Anand Rathi Suggests Buying This Small-Cap Agrochemical Stock, Sees 28% Upside Potential


Company Overview

The company is a manufacturer, exporter and marketing company of crop protection chemicals based in Vapi, Gujarat with corporate and administrative offices in Mumbai. It manufactures intermediates, technical products and formulations and is one of the leading domestic producers of synthetic pyrethroids. Its Pesticides line includes insecticides, herbicides, fungicides and public health products for pest control.

The composition of the Company’s business includes: domestic institutional sales of technical products (37%), export of technical products (25%), domestic formulations (31%) and export of formulations (7%).

Outlook and stock returns

Outlook and stock returns

On NSE, the current market price (CMP) of Heranba Industries is ₹510 per share. At the time of writing, the stock is trading down 0.25% from its previous close of ₹511.30 per share. According to data on NSE, the stock recorded its 52-week high on January 21, 2022 at ₹744.70 and the 52-week low on August 16, 2022 at ₹480, respectively.

On NSE, the stock was listed on March 5, 2021. Since its listing, it has yielded negative returns of 37.11%. It fell by 1.2% in one week and by 9.2% in 3 months. However, in 1 month, it increased by 0.35%. In one year, it gave 23.91% negative returns on investments.

Q2-FY23 Results Update

Q2-FY23 Results Update

The company posted strong Q3 figures with revenue growth of 19.8% YoY to ₹4,233m in standalone mode, driven by strong performance in the domestic market navigating uneven distribution monsoon. Management expects the domestic agrochemical industry to do well in the second half of FY23 due to residual moisture from the late retreat of the southwest monsoon to higher reservoir levels and an increase in the MSP (minimum selling price) of Rabi crops for the upcoming 2023-24 marketing season.

On the profitability front, EBITDA from operations for the quarter increased 8.4% year-on-year to £664m with an operating margin of 15.3%. The company achieved the reported PAT of ₹477 million, an increase of 4.5% year-on-year with a net margin of 11.2% translating to EPS of ₹11.92 per share for the trimester.

Buy for a target price of Rs 650

Buy for a target price of Rs 650

The company spent ₹410 million in capital expenditure at its Sarigam plant in the first half of FY23 and will spend a further ₹1,000 million in the second half of FY23. Commercial production of pesticides and technical grade intermediates from the Sarigam facility is expected to commence from the first quarter of FY24, adding a significant contribution to the company’s revenue. The company’s management has given forecasts of annual revenue and EBITDA margin similar to what is currently maintained.

“We are positive on Heranba Industries Ltd, the company has a diverse product line, strong margins, strong balance sheet, capacity expansion and other off-patent product opportunities in highly regulated markets. We maintain a BUY rating. on the stock with a revised target price of ₹650 per share,” the brokerage said.

Disclaimer

Disclaimer

The stock was picked from Anand Rathi’s brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.

Previous SenesTech appoints industry veteran as CEO
Next EcoClear Solves Supply Chain Challenges for Cleaning and Pest Control Solutions with... | New