Agri stocks rally; Bayer Crop, Dhanuka Agritech hit all-time highs

CRISIL expects a real agricultural growth of 2.5 per cent in fiscal 2021
Shares of agrochemicals companies rallied up to 5 per cent on the BSE on Tuesday amid expectation of earning improvement on the back of normal South-West monsoons this year, which bodes well for the consumption of fertilizers and agrochemicals in the Kharif season.

Bayer Cropscience and Dhanuka Agritech hit their respective lifetime highs while PI Industries, and Rallis India hit their 52-week highs after rallying up to 5 per cent each. In the past one month, the share prices of Dhanuka Agritech, Sharda Cropchem, Aster Lifesciences, Bayer Cropscience, Insecticides India, Rallis India, and UPL have rallied between 11 per cent and 44 per cent. In comparison, the S&P BSE Sensex was up 9 per cent during the period.

Agriculture and allied activities could be the Indian economy’s only bright spot in a year when the Covid-19 pandemic has slammed the brakes on industry and services, rating agency CRISIL said in a note.

Overall, CRISIL expects a real agricultural growth of 2.5 per cent in fiscal 2021, with risks tilted to the downside due to a hit to horticulture and any likely impact of locust attacks. Growth in agriculture and allied activities this fiscal hinges on a bumper food grains production. A normal monsoon will be critical, too, the rating agency said in a report.

Reform measures related to agriculture stand out in the Atma Nirbhar Bharat Abhiyan package. The proposed new law, which provides the farmer a choice in selling the produce rather than being captive to the Agriculture Produce and Marketing Commission (APMC) Act, was long overdue. The amendment of the Essential Commodities Act to deregulate food items (food grains, oilseeds, onion and potato), too, is aimed at improving price realisation for farmers and in curtailing the ambiguity, CRISIL said.

Among individual stocks, Dhanuka Agritech hit a new high of Rs 704 today. The stock has soared 45 per cent in the last one month. The company’s EBITDA (earnings before interest, taxes, depreciation, and amortisation) for the quarter ended March 2020 (Q4FY20) rose 38.6 per cent year-on-year (YoY) to Rs 45.78 crore from Rs 33.03 crore in the previous year quarter. EBITDA margin improved 297 basis points (bps) to 20.11 per cent from 17.14 per cent during the quarter.

The management of Bayer CropScience said a good monsoon in 2019 ensured sufficient water reserves for Rabi sowing. "This coupled with stable commodity prices, favorable climate and strong portfolio performance in corn and horticulture, helped us achieve strong growth in Q4", they said.

The stock of Bayer Cropscience, too, hit a new high of Rs 5,714 today. It has rallied 26 per cent in the past one month, after the company reported profit before exceptional items and tax (PBET) of Rs 54.3 crore in Q4FY20, on the back of strong operational performance. It had posted a loss before exceptional items and tax of Rs 95 crore in the corresponding quarter of the previous year.

DHANUKA AGRITECH 699.90 485.15 44.26
SHARDA CROPCHEM 194.85 140.60 38.58
ASTEC LIFE 711.55 545.65 30.40
BAYER CROP SCI. 5708.75 4526.60 26.12
INSECTICID.INDIA 488.00 396.35 23.12
RALLIS INDIA 258.20 213.65 20.85
UPL 421.80 378.95 11.31
P I INDUSTRIES 1629.60 1485.70 9.69
MEGHMANI ORGAN. 50.50 47.15 7.10

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