PI’s already robust product basket for the domestic market is likely to strengthen further following the new agreement to market Mitsui products. The company has various in-licensed products that are doing well and continues introducing new products.
Analysts at Edelweiss remain upbeat on PI’s prospects expecting better monsoons and new launches acting as catalysts for domestic growth, as also bright prospects of contract manufacturing (CSM) business in FY17. Crops during FY16 were impacted not only in India but internationally and hence the growth rate of PI’s CSM business (60 per cent of overall revenues) had remained subdued at 10 per cent compared to the compounded annual growth rate (CAGR) of 36 per cent seen during FY08-16.
Thus, the stock remained range-bound. While the trend may continue till earnings catch up, triggers for growth are visible. The CSM business is likely to grow 18-20 per cent during FY17 led by stabilisation of the Jambusar plant and order book of $850 million which is equivalent to about four years of revenues. Analysts at Axis Capital say they like PI due to its in-licensing model in domestic agrichem (enjoying higher margins) and strong entry barriers in the CSM business. Sighting similar reasons, analysts at Edelweiss say they remain upbeat on the company’s long-term prospects.
Like PI, a few other companies also have a strong portfolio in herbicides and fungicides in addition to insecticides. Analysts at HSBC say the herbicide category is currently 28 per cent of the $2.4-billion domestic market and they expect this category to grow at 15 per cent CAGR over the next five years aided by labour shortage. Within domestic pure-plays, they continue to prefer Bayer CropScience and Dhanuka Agritech, given their excellent product portfolios and pipeline, and the alignment of these towards the high-growth categories of herbicides and fungicides. Analysts at Emkay Research believe Bayer will continue to enjoy rich valuations due to MNC premium, cash-rich balance sheet and history of buybacks. Trading at Rs 3,934, HSBC has a target price of Rs 4,335 and a good monsoon can lead to further upgrades.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.