Buy Insecticides (India); target of Rs 690: Sharekhan

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Sharekhan's research report on Insecticides (India)

Strong revenue growth was led by a 53%/44% y-o-y revenue growth from B2C/herbicide business and increased sales of Maharatna products. OPM at 6.5% (up 60 bps y-oy) was 107 bps above our estimate of 5.5% owing to market acceptance of IIL’s newly launched products which have better margin profile. Consequently, operating profit of Rs. 23 crore was 23.5% above our estimate. PAT of Rs 9 crore and was 11.6% above our estimate of Rs. 8 crore as beat in margins got partially offset by higher-than-expected finance costs. Management eyes a revenue CAGR of 25% from FY22-25 led by addition in high-margin new products/ patents and expects EBITDA to grow faster than revenue growth. Export pressures dragged down FY23 export guidance to Rs. 100 crore from 150 crore but management is confident of Rs. 200 crore of exports in FY24 on the back of product registrations in the export market.

Outlook

We maintain a Buy on Insecticides (India) Limited with a revised PT of Rs. 690 as we expect a strong 23% PAT CAGR over FY22-FY25E. Valuation of 10.9x/8.5x its FY2024E/FY2025E EPS is attractive.

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Insecticides (India) - 18 -02 - 2023 - khan