore of exports in FY2024 on the back of product registrations in the export market. The company has also acquired a new site (over 15 acres) at Sotalana (Rajasthan) for building the formulation plant, which bodes well for the company’s long-term growth. Management has guided a 20% revenue CAGR over the next few years.

Outlook

We maintain our Buy rating on Insecticides (India) Limited with an unchanged PT of Rs. 540. Valuation of 13x/9x its FY2024E/FY2025E EPS is attractive.