8 Stocks To Buy From The Agrochemicals Space With Potential To Rally

Prabhudas Lilladher expects companies in its coverage universe from the agrochemicals space to report Revenue/EBIDTA/ PAT growth of 26%/15%/23% YoY (Agrochemicals 14%/11%/17% YoY, Fertilizers 51%/28%/36% YoY). Here are 8 stocks where the brokerage has a buy call on.

Sumitomo Chemicals

For Sumitomo Chemicals, Prabhudas Lilladher believes, the company likely take a big leap given comprehensive distribution network, branded portfolio and rising share of exports to overall revenues. According to the brokerage innovative product launches and parent's R&D capabilities that effectively anchor Sumitomo to outpace Indian agrochemical markets. "We expect Sumitomo to post revenue/ EBITDA/PAT CAGR of 18%/21%/22% over FY22-25E (FY18-22 CAGR of 13%/29%/31%), respectively. Maintain 'BUY' at target price of Rs 610 based on 40xFY25E EPS," Prabhudas Lilladher has said in its report.

The stock of Sumitomo was last trading at Rs 490 on the National Stock Exchange.

PI Industries: Buy the stock for a target of Rs 4350

Another stock from the agrochemicals space where Prabhudas Lilladher has a "buy" call is the stock of PI industries. Citing robust demand momentum, PI Industries continues to guide at +20% YoY growth in revenues with margins likely to improve from current levels primarily led by strong enquiries in the CSM business and new launches in the domestic segment. We expect PI Industries to report revenue/PAT CAGR of 21%/ 25% (FY11-22, 20%/26%) over FY22-25E. Maintain 'BUY' at target price of Rs 4,350 based on 40xFY25 EPS," Prabhudas Lilladher has said in its latest report

The stock of PI Industries was last quoting at Rs 3329 on the Bombay Stock Exchange.

Coromandel International

Prabhudas Lilladher anticipates Coromandel International to report stable margins over long term backed by a) efficient sourcing of raw materials and also benefits of backward integration; and rising share of unique grades. According to Prabhudas Lilladher product innovation and capacity expansion in both the business and enhanced focus on branding of products both in nutrition and CP segment. "We Maintain 'BUY' at target of Rs 1200 based on 18xFY25E EPS," the brokerage has said. The company is one of the top players in the agro chemicals and crop nutrient space.

The stock of Coromandel International last closed at Rs 899.45 on the NSE. The shares of the company have hit a 52-week low of Rs 730 and 52-week high of Rs 1094.40.

Other stocks where the brokerage has a buy call on

Name	Current market price	Target price
Chambal Fertilizers	317.85	410
Dhanuka Agritech	699.8	940
Rallis India	245.3	250
Sharda Cropchem	487.35	660
UPL	721.55	1070

Subdued demand

Prabhudas Lilladher interacted with several agrochemical dealers and industry experts to gauge demand scenario at the ground level. Key takeaways were : 1) Sowing in ongoing Rabi season started on a positive note with expectation of domestic industry growth at a mid-single to low double digit (PLe 14% YoY growth -largely led by price) in 3QFY23; 2) Maize acreages up 21% YoY till 30th Dec'22, led by remunerative crop prices up 34% YoY to Rs2219/Qtl (augur well for Bayer crop science); 3) Inventory at higher levels led by insecticides category; 4) Higher sales return expected in 3QFY23; 5)Prices holding up for majority of products; 6) RM prices cooled off significantly from its recent highs; 6) Recent restriction by Govt. on Glyphosate use not likely to meaningfully impact the domestic industry.

 

Cautious stance

According to Prabhudas Lilladher, though major macro-economic variables (Soil moisture, Water reservoir levels, domestic crop prices etc.) continue to remain on positive trend, yet higher base of last year (2HFY22, ~25% YoY growth) may pose challenges for domestic agri-input players. "With export-oriented players at a much better position aided by healthy demand scenario and higher price realizations than that of pure play domestic players, we continue to like Sumitomo chemicals and PI Industries in the agrochemical space. Coromandel International remains our preferred pick in fertilizer space," it has stated.