Result Update: Insecticides India Ltd - BUY - TP Rs.643 - Kotak

IIL Q2FY19 results was better than our estimates in terms of revenue and margins. The company expects to maintain growth into pline in the longer run despite its two major products will be phased out by 2020 due to ban, as it has strong product pipeline which will make up for the revenue losses.

Key Highlights

- IIL reported better than estimated revenue of Rs 4.6 bn (Vs estimate of 4.2 bn) with 10% yoy growth driven by strong performance of B2C formulations, higher exports and increased contribution from high margin new branded products.

- EBITDA margin remain strong at 15.1% and was ahead of our estimates with growth of 170 bps yoy led by better product mix and reduced exposure to low margin old generic products.

- IIL has maintained guidance of 150 bps improvement EBITDA margins in FY19E. The company has launched 6 new products and has pipeline for 3 more products in FY19E, with most of them are 9(3) registrations.

- The company believes that the discontinuation of two major products due to ban contributing Rs 1.6 bn revenue, will not impact its revenue and will be compensated by new launches.

Valuation & outlook

- We believe that IIL is well placed to grow in agro chemical sector in the longer run based on strong business model and robust pipeline of new products. We have cut our revenue and earnings estimates for FY19E and FY20E factoring in impact of discontinuation of two major products in our EPS estimates.

- The stock is presently trading at 10.1x/9.6x on FY19E/20E EPS of Rs 46.7/Rs49.5 (vs Rs 49.1/Rs 55.7 earlier) respectively. We maintain our Buy rating on the stock with revised target price of Rs 643 (Vs Rs 892 earlier), valuing the stock at 13x FY20E earnings vs 16x earlier factoring in increased risk on growth due to ban on certain products

Shares of INSECTICIDES (INDIA) LTD. was last trading in BSE at Rs.540 as compared to the previous close of Rs. 509.9. The total number of shares traded during the day was 10203 in over 667 trades.

The stock hit an intraday high of Rs. 550 and intraday low of 515. The net turnover during the day was Rs. 5486721.

Source : Equity Bulls

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