bharat rasayan ltd...metaphenoxy benzaldehyde. during q2 fy19, the company’s net profit jumps to...

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BHARAT RASAYAN LTDResult Update (PARENT BASIS): Q2 FY19

CMP: 5671.00 DEC 18th, 2018

Overweight ISIN:INE838B01013

Index DetailsSYNOPSIS

Bharat Rasayan Ltd is an India-based companyengaged in manufacturing of pesticides-technical,formulations and its intermediates. Its offersMetaphenoxy Benzaldehyde.

During Q2 FY19, the company’s net profit jumps toRs. 357.90 million from Rs. 240.80 million in thecorresponding quarter ending of previous year, anincrease of 48.63%.

Revenue for the 2nd quarter stood at Rs. 2852.70million from Rs. 2440.60 million, when comparedwith the prior year period, higher by 16.89%.

For the Q2 FY19, EBITDA stood at Rs. 593.30million as against Rs. 461.50 million in thecorresponding period of the previous year.

During Q2 FY19, Profit before tax stood at Rs.510.70 million against Rs. 381.80 million in Q2FY18.

EPS of the company stood at Rs. 84.24 a shareduring the quarter, as against Rs. 56.68 per shareover previous year period.

Revenue of the company registered a growth of23.84% at Rs. 5303.90 million in H1 FY19 ascompared to Rs. 4283.00 million in H1 FY18.

During H1 FY19, PAT of the company stood at Rs.607.70 million as compared to Rs. 397.10 million inH1 FY18, up by 53.03%.

Net Sales and PAT of the company are expected togrow at a CAGR 28% and 43% over 2017 to 2020E,respectively.

Stock DataSector AgrochemicalsBSE Code 590021Face Value 10.0052wk. High / Low (Rs.) 8395.00/3561.00Volume (2wk. Avg.) 216Market Cap (Rs. in mn.) 24094.38

Annual Estimated Results(A*: Actual / E*: Estimated)

Years(Rs in mn) FY18A FY19E FY20ENet Sales 8104.00 10211.04 12253.25EBITDA 1608.10 1999.69 2370.76Net Profit 983.20 1190.60 1420.76EPS 231.41 280.23 334.40P/E 24.51 20.24 16.96

Shareholding Pattern (%)

As on Sep 2018 As on June 2018

Promoter 74.79 74.79

Public 25.21 25.21

Others -- --

1 Year Comparative Graph

BHARAT RASAYAN LTD S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDENDCompany Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Bharat Rasayan Ltd 5671.00 24094.38 281.01 20.18 8.08 15.00Insecticides (India) Ltd 556.85 11508.90 45.62 12.21 2.10 20.00UPL Limited 764.00 389137.80 10.19 74.89 4.88 400.00Bhagiradha Chem & Indu Ltd 432.50 3593.90 8.60 50.29 3.51 0.00


QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q2 FY19,

Rs. In Million Sep-18 Sep-17 % Change

Revenue 2852.70 2440.60 16.89%

PAT 357.90 240.80 48.63%

EPS 84.24 56.68 48.63%

EBITDA 593.30 461.50 28.56%

The company’s net profit stood at Rs. 357.90 million as against Rs. 240.80 million in the corresponding quarter ending of

previous year, up by 48.63%. Revenue for the 2nd quarter rose by 16.89% to Rs. 2852.70 million from Rs. 2440.60

million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 84.24 a share

in Q2 FY19 as against Rs. 56.68 in the corresponding quarter of the previous year. Profit before interest, depreciation and

tax is Rs. 593.30 million as against Rs. 461.50 million in the corresponding period of the previous year.

Break up of Expenditure,

Break up of Expenditure

Value in Rs. Million

Q2 FY19 Q2 FY18 %Chng

Cost of MaterialConsumed 1828.70 1383.40 32%

Purchase of Stock-in-Trade 31.50 191.90 -84%

Employee BenefitExpenses 156.10 129.90 20%

Depreciation &Amortization Expense 42.50 40.30 5%

Other Expenses 168.80 161.30 5%


COMPANY PROFILEBharat Rasayan Ltd is an India-based company engaged in manufacturing of pesticides-technical, formulations and its

intermediates.

