Feb. 15, 2016
Bayer CropScience India (BCS) posted a decline of 9% in Sales to Rs6,222 mn and 10% in total revenue to Rs 6,424 bn during Q3FY16. This compares poorly to 5% decline in Q2FY16. Growth was impacted on account of poor monsoon across the country.
Total raw material cost for the quarter declined by 9% inline with sales decline. Gross margin showed a marginal contraction of 40bps to 36.8%. However decline in sales led to lower operating efficiency and 350bps contraction in EBITDA margin. EBITDA margin for the quarter came in at 6.7% against 10.2% Q3FY15.
Interest for the quarters came in at Rs 28mn an increase of 211% yoy, while other income declined by 27% yoy basis. Overall PAT declined by 50% to Rs 274 mn.
Outlook and valuation
BCS posted disappointing performance for Q3FY16 on back of drought condition at country level. "We have cut our earning estimates by 31% & 30% to reflect the same and buyback impact. We expect BCS to post CAGR of 5% in Sales & 10% decline in PAT over FY15-17E. At Target P/E of 25x and adding surplus cash, we arrive at target price of Rs 2,302 which indicates for a huge downside of 34% from current levels. Hence we recommend Sell on stock."