Buy Heranba Industries Ltd For Target Rs.745 - Anand Rathi Share and Stock Brokers
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Q1-FY23 Result Update
* The company is a crop protection chemical manufacturer, exporter and marketing company based out of Vapi, Gujarat, with Corporate and Administration Offices in Mumbai. It manufactures Intermediates, Technicals and Formulations & is one of the leading domestic producers of synthetic pyrethroids. Its Pesticides range includes insecticides, herbicides, fungicides and public health products for pest control. The company’s business mix include: Domestic Institutional sales of Technicals (35%), Technicals Exports (32%), Domestic Formulations (23%) and Formulations Exports (10%).
* The company reported disappointing set of numbers for the quarter under review with revenue growth of 3.0% year-on-year to ?3,619 million on standalone basis due to challenging macro-economic developments and late onset of monsoon in the domestic market. However, the management highlighted that the company’s products are experiencing a pickup in demand due to good rainfall across India and a healthy reservoir level, setting a positive sentiment for the agro chemical industry.
* On profitability front, the EBITDA from operations for the quarter declined by 28.6% year-on-year at ?463 million with an operating margin of 12.8%. The company achieved the reported PAT of ?337 million, a decline of 28.9% year-on-year with a net margin of 9.3% translating into EPS of ?8.42 per share for the quarter.
* The company’s construction work for its Sarigam expansion is ongoing and will soon reap the benefits of the same. The company intends to capitalize on opportunities generated by various technicals going off patent in the coming years by manufacturing and supplying generic variants of the technicals, in the highest regulated markets of the United States of America and Europe. The company’s management gave an annual revenue growth guidance for FY23 of ~16% and EBITDA margins of ~17%.
* We are positive on Heranba Industries Ltd, the company has diverse product range, strong margins, strong balance sheet, capacity expansion and further opportunities from off patent products in highly regulated markets. We maintain BUY rating on the stock with a revised target price of ?745 per share.
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