Bharat Rasayan Ltd primarily offers Metaphenoxy Benzaldehyde. The Company's products are Insecticides, which

include Acetamiprid, Bifenthrin, Chlorpyrifos, Cypermethrin, Imidacloprid, Permethrin and Thiamethoxam; Herbicides,

which include Clodinafop Propargyl, Cloquintocet Mexyl (Safener), Diuron and Metsulfuron Methyl; Fungicides, which

include Tricyclazole and Myclobutanil; Acaricide, which include Fenpyroximate, and Intermediates, which include Meta

Phenoxy Benzaldehyde and Para Chloro Benzyl Cyanide.


FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as of March 31, 2017 -2020E

FY17A FY18A FY19E FY20EASSETS1) Non-Current Assets

a) Property, Plant and Equipment 1309.52 1476.06 1549.86 1658.35b) Capital Work in Progress 12.10 69.01 115.93 179.70c) Other Intangible Assets 0.82 1.13 2.12 2.86d) Intangible Assets Under Development 0.00 2.37 4.63 6.02e) Financial Assets

i) Investments 0.88 0.88 0.92 0.99ii) Other Financial Assets 11.24 15.42 16.19 16.83

f) Other Non -Current Assets 8.35 12.41 0.00 0.00Sub Total Non- Current assets 1342.91 1577.27 1689.65 1864.75

2) Current Assetsa) Inventories 838.61 941.75 1469.13 2027.40b) Financial Assets

i) Trade Receivables 1201.52 2216.09 3501.43 4726.93ii) Cash and Cash Equivalents 10.51 12.32 13.30 14.23iii) Other Balances with Banks 23.12 37.57 84.53 116.65iv) Other Financial Assets 3.09 4.98 8.22 11.26

c) Current Tax Assets (Net) 0.42 13.68 14.09 14.80d) Other-Current Assets 274.53 233.38 315.06 403.27Sub Total - Current Assets 2351.80 3459.77 5405.76 7314.54

Total Assets (1+2) 3694.71 5037.04 7095.41 9179.29EQUITY AND LIABILITIES1) EQUITY

a) Equity Share Capital 42.49 42.49 42.49 42.49b) Other Equity 1964.60 2939.97 4115.96 5536.72

Total Equity 2007.09 2982.46 4158.45 5579.212) Non Current Liabilities

a) Financial Liabilitiesi) Borrowings 400.00 400.00 388.00 380.24

b) Long-Term Provisions 6.43 7.89 10.10 11.61c) Deferred Tax Liabilities (Net) 83.30 120.42 125.23 128.99Sub Total - Non Current liabilities 489.73 528.31 523.33 520.84

3) Current Liabilitiesa) Financial Liabilities

i) Borrowings 747.13 883.44 1085.97 1248.87ii) Trade Payables 187.71 353.75 795.93 1065.56iii) Other financial liabilities 178.28 229.72 411.20 555.12

b) Other Current Liabilities 16.15 16.03 11.07 7.97c) Short-Term Provisions 0.52 0.86 1.14 1.31d) Current Tax Liabilities (net) 68.10 42.48 108.32 200.40Sub Total - Current Liabilities 1197.89 1526.28 2413.63 3079.23

Total Equity And Liabilities (1+2+3) 3694.71 5037.04 7095.41 9179.29


Annual Profit & Loss Statement for the period of 2017 to 2020E

Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Description 12m 12m 12m 12mNet Sales 6760.00 8104.00 10211.04 12253.25Other Income 22.20 26.20 34.06 40.19

Total Income 6782.20 8130.20 10245.10 12293.44

Expenditure -5655.50 -6522.10 -8245.41 -9922.68

Operating Profit 1126.70 1608.10 1999.69 2370.76Interest -120.10 -106.40 -162.79 -187.21

