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Indian agri-input sector may bounce back faster on government actionqrcode

−− The government’s focus on opening up farms despite the lockdown has led to demand for seeds, fertilisers and pesticides.

May. 5, 2020

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May. 5, 2020
By Rajesh Mascarenhas
 
The agri-input sector, which remained largely insulated against disruptions, will likely recover in the near-term on government intervention and the likelihood of normal monsoons. So, analysts are recommending stocks like Bayer Crop Science, Sumitomo Chemicals, Insecticides India, Dhanuka Agritech, Coromandel, UPL, and PI Industries.
 
“While availability of products and farmers’ cash flows are teething issues, demand for agri inputs remains intact, and we expect government intervention to smoothen operations,” said Rohan Gupta, analyst, Edelweiss Securities. “Hence, we remain positive on domestic agriinput companies and continue to like Dhanuka Agritech, Sharda Cropchem, UPL and Coromandel International.”
 
The government’s focus on opening up farms despite the lockdown has led to demand for seeds, fertilisers and pesticides. “Although Covid-19 is expected to impact performance in the near term, on the backdrop of a good rabi season and expectations of normal monsoons, the demand for agri-inputs is expected to be healthy in the kharif season,” said Rishab Bothra, analyst, Sharekhan. “We like PI Industries owing to its strong order book, healthy domestic business and strong balance sheet and UPL for healthy inventory levels.”
 
IMD has predicted a normal monsoon for the year, with estimated rainfall to range between 96% and 104% of long-term average. While water availability across the soil is conducive for timely sowing of kharif crop, normal monsoon is expected to boost overall consumption, said analysts.
 
“Monsoons are expected to be normal this year, and fertiliser sales are likely to remain robust as they form the primary source of plant nutrients,” said Pratik Tholiya, analyst, Elara Capital. “Companies say that farmer income from the rabi harvest will not be affected as the government is procuring crops at minimum support prices (MSP). Besides, frontloading of the PM-Kisan payments would help alleviate the cash crunch.”  

The government’s move to provide stimulus via distributing food grains will most likely push government cooperatives to buy grains at MSP. “We expect marginal impact of Covid-19 on the agrochemical industry as pesticides are placed under essential category while agrochemical liquidation commences only from May,-end” said Prashant Biyani, analyst, Prabhudas Lilladher.
 

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