Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A changing Indian agricultural landscape with rising profitability, government investment and
higher input demand implies secular multi-year growth opportunities for companies in agri inputs
and services sectors. Our top picks are Rallis and United Phosphorus followed by Tata
Chemicals and Coromandel
Indian agricultural landscape is changing fast
Farmers’ profitability has risen significantly in the last few years, based on higher crop prices. We
estimate gross margins for rice and wheat rose 48/70% over FY08-11. Meanwhile, an estimated
Rs520bn government direct investment (XI plan), a shift towards non-food grain crops, and the
rising costs of key inputs (including labour) are changing the face of Indian agriculture. Agri input
investment in India is still only 11% of the cost of crop production vs 35% in the USA, with
pesticides and seeds being highly underinvested. Overall, we believe there is a major investment
opportunity in Indian agriculture, with low consumption of key agri inputs and strong demand pull
from the domestic market.
We believe direct plays in agri inputs and services are becoming investible
We believe agri input plays, especially in pesticides and seeds, are especially attractive, with
fertilisers a play on reform. We forecast three-year CAGR for fertiliser demand of 4-5% and for
agrochem/seeds of 12/18%. Government policy reforms and incentives should also aid these
industries. The stocks on which we are initiating coverage have tended to outperform the broader
market over the last six to 12 months, but they are relatively inexpensive especially in light of the
good earnings visibility, in our view. Also, compared with global peers, our picks are not trading at
a significant premium, on our forecasts.
Global food and agri scenario also offers opportunities
Globally, rising demand for food from emerging countries and stagnation in arable land will likely
mean higher demand for agri inputs. Indian companies have begun actively tapping this
opportunity, especially in the less regulated markets of Asia and Latin America.
Top picks – Rallis and United Phosphorus
We initiate coverage on five stocks – Coromandel International, Jain Irrigation, Rallis, Tata
Chemicals and United Phosphorus. Our top picks are Rallis and United Phosphorus as we
believe agrochemicals and seeds offer the more exciting opportunities. We are also positive on
fertiliser companies like Coromandel International and Tata Chemicals. We are cautious on Jain
Irrigation as we feel balance sheet concerns and delays in subsidy payments could weigh on
near- and medium-term prospects.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A changing Indian agricultural landscape with rising profitability, government investment and
higher input demand implies secular multi-year growth opportunities for companies in agri inputs
and services sectors. Our top picks are Rallis and United Phosphorus followed by Tata
Chemicals and Coromandel
Indian agricultural landscape is changing fast
Farmers’ profitability has risen significantly in the last few years, based on higher crop prices. We
estimate gross margins for rice and wheat rose 48/70% over FY08-11. Meanwhile, an estimated
Rs520bn government direct investment (XI plan), a shift towards non-food grain crops, and the
rising costs of key inputs (including labour) are changing the face of Indian agriculture. Agri input
investment in India is still only 11% of the cost of crop production vs 35% in the USA, with
pesticides and seeds being highly underinvested. Overall, we believe there is a major investment
opportunity in Indian agriculture, with low consumption of key agri inputs and strong demand pull
from the domestic market.
We believe direct plays in agri inputs and services are becoming investible
We believe agri input plays, especially in pesticides and seeds, are especially attractive, with
fertilisers a play on reform. We forecast three-year CAGR for fertiliser demand of 4-5% and for
agrochem/seeds of 12/18%. Government policy reforms and incentives should also aid these
industries. The stocks on which we are initiating coverage have tended to outperform the broader
market over the last six to 12 months, but they are relatively inexpensive especially in light of the
good earnings visibility, in our view. Also, compared with global peers, our picks are not trading at
a significant premium, on our forecasts.
Global food and agri scenario also offers opportunities
Globally, rising demand for food from emerging countries and stagnation in arable land will likely
mean higher demand for agri inputs. Indian companies have begun actively tapping this
opportunity, especially in the less regulated markets of Asia and Latin America.
Top picks – Rallis and United Phosphorus
We initiate coverage on five stocks – Coromandel International, Jain Irrigation, Rallis, Tata
Chemicals and United Phosphorus. Our top picks are Rallis and United Phosphorus as we
believe agrochemicals and seeds offer the more exciting opportunities. We are also positive on
fertiliser companies like Coromandel International and Tata Chemicals. We are cautious on Jain
Irrigation as we feel balance sheet concerns and delays in subsidy payments could weigh on
near- and medium-term prospects.
No comments:
Post a Comment