MUMBAI, JULY 08: Text of Crisil press release onfundamental grade of Insecticides (India) Ltd. CRISIL Equities assigns fundamental grade '3/5' to Insecticides (India) Ltd CRISIL Equities has assigned a CRISIL IER fundamental grade of '3/5' (pronounced three on five) to Insecticides (India) Ltd (IIL). The grade indicates that the company's fundamentals are 'good' relative to other listed equity securities in India. CRISIL Equities has assigned a valuation grade of '3/5', indicating that market price is 'aligned' with the current levels. Our one-year fair value of the stock is Rs 338. The stock is currently trading at Rs 335 per share. The grades are not a recommendation to buy, sell or hold the graded instrument, or a comment on the graded instrument's future market price or its suitability for a particular investor. The assigned fundamental grade reflects the doubling of IIL's market share from 1.2% in FY05 to 2.4% in FY10 amidst high competition in the domestic pesticides industry. An effective branding strategy - launching self-owned brands, acquiring 'high recall, but off-shelf' brands and entering into a technical collaboration with a foreign player - has enabled IIL to log higher growth than the industry. The grade factors in IIL's successful foray in the technicals segment, an input to manufacturing formulations, which is expected to enhance the company's profitability through backward integration. IIL's diversified product portfolio, pan India distribution network and capacity expansions - in the formulations and technical segments - also support the grade. The grade is constrained by the fact that IIL's margins are relatively lower than that of its peers because of its product portfolio, which is skewed towards lower-margin generic formulations. Further, IIL's branding strategy entails higher advertising spend. Industry risks such as unpredictable weather conditions, lengthy and expensive registration processes, risk of ban on certain pesticide products and threat of pest-resistant biotech seeds further moderate the grade.FINANCIAL OUTLOOK CRISIL Equities expects IIL's revenues to grow at a two-year CAGR of 37% to Rs 8.4 bn in FY13 largely driven by the commencement of three new plants, two in Dahej, Gujarat and one in Udhampur, Jammu, along with the recent acquisition of the hugely popular brand 'Monocil'. EBITDA margin is expected to expand to 10.7% in FY13 driven by higher consumption of indigenously manufactured technicals. Adjusted PAT is estimated to increase to Rs 664 mn in line with an improvement in operating profits. EPS is expected to increase from Rs 25.5 in FY11 to Rs 52.4 in FY13. We expect RoE to increase to ~29.6% in FY13 from 23.6% in FY11.VALUATION (3/5 - CURRENT MARKET PRICE IS ALIGNED) CRISIL Equities has used the discounted cash flow method to value IIL and arrived at a one-year fair value of Rs 338 per share. At this value, the implied P/E multiples are 8.5x FY12E EPS and 6.4x FY13E EPS.ABOUT THE COMPANY Incorporated in 1996, IIL manufactures insecticides formulations for crop protection. It has two formulations manufacturing units: one each in Chopanki, Rajasthan and Samba, Jammu. It backward integrated into the technical segment in 2007. The technicals manufacturing unit is located in Chopanki, Rajasthan. The popular IIL brands are Lethal, Thimet and Victor. These brands, along with their variants, accounted for ~35% of total revenues in FY11.ABOUT CRISIL INDEPENDENT EQUITY RESEARCH CRISIL IER (Independent Equity Research) is an independent, unbiased opinion on fundamentals and fair valuation of the company. CRISIL IER encompasses a comprehensive analysis of the four pillars ofsustainable value creation, namely: Industry and business prospects, financial performance & outlook, management capabilities and corporate governance.ABOUT CRISIL FUNDAMENTAL AND VALUATION (CFV) MATRIX The CFV matrix addresses two important aspects in investment making decision - analysis of fundamentals(addressed through fundamental grade) and analysis of returns (valuation grade). CRISIL's fundamental grade represents an overall assessment of the fundamentals of the company graded in relation to other listed equity securities in India. The grade facilitates easy comparison of fundamentals between companies, irrespective of the size or the industry they operate in. A CRISIL IER fundamental grade of '5/5' indicates 'excellent' fundamentals and a fundamental grade of '1/5' indicates 'poor' fundamentals relative to other listed equity securities in India. CRISIL's valuation grade represents an assessment of the fair value of the company's stock for an equity investor over a 12-month period. The grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP) to grade 1 (strong downside from the CMP). A CRISIL IER grading should not be construed as a recommendation to invest in the graded security, nor a comment on suitability of a particular investment for the reader. Compiled by Abhijeet SawantPhone: +91 (22) 66497000. feedback@tickerplantindia.com Copyright (c) TickerPlant Ltd.
Copyright (c) TickerPlant Ltd.
Copyright (c) TickerPlant Ltd.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
