1. Company & Business Strength: 9/10
India Pesticide limited is one of the global agrochemical manufacturers in India. The company is operational since 1984 and is one of the faster-growing companies in this sector. The company is a niche and sole manufacturer in India & also top 5 in the world for products like Folpet, thiocarbamate herbicide, etc.
Its focus area includes Herbicides, Insecticides, fungicides & Active pharmaceutical ingredients (API). The company has been focusing on R&D and has 2 in-house laboratories to produce innovative & quality products and services for its customers.
IPL has been a beneficiary of China plus one and the Aatmanirbhar Bharat initiative.
It has clients such as UPL, Conquest, Syngenta, Ascenza, Stotras, S.A., Sharda Cropchem, Asia Pacific Pte, and others. The company has had associations with clients with been related for more than 10 years.
Business Segment:
Technicals:
Development, Manufacturing of generic Technical used in fungicides, Herbicides, and API, for application in dermatological products.
They include:
a. Folpet: Fungicide to control crops, biocide in paint, vineyards, cereals, etc.
b. Cymoxanil: Fungicide to control downy mildews of potatoes, grapes, vegetables, and other crops.
c. 135+ Thiocarbamate Herbicide with used in wheat, rice, and other crops.
Formulations:
Formulations of Insecticides, fungicides, herbicides, growth Regulators, and Ascarides. They manufacture 30+ Formulations including Takatvar, IPL Ziram-27, IPL guru, IPL Soldier, and IPL Dollar.
API:
API is used in the manufacture of a drug and is an important constituent of a drug.
IPL produces API for:
a. Anti fungal drug-Drug that acts on fungal hyphae and inhibits squalene epoxidase.
b. Anti-scabies drug-Drug for scabies and pediculosis.
2. Competitive Strength: 7/10
India Pesticides Ltd is a Indian Pesticides & Agrochemicals company, it has competition with other giants like UPL, PI Industries, Bayer, Bharat Rasayan, Rallis India, Dhanuka Agrotech, Heramba Industries, and others.
It has also multinational competitors like Sumitomo chemicals India, BASF India, and others.
Agrochemicals sector has always been with a lot of regulations.
3. Stock Analysis Return & PE Ratio: 6/10
India Pesticides Ltd Stock is listed both in NSE, and BSE and currently trading at around 320 (Jan 2022), with 52 highs of 360s and a low of 280s.
It has a market cap of 3000+ which is Small cap, Stock has been consolidating for a long time after the IPO listing in 2021 and has not generated any return since.
The stock has given a -6% return in the last six months.
The face value is 1, so expect bonuses and buybacks.
PE Ratio: IPL has a PE of 27 currently which is good compared to sector PE.
4. Dividend: 4/10
The stock has been giving a fair dividend of 0.1%. Generally, we expect a growing company to give atleast 1% dividend which is a good gesture and sign unless high Capex is planned.
Financial Ratios:
5. Sales Growth/Revenue: 10/10
The Sales growth indicates that the company can capture the market, and which may increase profitability.
India Pesticides has a 3-year median Sales growth of 37.79% which is exceptional. Current year (2021) growth stands at 35.3%. For Small caps, we consider the growth of atleast 20%+ as healthy sales.
6. Profit Growth: 10/10
Sales growth indicates a good income, but unless profit is not made it's terrible. Profit growth indicates how expenses are managed or also how the company has pushed the raw material prices to end customers.
India's Pesticides Profit growth stands at a 3-year median of 60.07% which is exceptional, Current year stands at 90.08%. For Small cap, atleast 20-25+%+ is considered healthy growth in Profitability.
7. [ROE] & [ROCE] %: 10/10
Return on Equity:
ROE indicates the ability to generate profits from shareholders/Equity Investments. India's Pesticides ROE has a 3-year median of 33.66%. The current year stands at 41.63%.
We consider a healthy ROE to be atleast 20% for growth companies.
Return on Capital Employed:
ROCE indicates the ability to use its capital employed for business. India's Pesticides ROE has a 3-year median of 39.83%. The current year stands at 52.05%.
We consider a healthy ROCE to be atleast 20% for growth companies.
8. Debt/Equity: 9/10
D/E is a measure of which a company is running through debts vs owned funds. Ideally, D/E should be less than 1, which indicates stability.
IPL has a D/E of 0.08 which is Negligible. Unless capital expansion or any other is required, a low debt is always good to maintain profitability.
We consider debt-free or D/E<0.1 to be healthy.
Note: Company has reduced debt recently.
9. Shareholding %: 8/10
The company has a high Promotor holding of 66.17%. The FII and DII of 2.99% and 1.13% indicate Institutions have very less holding, the Remaining area Public.
Note: The Promoter Pledging % is 0% which is good, generally no pledging indicates a good sign.
Another indicator like interest coverage ratio, Return on Assets[ROA], and others also seems good.
10. Future Prospects: 8/10
Pros:
India is expected to have high Agricultural growth in the future due to high consumption. As agricultural growth rises, the demand for crop protection will be high and would benefit IPL.
Strong R&D facilities and innovative products.
Well-diversified business from crop protection to APIs which would minimize individual risks.
The company is trading at low PE.
China plus one or Aatmanirbhar Advantage.
The Financial ratios have been very good in most aspects.
The company is giving dividends although very small.
Cons:
Pre-approval and regulatory risk are always there for launching new products for crop protection and insecticides.
The company is dependent on agriculture growth, which leads to seasonal risks such as floods and drought.
Risk of organic farming and protections.
Investment Hacks Score Card:
The average score of India Pesticides Limited based on all factors comes to be 8.1/10.
Conclusion:
Overall India Pesticides Limited seems to have good Management, research facilities, and Exceptional growth in financials. The stock has not given any return to shareholders from listing and in fact, gave negative returns. Since this is Small cap stock, Investors can see volatility in the future and should carefully watch future plans and growth.
Disclaimer:
Since this is an educated opinion, Please research thoroughly or consult your financial advisor before Investment.
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Team Investment Hacks
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