Excel Crop Care Excellent growth

Excel Crop Care (courtesy InvestmentGrowth)
CMP: 259

With a normal monsoon and easy availability of credit, the agrochemicals industry should see buoyant growth

Excel Crop Care: Financials

Excel Crop Care (ECCL) is engaged in the manufacture and trading of pesticides. The company came into existence as a result of the transfer of the agri-business of Excel Industries (EIL) with effect from 1 April 2002.

ECCL's agrochemicals business includes insecticides, herbicides, fungicides, fumigants and rodenticides. The company has its manufacturing plants at Bhavnagar (Gujarat), Silwasa (Dadra and Nagar Haveli) and Kutch (Gujarat). The increase in manufacturing capacities of various plants and obtaining new registrations of certain products in the last couple of years have helped it to meet higher demands.

Buoyed largely by favourable conditions in the global market, the Indian pesticides industry recorded an impressive growth of over 25% in exports, whereas the growth was around 12% in the domestic market. In particular, manufacturers of generic products optimally benefited from increased exports as well as improving profitability through price and volume. Faster growth in the domestic market was mainly lead by Indian players co-marketing new cotton insecticides and wheat herbicide products from global majors.

Going forward, the near normal monsoons greater thrust on agriculture by the government, and increasing area under cotton crop can result in a strong double-digit growth in domestic demand.

ECCL has impressively capitalised on the opportunities at and out of home, with registration of new molecules and enhancing existing capacities. The major work of installation of plant and machinery for setting up a new plant for triazophos and its formulations at its Bhavnagar unit is in the advanced stage of completion. The company has carried out the expansion of production capacity at its profenophos plant and also implemented an improved process for the manufacture of chlorpyriphos at its Bhavnagar plant. This is likely to fetch greater revenue from FY 2006 onwards.

ECCL has posted a 15% growth in sales to Rs 99.19 crore in the quarter ended June 2005. However, the operating profit margin (OPM) jumped by 120 basis points (bps) to 14.1%, despite the firmer raw materials. As a result, the operating profit (OP) advanced by 26% to Rs 13.97 crore. The profit before tax (PBT) increased by 28% to Rs 11.48 crore and the profit after tax (PAT) recorded a healthy 37% rise to Rs 7.53 crore.

In FY 2005, the sales jumped by 32% to Rs 387.72 crore and OP jumped by 57% to Rs 40.93 crore. The growth in sales was powered by the impressive 34% growth in exports to Rs 129.27 crore. OPM gained 170 bps to 10.6% mainly due to improved realisation and focus on cost reduction. The interest cost reduced by 31% to Rs 6.99 crore, which strengthened the financials. PBT and PAT jumped by 112% to Rs 33.91 crore and 113% to Rs 21.93 crore. This performance was achieved despite the poor agricultural scene due to below-normal and uneven rains.

With the monsoon turning out to be normal this year and easy availability of rural credit, the pesticides industry should see buoyant growth for the rest of the year. With expanded capacities, improved processes and a larger number of registrations, ECCL is well set to capitalise on the better times.

In FY 2006, ECCL can report sales of Rs 460.98 crore and net profit of Rs 30.03 crore, giving an EPS of Rs 27.3. The current price of Rs 228 (05 September 2005) discounts this only 8.4 times, leaving decent scope for appreciation.