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Sharda Cropchem IPO note by Emkay
Sharda cropchem is an agrochemical company with presence in global markets of EU, LATAM and NAFTA and has distinct asset light business model
Its strategy is to focus on product registration (technical / formulation / brands) while it depends on third party for sourcing of raw material and distribution to end customers
It has developed competencies to work in stringent regulatory environment and has basket of 1,200+ registered products which creates strong entry barriers
It enjoys high EBIDTA margins (~20%) and return ratios (RoCE of ~30%) which is comparable with industry peers while strong pipeline of registrations ensures growth
Issue priced at 12-13x P/E (FY14 EPS) is attractively valued. Expect 30-40% returns in the medium term, assign Subscribe
The Company is a leading exporter of agro chemical products globally with a large basket of registered products. The company has ~1,200 registrations across markets and regions. The company has been focusing on increasing its product registrations to drive faster growth across regions especially in the EU and LATAM countries. Stringent product registrations in agro chemicals are a key entry barrier.
The Company has an asset light business model as it does not have any manufacturing plants and relies on third party outsourcing to meet its requirements. It sources ~90% of its requirement from China and the balance 10% from India. The asset light model of the company provides flexibility to the model to switch between products based on the end customer demand.
On back of its unique asset light business model, the company enjoys high EBIDTA margins (18-20%) and PAT margins of 12-13%. The only investment required is for registration and to fund its working capital (mainly debtors) resulting into strong return ratios (RoCE of ~30%).
The company continues to focus on new registrations to drive revenue growth in the medium term. It aims to continue to invest ~Rs 800-900mn in new product registration with focus on increasing revenue share in the European markets.
The issue price of Rs 145-156 is priced at 12x-13x FY14 EPS which works out at ~50% discount to its peers. We believe that the issue is attractively priced and expect the stock to trade at 16-17x FY14 EPS which provides an upside of 30-40%, ascribe a Subscribe rating.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
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Sharda Cropchem IPO note by Emkay
Sharda cropchem is an agrochemical company with presence in global markets of EU, LATAM and NAFTA and has distinct asset light business model
Its strategy is to focus on product registration (technical / formulation / brands) while it depends on third party for sourcing of raw material and distribution to end customers
It has developed competencies to work in stringent regulatory environment and has basket of 1,200+ registered products which creates strong entry barriers
It enjoys high EBIDTA margins (~20%) and return ratios (RoCE of ~30%) which is comparable with industry peers while strong pipeline of registrations ensures growth
Issue priced at 12-13x P/E (FY14 EPS) is attractively valued. Expect 30-40% returns in the medium term, assign Subscribe
The Company is a leading exporter of agro chemical products globally with a large basket of registered products. The company has ~1,200 registrations across markets and regions. The company has been focusing on increasing its product registrations to drive faster growth across regions especially in the EU and LATAM countries. Stringent product registrations in agro chemicals are a key entry barrier.
The Company has an asset light business model as it does not have any manufacturing plants and relies on third party outsourcing to meet its requirements. It sources ~90% of its requirement from China and the balance 10% from India. The asset light model of the company provides flexibility to the model to switch between products based on the end customer demand.
On back of its unique asset light business model, the company enjoys high EBIDTA margins (18-20%) and PAT margins of 12-13%. The only investment required is for registration and to fund its working capital (mainly debtors) resulting into strong return ratios (RoCE of ~30%).
The company continues to focus on new registrations to drive revenue growth in the medium term. It aims to continue to invest ~Rs 800-900mn in new product registration with focus on increasing revenue share in the European markets.
The issue price of Rs 145-156 is priced at 12x-13x FY14 EPS which works out at ~50% discount to its peers. We believe that the issue is attractively priced and expect the stock to trade at 16-17x FY14 EPS which provides an upside of 30-40%, ascribe a Subscribe rating.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
LINK:
http://www.moneycontrol.com/mccode/news/article/article_pdf.php?autono=1174193&num=0
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