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Sharda Cropchem (Sharda) is a crop protection chemical company
engaged in the marketing and distribution of a wide range of formulations
and generic active ingredients globally. It is also involved in order based
procurement and supply of belts, general chemicals, dyes and dye
intermediates. The topline and bottomline have grown at a CAGR of
22.1% and 38.6%, respectively, in FY10-14. In FY14, the company clocked
a consolidated topline of | 782 crore with ~82.5% being contributed by
the agro chemical business (| 645 crore), ~15.8% being contributed by
the conveyor belt business (| 123 crore) and ~1.7% being contributed by
other business (dyes). The company is export-oriented and realises a
healthy 97% of its topline from exports. Among geographies, it has major
exposure to the European Union, which constitutes ~61.3% of its FY14
consolidated revenue.
Investment Rationale
High number of registrations- key USP
Sharda has an asset-light business model whereby it focuses on
identifying generic molecules, preparing dossiers, seeking registrations,
marketing and distributing formulations through third-party distributors or
its own sales force. The company as of FY14 holds around 1200
registrations of which the European Union constitutes ~45% (534
registrations), Latin America ~26% (312 registrations), Nafta ~6% while
the rest of world (RoW) comprises the remaining ~23%.
Asset light model; healthy balance sheet coupled with good return ratios
By virtue of following an asset light model, Sharda has a healthy balance
sheet with debt-equity at 0.1x FY14. As of FY14, the company holds
~| 197 crore of fixed assets comprising | 62 crore of intangible assets
(registrations) and | 134 crore of intangible assets under development
(registrations in various stages of development). The company has a net
cash of | 151 crore as of FY14. Sharda also commands healthy return
ratios with RoE and RoCE of 20.9% and 21.1%, respectively, in FY14.
Concerns
• Stretched working capital cycle (~90+ days)
• Company’s trademark not registered
• Growth of GM crops limiting growth of agro chemicals
Available at 13.2x FY14 P/E & 2.5x FY14 P/BV; recommend SUBSCRIBE
At the upper price band of | 156, the company is available at a P/E of
13.2x on FY14 EPS. We reiterate that this issue is essentially an offer for
sale wherein no proceeds from the issue will be ploughed back in the
company. We recommend SUBSCRIBE on the issue for listing gains.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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Subscribe for listing gains…
Sharda Cropchem (Sharda) is a crop protection chemical company
engaged in the marketing and distribution of a wide range of formulations
and generic active ingredients globally. It is also involved in order based
procurement and supply of belts, general chemicals, dyes and dye
intermediates. The topline and bottomline have grown at a CAGR of
22.1% and 38.6%, respectively, in FY10-14. In FY14, the company clocked
a consolidated topline of | 782 crore with ~82.5% being contributed by
the agro chemical business (| 645 crore), ~15.8% being contributed by
the conveyor belt business (| 123 crore) and ~1.7% being contributed by
other business (dyes). The company is export-oriented and realises a
healthy 97% of its topline from exports. Among geographies, it has major
exposure to the European Union, which constitutes ~61.3% of its FY14
consolidated revenue.
Investment Rationale
High number of registrations- key USP
Sharda has an asset-light business model whereby it focuses on
identifying generic molecules, preparing dossiers, seeking registrations,
marketing and distributing formulations through third-party distributors or
its own sales force. The company as of FY14 holds around 1200
registrations of which the European Union constitutes ~45% (534
registrations), Latin America ~26% (312 registrations), Nafta ~6% while
the rest of world (RoW) comprises the remaining ~23%.
Asset light model; healthy balance sheet coupled with good return ratios
By virtue of following an asset light model, Sharda has a healthy balance
sheet with debt-equity at 0.1x FY14. As of FY14, the company holds
~| 197 crore of fixed assets comprising | 62 crore of intangible assets
(registrations) and | 134 crore of intangible assets under development
(registrations in various stages of development). The company has a net
cash of | 151 crore as of FY14. Sharda also commands healthy return
ratios with RoE and RoCE of 20.9% and 21.1%, respectively, in FY14.
Concerns
• Stretched working capital cycle (~90+ days)
• Company’s trademark not registered
• Growth of GM crops limiting growth of agro chemicals
Available at 13.2x FY14 P/E & 2.5x FY14 P/BV; recommend SUBSCRIBE
At the upper price band of | 156, the company is available at a P/E of
13.2x on FY14 EPS. We reiterate that this issue is essentially an offer for
sale wherein no proceeds from the issue will be ploughed back in the
company. We recommend SUBSCRIBE on the issue for listing gains.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
LINK:
http://content.icicidirect.com/mailimages/IDirect_ShardaCropchem_IPOReview.pdf
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