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Portfolio revamp to drive profitability; maintain Buy
* Insecticides India’s (INST) revenues at Rs1.98bn (+17.8% yoy) were above our estimates of Rs1.8bn, primarily due to new product launches and better performance from exports which was benefitted from the favorable demand in global market.
* Gross margins declined by 345bps yoy to 27.6% amid high volatility in RM prices. However, due to better product mix and lower other expenses, EBITDA margins improved by 346bps yoy to 14.5% and were above our estimate of 12.2%.
* Management has guided for 8-10% revenue growth for FY20 as a result of new product launches, while margin guidance has been increased by 150bps owing to improvements in high-margin product mix and introduction of new molecules.
* We increase FY20/21E earnings by 24.3%/17%, factoring in growth from new product launches and margin improvement. Reiterate our Buy rating with a revised TP of Rs822, based on 12x FY21E EPS of Rs68.5.
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