Nagarjuna Agrichem Ltd (Rs 228)
(BSE Code - 524709)
(P/E - 5.7, Equity - Rs14.9 cr, Promoter’s stake - 78.29%, Market Cap - Rs340 cr)
Nagarjuna Agrichem Ltd (NAC), a co. belonging to the Hyderabad based Nagarjuna group, was established in 1994 for producing Monocrotophos Technical. NACL has since grown substantially and now manufactures a comprehensive range of pesticide technical's, formulations and custom manufactured fine chemicals. NAC has tie-ups with large Indian Agrochemical Majors and MNC’s for the domestic and export markets. NAC has an impressive range of branded formulations in the categories of Insecticides, Fungicides and Herbicides. NAC has one of the largest dealer network spread across India, with marketing and sales offices in addition to an extensive Warehousing & Logistics Infrastructure to handle operations in 20 Indian states. NAC has been continuously expanding its production capacities and reporting better results. On a equity of 14.9 cr. the public holding in the company is 15.48%, and that of the promoters is 78.29%.
The export market offers good growth opportunities to the NAC and it has been strengthening its presence in the overseas market by exploring new markets, promoting existing and new products and protecting its existing product registrations and making investment in new product registrations. NAC’s market spans the entire Indian subcontinent as well as Europe, the Middle East, Japan, USA, Australia and Africa. Low cost production of the Indian agrochemical manufacturers helps them to win CRAMS business from the global agrochemical majors. The extremely low per hectare domestic consumption and thrust on increasing output per hectare promise healthy domestic growth going forward. The per capita consumption of crop protection products in India is one of the lowest in the world
NAC’s sales have been growing by an average 37% over the past five years, while its operating profit rose 35% over the same period. Margins have averaged a decent 15% over these five years. Most importantly, Nagarjuna is a very efficient user of capital. Its RoE has averaged 41.27% over the past three years. For the year ended March 2009, NAC reported 46% growth is net sales to Rs 605.3 cr., whereas net profit grew 91% to Rs 49.2 cr., despite 120% rise in income tax to 31 cr. from 14 cr. NAC improved its operating margins from 17% to 19%. On a equity of 14.9 cr, the EPS stood at Rs 33 and the dividend declared was 50%. The company improved its OPM from 17% to 19.5%. For the half year ended Sept. 2009, NAC has posted 42% rise in net profit to Rs 28.5 cr. on net sales of Rs 338 cr.(up 12%). Interim dividend of 20% has also been declared.
Going forward, emerging global imperative of productivity enhancement will revitalize the crop protection industry. The crop segment that NACL is targeting, is its key crop segment- rice, cotton and in the tea plantation. NAC is a company from the farm sector which combines a high RoE (41.27%) and reasonably low current valuations as compared to its peers such as Rallis India, Bayer Cropscience etc. At current levels the stock trades at about 6.9 times FY09 earnings and at about 5.7 times FY10E earnings (Rs 40) and has a market cap of about 340 cr.. The stock is certainly cheaply valued with its market-cap at just 2.9 times its FY09 operating profit of Rs 117 cr. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months.
Source: Internet (Valuenotes by Sanjay Chhabria)
(BSE Code - 524709)
(P/E - 5.7, Equity - Rs14.9 cr, Promoter’s stake - 78.29%, Market Cap - Rs340 cr)
Nagarjuna Agrichem Ltd (NAC), a co. belonging to the Hyderabad based Nagarjuna group, was established in 1994 for producing Monocrotophos Technical. NACL has since grown substantially and now manufactures a comprehensive range of pesticide technical's, formulations and custom manufactured fine chemicals. NAC has tie-ups with large Indian Agrochemical Majors and MNC’s for the domestic and export markets. NAC has an impressive range of branded formulations in the categories of Insecticides, Fungicides and Herbicides. NAC has one of the largest dealer network spread across India, with marketing and sales offices in addition to an extensive Warehousing & Logistics Infrastructure to handle operations in 20 Indian states. NAC has been continuously expanding its production capacities and reporting better results. On a equity of 14.9 cr. the public holding in the company is 15.48%, and that of the promoters is 78.29%.
The export market offers good growth opportunities to the NAC and it has been strengthening its presence in the overseas market by exploring new markets, promoting existing and new products and protecting its existing product registrations and making investment in new product registrations. NAC’s market spans the entire Indian subcontinent as well as Europe, the Middle East, Japan, USA, Australia and Africa. Low cost production of the Indian agrochemical manufacturers helps them to win CRAMS business from the global agrochemical majors. The extremely low per hectare domestic consumption and thrust on increasing output per hectare promise healthy domestic growth going forward. The per capita consumption of crop protection products in India is one of the lowest in the world
NAC’s sales have been growing by an average 37% over the past five years, while its operating profit rose 35% over the same period. Margins have averaged a decent 15% over these five years. Most importantly, Nagarjuna is a very efficient user of capital. Its RoE has averaged 41.27% over the past three years. For the year ended March 2009, NAC reported 46% growth is net sales to Rs 605.3 cr., whereas net profit grew 91% to Rs 49.2 cr., despite 120% rise in income tax to 31 cr. from 14 cr. NAC improved its operating margins from 17% to 19%. On a equity of 14.9 cr, the EPS stood at Rs 33 and the dividend declared was 50%. The company improved its OPM from 17% to 19.5%. For the half year ended Sept. 2009, NAC has posted 42% rise in net profit to Rs 28.5 cr. on net sales of Rs 338 cr.(up 12%). Interim dividend of 20% has also been declared.
Going forward, emerging global imperative of productivity enhancement will revitalize the crop protection industry. The crop segment that NACL is targeting, is its key crop segment- rice, cotton and in the tea plantation. NAC is a company from the farm sector which combines a high RoE (41.27%) and reasonably low current valuations as compared to its peers such as Rallis India, Bayer Cropscience etc. At current levels the stock trades at about 6.9 times FY09 earnings and at about 5.7 times FY10E earnings (Rs 40) and has a market cap of about 340 cr.. The stock is certainly cheaply valued with its market-cap at just 2.9 times its FY09 operating profit of Rs 117 cr. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months.
Source: Internet (Valuenotes by Sanjay Chhabria)
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