Buy Bayer Cropscience; target of Rs 6421: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Bayer Cropscience has recommended buy rating on the stock with a target price of Rs 6421 in its research report dated August 07, 2020.

Broker Research

August 08, 2020 / 12:33 IST

Prabhudas Lilladher's research report on Bayer Cropscience

Bayer reported better than expected results with robust growth in both crop protection and seeds segment. Topline/EBITDA/APAT grew by 29%/61%/57% YoY. Gross margin contraction of 240 bps would have been largely due to higher sales growth of Roundup (Glyphosate) which is a low margin product for the company. Liquidation growth continues to be better than placement growth implying limited build-up of stocks at the dealer level. With robust paddy plantings and decent growth in Corn acreages, seeds segment is expected to sustain high growth. Lower labour availability, remunerative crop prices and well distributed monsoon will drive crop protection segment growth while leveraging synergy benefits from Monsanto acquisition will aid profits.

Outlook

We roll forward to Sept’22 earnings while marginally increasing our topline and EBITDA estimates for FY21 & FY22, maintain BUY rating with revised target price of Rs 6421 based on 35x Sep’22 earnings. Bayer remains our preferred pick in agchem space considering turnaround compelled by new management and robust free cashflow generation.

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