Buy Bayer Cropscience; target of Rs 5350: Prabhudas Lilladher

Prabhudas Lilladher’s research report on Bayer Cropscience

Bayer Crop Science (BYRCS) reported lower than expected results during 3QFY22. Though revenue growth of 8% YoY (9MFY22, +7% YoY) was in-line with our estimate,EBITDA declined 38%YoY to Rs663mn and was lower than ours as well as consensus estimate. Exceptional gain of Rs585mn arising out from sale of company’s seed distribution business (Cotton, millet, mustard and sorghum) along with investment property to Crystal crop protection resulted in PAT of Rs848mn (as against loss at PAT in the base quarter). Key highlights are: (a) clocked double digit revenue growth in crop protection business driven by better growth in herbicide category coupled with prudent channel management and demand generation; (b) corn hybrid seeds impacted led by subdued demand in domestic market; (c) gross margins up 230bps YoY to 42.9% which we believe was primarily led by higher price realizations in CP segment partially offset by lower contribution of corn hybrid seeds (higher margin business); (d) EBITDA margin contracted 480bps YoY, impacted by inflated input cost coupled with higher sales return in corn seed business and higher opex in terms of marketing and distribution spends.

Outlook

We trim our FY22/FY23/FY24 EPS by 11%/6%/6% to factor in lower operating performance of 9MFY22. We remain positive on BYRCS business model, riding comprehensive distribution network, innovative products pipeline and healthy balance sheet. Maintain “BUY” with a revised target price of Rs5,350 (earlier Rs5,700), based on 30xFY24E EPS.

More Info on Trent

At 14:47 hrs Bayer CropScience was quoting at Rs 4,698.60, up Rs 13.00, or 0.28 percent.

It has touched an intraday high of Rs 4,730.35 and an intraday low of Rs 4,671.05.

It was trading with volumes of 506 shares, compared to its thirty day average of 818 shares, a decrease of -38.16 percent.

In the previous trading session, the share closed down 3.44 percent or Rs 167.05 at Rs 4,685.60.

The share touched its 52-week high Rs 6,127.45 and 52-week low Rs 4,519.90 on 13 August, 2021 and 29 November, 2021, respectively.

Currently, it is trading 23.32 percent below its 52-week high and 3.95 percent above its 52-week low.

Market capitalisation stands at Rs 21,116.49 crore.

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