India Pesticides Limited (1Rs) : Ongoing & Future expansions to take company to new highs CMP Rs 302-305 : A Potential Multibagger

 India Pesticides Limited

Face Value of Share : Rs 1

Equity : 11.52 crores

Current Market cap : 3500 crores

ROCE :45%(2021)

ROE : 34%(2021)

About Company: India Pesticides Limited is one of the fastest growing globally operating chemical manufactures in India established in 1984, India Pesticides has pioneered the manufacturing of both Technicals & Formulations in Agro-Chemicals and Active Pharma Ingredients mainly for dermal application.

IPL is Sole Indian manufacturer of five Technicals and among the leading manufacturers globally for Captan, Folpet and Thiocarbamate Herbicide, in terms of production capacity  It’s diversified portfolio of niche and quality products along with value-added services makes it  a strategic supplier for US, Australia, Europe, Africa, South America and Asia.

Technicals (62%)  : Commercial form of the relatively pure active ingredients used for manufacturing formulated agro chemicals products. Herbicides, Fungicides, Insecticides & intermediates.

Formulations(28%): Final form of crop saving pesticide, which contains one or more technical grade ingredients in definite proportion.

API(Active Pharma Ingredients (10%) : Substance or part of any medicinal drug that produces the intended effects used in a finished pharmaceutical product. Anti Fungal Drugs,Anti scabies drugs

Manufacturing units                                             Capacity

1.UPSIDC ,Lucknow :        2100 MT PA (Technicals)    3000MT(Formulations)

2.UPSIDC Sardila              18900 MT   (Technicals)       3500MT (Formulations)

 3.Hamirpur : Coming up                    30000 MT 

Domestic Business(47%): PL distributes its products through network of over 20 sales depot spread across Pan India. All the sales depots are well connected with warehouses spread across 15 states. Overall domestic market is managed by our sales force located at 20 branches offices across India. 4712 Dealers and they are working on to increase presence in more number of states because  technical are also growing. 

Export Business(53%):IPL exports its products to more than 40 countries across the globe at regulated markets in US, Australia, Europe, Africa, South America and Asia,  dedicated Business Development Team members located in Europe and the United States focuses on expansion of distribution network.

Key Clients:

1.UPL  2.Stotras  3.Syngenta  4.Sharda Crop-chem   5.AscenZa Agro  6.Conquest Corp  7. Adama

Financials:

IPL has established a track record of robust financial performance with 90.48% growth in revenue from operation between FY19 to FY21. With an annual turnover of about Rs. 650 crores (FY 20-21)

Growth Drivers:

1. Expansion of existing facility and new manufacturing plant to drive higher production in the future

2. Continuous expansion of product portfolio on an ongoing basis to ensure significant business growth

3. Backward integration to reduce dependence on import of raw materials and covering entire stage of production

4.  Growing demand across India and globally in agrochemical and agricultural industry

5. China plus one policy being adopted by companies across globe

Risks :

Rising crude oil and commodity prices may impact margins in case of inability to pass on to customers

Investment Rational :

    IPL is almost a debt free and enjoys very high margin, it has grown from 230 crore (2016) to approx 700+crores(expected 2022) in just 6 years with consistent increasing profits. IPL has major expansion plans post IPO and some planned expansions in existing units has already been completed and new facility at Hamirpur is expected to be operational in 2023.It has already achieved revenue of 538 crores in FY2022 for 9 months ending December2021 and is expected to close year with 700+ crores  with expected EPS of 16-17 .Looking at planned expansion ,very high profit margins and strong growth potential from export and domestic, management is confident of achieving 20%+ growth in next 3 years. Stock is availaible at much cheaper valuations as compared to other listed peers. From 1 year point of view it can deliver EPS of Rs 20-21 in FY22-23 and at PE multiple of 20 stock can touch Rs 410-420 in 1 year.

Long term investors may buy at cmp of Rs 302-305 and accumulate on dips.