Result Preview - Agro-input - Players likely to have higher volumes amidst subdued realizations in Q1FY19

Q1FY19 earnings preview for agro-input sector.

Jul 21, 2018 12:07 IST India Infoline News Service

Agrochemical players are likely to report moderate earnings for the quarter on account of higher volumes due to onset of sowing season for kharif crops. Volumes are likely to be better on account of lower channel inventory and positive monsoon expectation for the current year. However, we expect margins to remain under pressure as the raw material prices are likely to remain at peak. Also, as the crop prices have remain subdued during the year, the companies are least expected to have taken a hike across product segments.

The integrated player having presence across the value chain are expected to report stable performance on account of hedge against inflationary prices of raw materials.

The sowing of crops under the current kharif season is down by ~21% yoy, on account of uneven distribution of rainfall across the country. The acreage of all the major crops like paddy, pulses, coarse cereals, oilseeds and cotton is down by 10.4%, 41%, 30%, 44% and 30% yoy, respectively.

The animal feed business is expected to be driven by volume growth across various categories. We expect market share for organised players to continue which would benefit the companies present across geographies.

Top picks: Godrej Agrovet

1 PI Industries (Rs cr) Q1FY19E YoY QoQ
Sales 663.8 20.0% 6.2%
EBITDA 150.0 15.0% 11.3%
EBITDA margin (%) 22.6% (98.2)bps 104.1bps
PAT 109.1 9.0% 3.5%
PI Industries is expected to witness revenue growth of 20% on account of traction under domestic business and revival of export business due to previous year's spillover effect for the orders. We expect decline in EBITDA margin by ~100bps yoy on account of rise in input raw material costs despite increase in sales volume. We estimate moderate PAT growth of 9% yoy on account of increase in depreciation charge and stable effective tax rate of ~21% in FY19E.

2 Godrej Agrovet (Rs cr) Q1FY19E YoY QoQ
Sales 1,478.5 10.0% 23.8%
EBITDA 151.0 20.0% 103.5%
EBITDA margin (%) 10.2% 85.1bps 400.0bps
PAT 87.5 15.0% 173.5%
Godrej Agrovet is expected to witness 10% growth in revenue led by recovery of volumes under animal feed segment, traction under palm oil buisness and revival of domestic agro-chemical business. We expect expansion in EBITDA margin on account of improvement in animal feed business mix, price recovery under agro-chemicals business and cost-optimization initiative. We estimate PAT to rise by 15% led by higher EBITDA, declining finance cost and stable other incomes.

3 Bayer Cropscience (Rs cr) Q1FY19E YoY QoQ
Sales 781.8 12.0% 160.4%
EBITDA 127.2 10.0% -880.1%
EBITDA margin (%) 16.3% (29.6)bps 2,169.6bps
PAT 94.9 -15.0% -836.0%
Bayer Cropscience revenue growth is estimated to be at 12% yoy on account of low base effect in Q1FY18 and traction from new product launches. EBITDA margin is expected to decline on pricing pressure of raw material coupled with subdued realization level due to lower crop prices. PAT is expected to decline by 15% yoy on account of decline in EBITDA margin, higher depreciation charge and lower levels of other income.

4 UPL (Rs cr) Q1FY19E YoY QoQ
Sales 4,020.8 8.0% -29.3%
EBITDA 817.5 9.0% -32.9%
EBITDA margin (%) 20.3% 18.7bps (107.1)bps
PAT 547.4 9.3% 1.6%
UPL's revenue growth is estimated at 8% backed by higher volumes in India and North America and upward movement of cross currency. EBITDA margin is expected to remain stable on account of higher volumes offsetting the pricing pressure of the products across locations and forex gain on rupee depreciation on exports. We expect PAT to grow by 9% yoy majorly led by rise in EBITDA and stable other income and effective tax rate. However, it may witness foreign exchange loss on translation due to rupee depreciation.

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