BASF: Performance driven by Agri

20 Nov 2023 , 02:08 PM

• BASF India’s performance remained under pressure during H1’24, due to soft demand and severe pricing pressure. Global over capacity amid demand slowdown impacted performance. Agri-solutions performance came in strong, while other segments’ profitability either remained subdued or incurred losses.
• Despite delayed monsoons, Agri-solutions reported ~10% YoY growth in H1’24. Ebit was up 96% to Rs3.1bn (margins at 25.3%). Strong performance was driven by the recently launched insecticide Exponus. The top two products include Exponus (insecticides) and Tinger (herbicide).
• Optimism around BASF India largely stems from its strong parentage. Globally, the BASF group has a much wider and richer product portfolio and believes in setting up Verbund sites. However, the expectation of similar investments in India is yet to see light.
• As per the management, India continues to be a growth story, though the case for stepping up investments is not yet compelling given the lack of feedstock-availability. Also, its global units are currently under-utilised given weak demand which is likely to delay investments in India.
• Analysts of IIFL Capital Services await strong capex announcements before becoming constructive on the company. At 26x FY25 earnings, valuation does look reasonable for an MNC like BASF India; however, lack of clear growth visibility is what compels us to remain on the side-line. Analysts of IIFL Capital Services have not rated the stock.