Insecticide India reports a net profit of Rs. 38 Cr.

In the June quarter, Insecticide India reported total sales of Rs. 561 Cr. The company’s net profit stood at Rs 38 crores as compared to Rs 22 crores in the March quarter. EBITDA was 66 crores in Q1 FY23, compared to 42 crores in Q4 FY22 and 61 crores in Q1 FY22, with EBITDA margins contracting to 90 basis points. In the first quarter of FY23, B2C, B2B, and exports contributed 66%, 29%, and 5%, respectively. The better product mix, coupled with price hikes in the recent past, led to a gross margin improvement of 70bps. The Institutional (B2B) category grew by +30% YoY in 1Q.

New launches to increase demand:

Insecticide India has launched 3 new products in 1Q and intends to launch another 6 products in FY23E. There is a CAPEX of Rs1.1bn largely behind, and the technical synthesis plant is to commence at the end of the year. Going forward, we expect the business to pick up with new launches, a better margin profile of in-licensing, the inauguration of new capacities, and backward integration projects. The management expects double-digit revenue growth with at least 100 bps improvements in margins to be led by better contributions from new product launches and superior product mix in FY23E.

In 1Q FY23, the ITI (innovation turnover index) index was at 12.2%. They have recently received four patents for fungicides and pesticides, with a few more patents to be granted in the subsequent quarters. The company launched 3 new products in 1QFY23: Torry (Maize herbicide), Sargent Xpress (insecticide), and Himax (non-selective weedicide). While the revenues from the recently launched products in FY22-Hachiman, Oxim, and Shinwa grew 3x in 1QFY23. There has been a marginal increase in the CAPEX budget on account of inflationary costs and non-budgeted incidental expenditures. The technical synthesis plant at Dahej is expected to commence operations by the end of 1HFY23. We expect similar growth momentum in FY24. However, the company lowered export revenue guidance by 25% to Rs. 150 crore.

Valuation:

The EPS  stood at Rs.54.0, while the stock is trading at a P/E of 18.5X. The 5-year P/E stood at 11.2x. The EBITDA was at 11.6x and the interest coverage ratio was at 25.7x. The ROCE was at 16% and the ROE was at 12.7%. The scrip closed at Rs.1000, down by 1.06% on Tuesday.