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Q3 preview: Agro-chem firms may see robust revenue growth on better monsoon
−− Emkay expects Rallis India's revenue to rise 14% YoY, driven by an uptick in exports, while Dhanuka Agritech's revenues to rise 23% YoY on robust rabi sowing.
Jan. 14, 2020
With the gradual recovery in sowing in the first week of December and higher water availability, brokerages expect robust revenue growth in Q3.
According to Emkay Research, growth in the fertilizer companies will be driven by higher rabi sowing, and improved profitability due to falling raw material prices.
The falling raw material prices have resulted in price corrections, albeit at a slower pace, resulting in improvement in gross margins, it added.
The research house is positive on PI Industries as it expects 27% growth in exports, while it turned equal-weight on Coromandel International after the recent stock price run-up.
Emkay expects Rallis India's revenue to rise 14% YoY driven by an uptick in exports, while Dhanuka Agritech's revenues are expected to rise 23% YoY on robust rabi sowing resulting in higher demand for its generic products and specialty products.
"The raw material inflation continues to pose a challenge, with the situation in China worsening by the day. However, prices of certain Active Ingredients (AIs) are almost down to normal levels and should lead to benefit accruing from Q4FY20," said Dolat Research.
The broking house expect PI Industries' CSM segment to continue to propel earnings, together with a conducive domestic scenario for agro-chemicals sales given a good rabi season.
In Sharda Cropchem, it expects de-growth in sales of 2.4% YoY to Rs 4.6 billion, due to de-growth in NAFTA and Europe. EBITDAM is likely to decline by 200bps YoY, due to lower expectation of gross margins and PAT is expected to de-grow by 66.2% YoY to Rs 69 million.
Source: Money Control
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