Result Update: Insecticides India Ltd - BUY - TP Rs.892 - Kotak

IIL Q1FY19 results was better than our estimates in terms of earnings growth with EBITDA margin was ahead of estimates.

Key Highlights

- IIL reported below expected revenue of Rs 3.2 bn (Vs estimate of 3.4 bn) with 2.3% yoy growth as the company adopted conservative approach, focused on high margin branded segment and high base of last year.

- EBITDA margin remain strong at 17.4% and was ahead of our estimates with growth of 120 bps yoy led by better product mix and reducing exposure to low margin old generic products. The company management has maintained guidance to improve margins by 100-150 bps every year based on increased contribution from Navratna products, rampup of sales in new launches and reducing exposure to low margin products.

- IIL has maintained guidance of 10% growth in revenue on conservative basis in FY19E. The company has launched 4 new products and has pipeline for 3 more products in FY19E, with most of them are 9(3) registrations.

Valuation & outlook

- We believe that IIL is well placed to grow in agro chemical sector based on strong business model, robust pipeline of new products and normal monsoon forecast to support demand. We have maintained our EPS estimates for FY19E & FY20E.

- The stock is presently trading at 15.8/13.0 on FY19E/20E EPS of Rs 49.1/55.7 respectively. We maintain our Buy rating on the stock with unchanged target price of Rs892, valuing the stock at 16x FY20E earnings.

Shares of INSECTICIDES (INDIA) LTD. was last trading in BSE at Rs.755.45 as compared to the previous close of Rs. 776.4. The total number of shares traded during the day was 1497 in over 145 trades.

The stock hit an intraday high of Rs. 775.05 and intraday low of 750.75. The net turnover during the day was Rs. 1132980.

Source : Equity Bulls

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