Buy Insecticides India; target of Rs 887: Prabhudas Lilladher

Prabhudas Lilladher's research report on Insecticides India

INST's outperformance vis-à-vis domestic industry continued in Q1FY20. Revenue grew by 12.4% YoY driven by formulation business (particularly new launches). The performance is expected to sustain going forward as well, led by its strong product pipeline. INST is in the midst of transition from a me-too agrochemical manufacturer to a research-driven integrated player with focus on creating brands (+100 branded and +21 technical products) with differentiated products. It is working on multiple fronts (proprietary off-patent, inlicensing and new discovery) to enrich its product portfolio. Timely execution of this strategy can enable INST to sustain high growth rate over the medium term. INST's revenue from new launches (8 in FY19 and pipeline of 35 products) is expected to neutralize the expected revenue loss from FY22E due to ban of DDVP and Phorate. Backward integration for key inputs will aid in securing supplies for its Maharatna range of products apart from increasing the sale of technicals.

Outlook

We estimate 11% revenue CAGR and 7% PAT CAGR over FY19-21. Maintain Buy with target price of Rs 887 based on 13x FY21 earnings.