Bayer Cropscience - Blockbuster Performance, Yet Again; Result Update Q3FY15 ::Edelweiss

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Bayer Cropscience’s (Bayer) Q3FY15 sales, EBITDA and PAT growth of 8.8%, 50.5% and 46.7% surpassed our 10.0%, 11.9% and 33.9% estimates, respectively. Superior EBITDA margin led to beat in estimate. We believe the company’s Q3FY15 sales growth was commendable considering the challenging market conditions owing to bleak rabi season; sales surpassed peers as well. Hence, we believe Bayer has continued to capture market share. The company continued with innovative product launches during 9mFY15 and based on our channel checks, it is expected to launch a new product before the upcoming kharif season. It has received a couple of product registrations for exports during 9mFY15. We continue to maintain our positive stance on the company anchored by its comprehensive distribution network, branded portfolio, launch of innovative products and parent’s (Bayer AG) R&D capabilities. We are rolling our target price on FY17E EPS. Further, we are revising up P/E multiple to 24x (earlier 20x) riding market share gain, new product launches and superior financials.

Volume surge, price hikes catapult sales

Bayer reported commendable sales growth of 8.8% YoY, which we believe was largely driven by volumes; it was also supported by higher product prices as industry effected 4-5% hikes during 9mFY15. EBITDA margin surged 40bps YoY to 12.3% primarily led by better operating leverage. PAT stood at INR0.55bn versus our INR0.50bn estimate.

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https://www.edelweiss.in/research/Bayer-Cropscience--Blockbuster-Performance,-Yet-Again;-Result-Update-Q3FY15/28217.html