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ICICIdirect's report on Sharda Cropchem IPO
Sharda Cropchem is a crop protection chemical company engaged in the marketingand 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 percent and 38.6 percent, respectively, in FY10-14. In FY14, the company clocked a consolidated topline of Rs 782 crore with around 82.5 percent being contributed by the agro chemical business (Rs 645 crore), around 15.8 percent being contributed by the conveyor belt business (Rs 123 crore) and around 1.7 percent being contributed by other business (dyes). The company is export-oriented and realises a healthy 97 percent of its topline from exports. Among geographies, it has major exposure to the European Union, which constitutes around 61.3 percent 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 around 45 percent (534 registrations), Latin America around 26 percent (312 registrations), Nafta around 6 percent while the rest of world (RoW) comprises the remaining around 23 percent.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
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ICICIdirect's report on Sharda Cropchem IPO
Sharda Cropchem is a crop protection chemical company engaged in the marketingand 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 percent and 38.6 percent, respectively, in FY10-14. In FY14, the company clocked a consolidated topline of Rs 782 crore with around 82.5 percent being contributed by the agro chemical business (Rs 645 crore), around 15.8 percent being contributed by the conveyor belt business (Rs 123 crore) and around 1.7 percent being contributed by other business (dyes). The company is export-oriented and realises a healthy 97 percent of its topline from exports. Among geographies, it has major exposure to the European Union, which constitutes around 61.3 percent 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 around 45 percent (534 registrations), Latin America around 26 percent (312 registrations), Nafta around 6 percent while the rest of world (RoW) comprises the remaining around 23 percent.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
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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 Rs 197 crore of fixed assets comprising Rs 62 crore of intangible assets (registrations) and Rs 134 crore of intangible assets under development (registrations in various stages of development). The company has a net cash of Rs 151 crore as of FY14. Sharda also commands healthy return ratios with RoE and RoCE of 20.9 percent and 21.1 percent, respectively, in FY14.
Concerns are stretched working capital cycle (more than 90 days), company’s trademark not registered and growth of GM crops limiting growth of agro chemicals.
Recommendation
At the upper price band of Rs 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.
LINK
http://www.moneycontrol.com/mccode/news/article/article_pdf.php?autono=1171854&num=0
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 Rs 197 crore of fixed assets comprising Rs 62 crore of intangible assets (registrations) and Rs 134 crore of intangible assets under development (registrations in various stages of development). The company has a net cash of Rs 151 crore as of FY14. Sharda also commands healthy return ratios with RoE and RoCE of 20.9 percent and 21.1 percent, respectively, in FY14.
Concerns are stretched working capital cycle (more than 90 days), company’s trademark not registered and growth of GM crops limiting growth of agro chemicals.
Recommendation
At the upper price band of Rs 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.
LINK
http://www.moneycontrol.com/mccode/news/article/article_pdf.php?autono=1171854&num=0
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