Insecticides (India) Ltd: Operating leverage at play, compelling valuation – BUYInsecticides (India) Ltd (IIL) is one of the fastest growing agrochemical companies in the country. It has established a strong position for itself in the industry on the back of (i) strategic brand acquisitions (ii) new innovative product launches (iii) close partnership with leading global agro chemical players (iv) aggressive branding and marketing strategies (v) strong pan-India distribution network (vi) well diversified product portfolio and (vii) experienced management with proven capabilities. Consequently, share of IIL in the domestic agrochemical market has risen from 1.9% in FY09 to 5.5% in FY15. During FY09-14, the company witnessed 26.8% revenue CAGR albeit on a lower base. We expect the revenue growth momentum to continue along with more than commensurate earnings growth as operating leverage comes through. We forecast ~20%/43% revenue/EPS CAGR over FY15-17E. Initiate with BUY and 12-month target of Rs1080 based on 12x FY17E EPS. Hostile weather conditions re! main key risk.
CMP Rs834, Target Rs1,080, Upside 29.1%
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Head of Research, IIFL
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