Gross profit 1006.60 1501.70 1836.89 2183.55

Depreciation -164.30 -164.20 -172.41 -182.75

Exceptional Items -3.10 18.80 0.00 0.00

Profit Before Tax 839.20 1356.30 1664.48 2000.79

Tax -293.90 -373.10 -473.88 -580.03

Net Profit 545.30 983.20 1190.60 1420.76Equity capital 42.49 42.49 42.49 42.49

Reserves 1964.60 2939.97 4115.96 5536.72

Face value 10.00 10.00 10.00 10.00

EPS 128.35 231.41 280.23 334.40

Quarterly Profit & Loss Statement for the period of 31st Mar, 2018 to 31st Dec, 2018E

Value(Rs.in.mn) 31-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18E

Description 3m 3m 3m 3mNet sales 1934.40 2451.20 2852.70 2053.94Other income 6.90 17.80 5.60 4.20

Total Income 1941.30 2469.00 2858.30 2058.14

Expenditure -1552.00 -2041.00 -2265.00 -1634.53

Operating profit 389.30 428.00 593.30 423.62Interest -21.80 -30.90 -40.10 -42.91

Gross profit 367.50 397.10 553.20 380.71

Depreciation -43.30 -40.30 -42.50 -44.63

Exceptional Items 59.30 0.00 0.00 0.00

Profit Before Tax 383.50 356.80 510.70 336.08

Tax -28.30 -107.00 -152.80 -85.70

Net Profit 355.20 249.80 357.90 250.38Equity capital 42.49 42.49 42.49 42.49

Face value 10.00 10.00 10.00 10.00

EPS 83.60 58.79 84.24 58.93


Ratio Analysis

Particulars FY17A FY18A FY19E FY20E

EPS (Rs.) 128.35 231.41 280.23 334.40

EBITDA Margin (%) 16.67% 19.84% 19.58% 19.35%

PBT Margin (%) 12.41% 16.74% 16.30% 16.33%

PAT Margin (%) 8.07% 12.13% 11.66% 11.59%

P/E Ratio (x) 44.19 24.51 20.24 16.96

ROE (%) 27.17% 32.97% 28.63% 25.47%

ROCE (%) 30.51% 33.85% 32.44% 30.35%

Debt Equity Ratio 0.57 0.43 0.35 0.29

EV/EBITDA (x) 22.37 15.75 12.74 10.80

Book Value (Rs.) 472.40 701.97 978.76 1313.16

P/BV 12.00 8.08 5.79 4.32

Charts


OUTLOOK AND CONCLUSION

At the current market price of Rs. 5671.00, the stock P/E ratio is at 20.24 x FY19E and 16.96 x FY20E respectively.

Earning per share (EPS) of the company for the earnings for FY19E and FY20E is seen at Rs. 280.23 and Rs. 334.40

respectively.

Net sales and PAT of the company are expected to grow at a CAGR of 28% and 43% over 2017 to 2020E,

respectively.

On the basis of EV/EBITDA, the stock trades at 12.74 x for FY19E and 10.80 x for FY20E.

Price to Book Value of the stock is expected to be at 5.79 x and 4.32 x for FY19E and FY20E, respectively.

Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

BRL is one of the few companies manufacturing its own technical grade pesticides from basic raw materials. This gives

the Company an inherent advantage over quality and prices and this further leads to manufacturing of quality products at

competitive prices. In India, agriculture sector is principal source of livelihood of more than 65% of the population.

However, in Indian agrochemicals industry, there is equal presence of Multinational as well as Indian Companies. The

MNC's have focused on high-end specialty products whereas Indian players have focused on generic and off-patent

products.

BRL has well equipped laboratory with latest analytical equipment's which enables the Company to achieve total

customer satisfaction by supplying quality products and services. The Company's products have been widely accepted in

foreign markets also and it has excellent track record of sales of Products.


