The stock of Bayer CropScience Ltd. gained nearly 20 percent in April, its best monthly performance since November 2014 following a normal monsoon forecast by weather agencies.
The jump in the agrochemicals company's stock price comes after a three-month losing streak which eroded 10 percent of its market value.
“For a domestic focused business such as Bayer CropScience, monsoon remains the biggest variable,” Alok Deshpande, analyst at HSBC Securities and Capital Markets, said in a note.
Bayer is the “best pure-play” stock in India's domestic agro-inputs sector, Deshpande added. “We are bullish on Bayer as we believe it will be able to deliver above-industry-average growth in the next 5-10 years,” according to the HSBC Securities note.
The brokerage expects Bayer to increase its market share in the crop protection segment, where it is already a leader, to 18 percent by the financial year 2019-20 from the current 15 percent. Sales may rise at a compounded annual growth rate (CAGR) of 15 percent from now to FY20, compared to the industry average of 11 percent this year.
The stock is 9.2 percent above the Bloomberg consensus one-year target price. It rose 10 percent so far this year and gained 20 percent in the past 52 weeks.
Despite this run-up, Deshpande sees more room on the upside. “We retain our ‘buy' rating on the stock with a revised target price of Rs 4,975,” he said.
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