Prabhudas Lilladher has given Hold recommendation for Insecticides India with a target price of Rs. 920 in its research report issued on Aug 17, 2022

Prabhudas Lilladher’s research report on Insecticides India

Insecticides India (INST) reported revenue/EBITDA/PAT growth of 20%/10%/10% YoY. Revenues were better than our estimates however EBITDA/ PAT were in line with our estimates largely led by lower margins. Key highlights are: (a) B2C/B2B/exports contributed to 66%/29%/5% in 1QFY23; (b) better product mix coupled with price hikes in the recent past led to gross margins improvement of 70bps YoY to 23.9%; (c) higher opex coupled with MTM provisions of Rs65mn due to forex has led to EBITDA margin contraction of 90bps YoY to 10.4%; (d) Institutional (B2B) category grew +30% YoY in 1Q; (e) launched 3 new products in 1Q; to launch +6 products in FY23E; (f) capex of Rs1.1bn largely behind; technical synthesis plant to commence in end of 1HFY23. Going forward we expect INST’s business to pick up driven by new launches, better margin profile of in-licensing molecules, commencement of new capacities and backward integration projects. The management expects double digit revenue growth with at least 100 bps improvement in margins to be led by better contribution from new product launches and superior product mix in FY23E. We broadly retain our estimates for FY23/24E.

Outlook

However, we assign 5-year average PE multiple of 13x (10x earlier) citing improved business traction post capex. Maintain ‘HOLD’ with revised TP of Rs920 (Rs680 earlier) based on 13x FY24E EPS (5 year high/low/average of 19x/5x/13x).

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