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Astec Lifesciences Ltd

Stock Rating

Industry Rank:
12
Relative Strength Rating:
96
Outstanding
Acceleration in Earning Rating
67
Positive
Technical Rating
92
Outstanding
Pesticides & Agrochemicals
CMP: Rs 735.85
Up
No change
Down

Company details

Market cap:
1,901.00
52-week high/low:
Rs. 998.00 / 305.00
NSE volume: (No of shares)
137,770.00
BSE code:
533138
NSE code:
ASTEC

Shareholding

(in %)
31-Mar
Promoter
71.33
Public
28.67
Others
0
Total
100

Indexed Stock Performance

Astec Lifesciences Ltd Sensex
Astec Lifesciences Ltd
One Year Performance

Price performance

Return (%)
1m
3m
12m
36m
Absolute
69.93
51.64
60.01
27.55
Sensex
9.01
-10.87
-13.26
9.51

+91 22 6639 3000

research@stockaxis.com

Astec Lifesciences Ltd

The company will start yielding better margins through backward integration of its products.

 

Established in 1994, Astec Life sciences is engaged in the manufacture & sale of intermediates, active ingredients and formulations in the off patent–proprietary category with a focus on agrochemical and pharmaceutical. With over two decades of experience in development and production of selected chemicals, the company has forged enduring relationships with large and small companies all over the world. This is evident in the fact that more than half of its business comes from export sales, to more than 25 countries. The company has three manufacturing units located in Maharashtra i.e. one unit at Dombivli & two units at Mahad with one of the unit being an EoU. The company exports its products to East Asia, Europe, Middle East and USA. Hexaconazole, Tebuconazole, Metalaxyl and Propiconazole are some of the key products in agrochemical segment which contributes its majority of sales.

 

Investment Thesis

Strong parentage backing with established track record in manufacturing fungicides: Due to strong parentage backing of Godrej group, the company gets good platform for distributing its product on a PAN india basis . The company has an extensive track record spanning more than two decades and it enjoys an established position in the manufacturing of technical grade fungicides. The company has long term relationship with its clients and is one of the preferred suppliers of technical grade fungicides to a reputed clientele, comprising large MNCs, supported by its technical competency.

Backward integration and cater to new products: The company commenced new intermediates plant in FY19 which enabled them to reduce its dependence on China and led to improvement and stability in margins. The timing of commencement of the new plant is appropriate as the company is already seeing increased demand for its products. In a bid to reduce dependence on China the company has undertaken additional projects to cater to the new products that the company intends to launch going forward. These new products will help the company in becoming a preferred partner for its customer.

Leveraging new capacities to capitalise new markets: The company derives majority of its revenue from the fungicides segment thus in a bid to reduce segment concentration, it is working on few products in herbicides segment. There is an ongoing capex towards setting up a herbicides manufacturing facility, which is expected to commence operations in FY2021. Furthermore, it is making investments for setting up a new R&D facility, which is expected to result in a quantum jump in their R&D capabilities and will facilitate its new product development plans.

Strong demand for its product portfolio : The company has long term relationship with few US and Japanese customers who are driving demand in the contract manufacturing segment. The global as well as domestic demand for its triazole fungicide product is robust, majorly due to launch of few combination fungicides with new chemistries and existing molecules. The company is also working on enhancing its offering within the azole fungicide products and developing a robust pipeline for contract manufacturing business.

Covid-19 impact: Due to Covid-19 pandemic, there will be no significant impact on the business of the company as agrochemical industry was relatively insulated from the disruption.

 

Key Risks

Client concentration: The company’s clientele in the CRAMS portfolio has remained concentrated and dependent on a few select clients.

Susceptible to the regulatory risks associated with the ban of products by regulatory authorities upon review or change in regulations.

 

Financial Highlights

(Rs Crores)

ParticularsMar-17Mar-18Mar-19Mar-20Mar-21EMar-22E
Net Sales298.60367.50430.90522.60586.60671.90
Total Expenditure236.20298.70354.40437.40490.20559.10
EBITDA62.4068.8076.5085.2096.40112.80
Margin (%)20.90%18.72%17.75%16.30%16.43%16.79%
Depreciation13.6014.6019.3023.1027.4029.50
EBIT48.8054.2057.2062.1069.0083.30
Other Income2.808.1011.1011.9011.1011.00
Interest12.2010.6012.3012.5010.008.00
Profit Before Tax & Exceptional Items39.4051.7056.0061.5070.1086.30
Exceptional Items-10.604.10
Profit before Tax28.8055.8056.0061.5070.1086.30
Provision for Tax9.5020.6020.1013.8017.5021.60
Tax rate33.00%36.90%35.90%22.44%25.00%25.00%
Profit After Tax19.3035.2035.9047.7052.6064.70
Adjusted EPS9.8017.8018.3024.3026.8033.00
Source: Stockaxis Research, Company Data

Valuation

We expect the company’s dominant position in the Triazole fungicide manufacturing business, backward integration for its key products and investments in the new R&D centre to provide stable growth going forward. The company is developing new products supported by deep technical capabilities and is likely to benefit from the opportunities that the global demand shift from China may present for the Indian entities. The stock is currently trading at 22.2x FY22E EPS.