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Key investment positives
Asset-light business model with core competence in
registration of ingredients
The company has an asset-light business model whereby
it focuses on identifying generic molecules, preparing
dossiers, seeking registrations, and marketing and
distributing formulations through third-party distributors
or its own sales force. As of August 5, 2014, SCL has over
180 good laboratory practices (“GLP”) certified dossiers
and as of July 15, 2014 it owns over 1,040 registrations
for formulations and over 155 registrations for generic
active ingredients across Europe, North American Free
Trade Agreement (NAFTA) nations, Latin America and the
Rest of the World. As of August 5, 2014, SCL has filed over
500 applications for registrations globally which are
pending at different stages.
Consequently, the company is able to cater to the demand
for protection of a wide range of crops grown in varied
soil and weather conditions across different jurisdictions
as well as serve turf and specialty markets. SCL also follows
an asset-light business model for its non-agrochemical
operations and supplies belts, general chemicals, dyes and
dye intermediates only on the basis of specific orders
received from distributors. It procures these nonagrochemical
products primarily from the manufacturers
in China or India which provides it the flexibility to cater
to varied customer demands.
Strong global distribution network
The company is undertaking the distribution of formulations
and generic active ingredients through third-party
distributors based in Europe, NAFTA, Latin America and the
Rest of the World. With an objective to increase its presence
in the agrochemical value chain, the company has set up
its own sales force in various countries in Europe as well as
in Mexico, Colombia, South Africa and India. As of date it
has over 440 third-party distributors and over 100 personnel
in its own sales force. SCL is able to increase the penetration
of formulations and generic active ingredients in various
countries because its third-party distributors and own sales
force are present across the globe.
Well diversified product portfolio
The company’s agrochemical business operations are spread
in over 60 countries across Europe, NAFTA, Latin America
and the Rest of the World offering a diverse range of
formulations and generic active ingredients in fungicide,
herbicide, insecticide and biocide segments. In the nonagrochemical
business, the product portfolio comprises
belts, general chemicals, dyes and dye intermediates which
enable it to cater to the varied demands of customers.
Debt-free with strong return ratios
The company has a strong balance sheet with healthy
return ratios. It has maintained a focus on capital
efficiency and has a conservative debt policy (zero debt
as per FY2014 balance sheet). It has the ability to leverage
the balance sheet to take advantage of a favourable
business cycle or market opportunity. The company has
demonstrated a consistent track record of profitability
over the last three years and a 25% compounded annual
growth in the net income over FY2012-14. It has strong
return on capital employed (RoCE) of 25% and return on
equity (RoE) of close to 20%. The net working capital days
have also improved over the last four years and at the
end of FY2014 the net working capital days stood at 99
days as compared with 143 days in FY2010.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
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Key investment positives
Asset-light business model with core competence in
registration of ingredients
The company has an asset-light business model whereby
it focuses on identifying generic molecules, preparing
dossiers, seeking registrations, and marketing and
distributing formulations through third-party distributors
or its own sales force. As of August 5, 2014, SCL has over
180 good laboratory practices (“GLP”) certified dossiers
and as of July 15, 2014 it owns over 1,040 registrations
for formulations and over 155 registrations for generic
active ingredients across Europe, North American Free
Trade Agreement (NAFTA) nations, Latin America and the
Rest of the World. As of August 5, 2014, SCL has filed over
500 applications for registrations globally which are
pending at different stages.
Consequently, the company is able to cater to the demand
for protection of a wide range of crops grown in varied
soil and weather conditions across different jurisdictions
as well as serve turf and specialty markets. SCL also follows
an asset-light business model for its non-agrochemical
operations and supplies belts, general chemicals, dyes and
dye intermediates only on the basis of specific orders
received from distributors. It procures these nonagrochemical
products primarily from the manufacturers
in China or India which provides it the flexibility to cater
to varied customer demands.
Strong global distribution network
The company is undertaking the distribution of formulations
and generic active ingredients through third-party
distributors based in Europe, NAFTA, Latin America and the
Rest of the World. With an objective to increase its presence
in the agrochemical value chain, the company has set up
its own sales force in various countries in Europe as well as
in Mexico, Colombia, South Africa and India. As of date it
has over 440 third-party distributors and over 100 personnel
in its own sales force. SCL is able to increase the penetration
of formulations and generic active ingredients in various
countries because its third-party distributors and own sales
force are present across the globe.
Well diversified product portfolio
The company’s agrochemical business operations are spread
in over 60 countries across Europe, NAFTA, Latin America
and the Rest of the World offering a diverse range of
formulations and generic active ingredients in fungicide,
herbicide, insecticide and biocide segments. In the nonagrochemical
business, the product portfolio comprises
belts, general chemicals, dyes and dye intermediates which
enable it to cater to the varied demands of customers.
Debt-free with strong return ratios
The company has a strong balance sheet with healthy
return ratios. It has maintained a focus on capital
efficiency and has a conservative debt policy (zero debt
as per FY2014 balance sheet). It has the ability to leverage
the balance sheet to take advantage of a favourable
business cycle or market opportunity. The company has
demonstrated a consistent track record of profitability
over the last three years and a 25% compounded annual
growth in the net income over FY2012-14. It has strong
return on capital employed (RoCE) of 25% and return on
equity (RoE) of close to 20%. The net working capital days
have also improved over the last four years and at the
end of FY2014 the net working capital days stood at 99
days as compared with 143 days in FY2010.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
Key risks
Operates in highly regulated business: The company
operates in the agrochemical business, which is a highly
regulated sector, and has to comply with the regulations
prescribed by the authorities of the jurisdictions. So
any regulatory hurdle may adversely affect the
company’s performance.
Currency risk: Any volatility in the local currency will
affect the earnings of the company.
Registration failure or delay may adversely affect
its performance: The process of seeking registrations
is complex, expensive and time consuming. If the
company is unable to successfully obtain registrations
in a timely manner or at all, it may lose the market
opportunities which will adversely affect its operations
and profitability.
http://www.moneycontrol.com/mccode/news/article/article_pdf.php?autono=1168837&num=0
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