INDIAN ECONOMY AND MARKETS

While the global economies continued to witness slow growth during the current year as well, the Indian economy on a

macro basis stayed fairly robust. The below par performance of global economy was reflected in a continued slowdown in

growth in most emerging and developing economies, driven by weaker capital inflows and a subdued global trade. India,

however, was one of the faster growing large economies in the world, with a currency that performed better than most

other emerging market currencies.

As per the estimations globally the population is expected to cross the mark of 9 billion by 2050. Rising population has

led to increasing food demand. India is the second most populous country in the world, with its population estimated to

grow over time. In order to meet their food and nutrition needs there is requirement of a sustainable approach that puts

thrust on increasing productivity against a background of lower yields and decreasing farm sizes.

INDIAN AGROCHEMICAL INDUSTRY

Indian Economy has undergone a tremendous change over the past three decades. From being primarily agrarian it has

continuously progressed towards secondary and tertiary sectors. Still agriculture continues to contribute extensively to the

Indian GDP due to its significant implications on food security, employment and poverty. India due to its inherent

strength of low-cost manufacturing and qualified low-cost manpower is a net exporter of pesticides to countries such as

USA & some European & African countries.

As per current year's budget allocation and initiatives the agriculture income is aspired to get double in next five years.

The government's support, with increased funds for irrigation, crop insurance and credit facilities will help the farmers to

deal with weather-related risk, income security, increase their production and productivity and to deal with post-harvest

challenges, have raised the prospects of growth of the Agriculture sector.

The growth of agrochemical industry is directly proportional to the growth of the agriculture sector. Any improved

situation like increased purchasing power with the farmers to buy more of agro-chemicals is a further to the industry. The

scope of the agro-chemical industry in India is quite wide given the fact that there is still a considerable part of the country

not touched by the modern technology and irrigation facilities.

Indian agrochemicals market will be driven by growth in herbicides and fungicides, increasing awareness towards

judicious use of agrochemicals, contract manufacturing and export opportunities. Challenges such as non-genuine

products, appropriate focus on R&D, inefficiencies in the supply chain etc. need to be addressed on priority. In addition to

the use of crop protection chemicals, Indian agriculture needs to focus on specific solutions to enhance crop productivity

adopt efficient agronomy practices, fertigation, seed treatment, biotechnology and integrated pest management to reduce

wastage and attain self-sufficiency in agricultural output.

Low purchasing power of farmers, lack of awareness amongst them and limited reach are some of the reasons for low

consumption of crop protection products in India, thus providing a great opportunity for growth of the crop protection

sector.


OPPORTUNITIES AND OUTLOOK

Rising costs and uncertainty in availability of some key raw materials continue to be a challenge. The exchange rate

fluctuations also impact the raw material prices. Genetically modified seeds which have more self-immunity from natural

adversaries pose a threat to the Large area exists in India for agriculture cultivation. Indian growth considering the cost

advantage as compared to that prevailing in developed countries as also considering the fact that usage of Insecticides in

India on average basis as compared to developed countries is comparatively low change in crop pattern and pest

formation. However introduction of new molecules area deterrent to domestic agro chemical companies with low

technology base and limited area of operations.

Indian agriculture is on a growth path, with an increase in investments and private funding in the past few years. The

Government has taken bold steps to support the farm sector by means of extended credit facilities, dedicated micro and

macro irrigation fund, post-harvest support, market reforms, crop insurance and basic infrastructure facilities. The sector

is expected to grow with better momentum in the next few years, owing to an increase in investment in agricultural

infrastructure such as irrigation facilities, warehousing and cold storage. Factors such as reduced transaction costs, time,

better port gate management and fiscal incentives will also contribute to this upward trend. Furthermore, the increased use

of genetically modified crops is also expected to better the yield of the Indian farmers. Within agrochemicals, fungicides

and herbicides are expected to show healthy growth on the back of increased acreage under horticulture, rising

horticulture produce prices and emergence of organised retail (largely used in fruits and vegetables).


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bharat rasayan ltd...metaphenoxy benzaldehyde. during q2 fy19, the company’s net profit jumps to...

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