In the crop protection business, the company has posted revenue growth of 22 per cent over the FY16-20 period on the back of steady organic growth, differentiated portfolio, and the acquisition of Astec Lifesciences in 2015. New product launches by the legacy agri input business, coupled with diversification of product portfolio and backward integration at Astec, should help sustain growth rates of around 10 per cent and margins (of around 22 per cent) for the segment.
Among the other segments, the edible oil business (palm oil plantation), which accounts for 9 per cent of revenues, is expected to see strong growth because of robust demand and government measures to boost local production amid high imports. The recovery in palm oil prices and steps to improve oil extraction ratio should aid in improving its margins. IIFL expects the business to grow at 16 per cent annually over the FY20-23 period.
The dairy and poultry businesses account for 7-8 per cent of revenues each. The increase in value-added products for the dairy business and higher poultry prices over the past couple of months should help improve margins for the two segments.
While prospects remain strong, the recent rally, which has increased valuations, factors in the triggers for its key segments. Investors can look at the stock on dips.