Company Introduction: Bayer CropScience is a leader in the areas of crop protection, pest control, seeds and plant biotechnology. The ‘Agri Care’ business which primarily includes manufacture, sale and distribution of insecticides, fungicides, weedicides and various other agrochemical products. Bayer Crop. is subsidiary of Bayer (Germany).
Investment Arguments Bayer CropScience is the largest player of pesticides in India with over 25% market share (organized). Bayer is the biggest beneficiary of increasing consumption of pesticides in India, which is we expect to grow at an 8-10% CAGR from the current consumption of a mere 0.6gms/Ha. Robust R&D backed by parent Bayer AG means the company is very well equipped to launch 3-4 new products every year. Strong R&D also helps the company to roll out new products to target pests that have developed resistance against older molecules.
Expected Value: 1402 Sector: Agri.
On the unlocking of value of the Thane plant (Around 1100 Crore) – the company has received the earnest amount of Rs. 260crs on March 2011 and an advance payment of Rs. 260crs on Dec 2011 for the exclusive arrangement. The remaining procedure should be completed at a future date and the receipt of the consideration will be received on or before 30th Nov 2012. High levels of cash coupled with strong balance sheet enables the company to chalk out big expansion (organic or inorganic).
Valuation
With new product is expected to be launched in FY 14-FY 15, we believe company is building strong platform for sustainable growth in future. Bayer Corp (Parent) is focusing on cost rationalization globally which will be reflected in Indian subsidiary too. We strongly believe stock price is much undervalued vis a vis growth potential. Our FY 14 target value of the stock is 1402 based on 9.5 EV/EBIDTA (median of last 7 years).
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