Nagarjuna Agrichem Ltd (NACL) is one of the largest pesticide agrichemical companies in the country with a market share of ~4% and belongs to the Nagarjuna Group of Hyderabad. NACL manufactures a comprehensive range of pesticide technicals, formulations and custom manufactured fine chemicals through its three plants situated at Srikakulam, Ethakota and Shadnagar in Andhra Pradesh. Pesticides account for more than 95% of the company’s total revenues. Historically, the domestic business has been contributing by around 70% to the company’s overall revenues, while exports have been accounting for the balance. However, in the recent past, the contribution of exports has come down, ie to ~20% in FY2014.
Outlook & Valuation: With the Srikakulam plant’s Block 5 back into operation, the company is expected to witness improved profitability, going forward. Thus, we expect the company to post a sales CAGR of 16.1% over FY2014-16E and a net profit of Rs.39cr in FY2016E V/s a loss of Rs. 12.6cr in FY2013. At the CMP, the stock trades at a P/E of 5.0x FY2016E EPS, which we believe is attractive in comparison to its peers. Thus we recommend a Buy on the stock with a target price of Rs. 18.
I think it might move up to 22
I smell cooked accounts here.