Trying to answer point by point
a) Competitive intensity will increase in everything in life if it is highly profitable with supernormal ROCEs. However, here some of it is safeguarded as the company has 20 years patent for recently launched products. Advantage may not last that long, but still 5-7 year runway is ahead for us and that is good enough. And then they have 28 products which are filed in limited competition category. So what you think may be a short time affair could continue for several years on constant new product launches. The data on filed products is confidential and I am not privy to that, but company has disclosed some products like Strobulin chemistry ones going forward during the concall. Ronfen, CTPR and recently approved patent on another ternary combination will drive growth for FY24 and FY25 I guess.
b) For now, frankly I am looking to ride the near 2-3 years and then worry about later. If I am right, FY24 and FY25 would both be a growth of 30-40% in bottom line. FY23 would obviously be more than 100% jump in bottom line over FY22 PAT of 104Cr. The company has already done 170cr in 1H. Overall the promoter is just 44 years old and is hungry for growth. Indian Agrochem industry has tailwinds and innovation will be rewarded is my bet. Unlike most other players like Sharda, Dhanuka, etc who just copy paste molecules or make formulations from imported technicals, BAL is trying something different.
However, 3rd quarter is likely to be a very weak quarter seasonally. So not getting hopes too high. Let’s see. Stock in my view is still cheap though. 11-12X FY24.
Disclosure: Invested and so my view may be biased.
Do not treat this as investment advice. Do your own research please!
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