Astec Lifesciences

→ Overall: Intent of proudly manufacturing Agrochem in India for the world. FY23 stats:

• Revenue: Export: 61% & Domestic: 39% | Enterprise: 74% & Contract Mfg.(CDMO): 26%
• Industry expected to grow at a CAGR of 8-10% by 2025.
• Leadership position in triazole fungicides
• CDMO strategy took 5~7 Yrs. to implement- Reguatory Approval, R&D Center etc.
• 4 Mfg. Plants @ Mahad, MH | R&D Center – In Rabale, MH (commissioned in April 2023)
• Expenditure on R&D: Capital – 68 Cr. Vs 16 Cr. [FY22]
• Permanent Employees: 551 & WORKERS: 200
• Number of Shareholders: 18,097. No. of Equity Shares: 1.99 Cr. | Promoter Holding: 66.76 %.
• Key Products: Enterprise & Contract Mfg.(CDMO)
  → Enterprise product: Over-reliance on few of the enterprise products. Strategies: Maintain cost position and broaden the portfolio (fungicides + herbicide). New product development launch in FY24.
• Feb 09, 2023: demand headwinds [high inventories with customers due to poor kharif season in the domestic market] & pricing erosion [China’s excess supplies & lower internal demand]
• May 15, 2023: Tebuconazole– price decline 69% [Muted demand in China and overcapacity situation]. Price pressure will continue in FY24. Propiconazole– price decline 44% [inventory pileup & erratic weather condition] | Demand-Supply balanced and should recover with season
• August 10, 2023: Few more months to achieve normalcy
  → Contract Mfg.(CDMO): In long run, this business shall be bigger than enterprise business and will help to attain sustainable revenue and margins.
• Revenue 84 Cr., 162 Cr., ~320Cr.(E), and ~550 Cr.(E) in FY22, FY23, FY24 and FY25 respectively
• After steady state (i.e., FY 25 onwards), revenue CAGR of 20~25%
• Within 6 months of R&D center, hand full with several projects

→ Capex: 2nd herbicide facility [INR 120 – 130 crores] to be commercialized by Dec 23 & multipurpose plant – Capex [500Cr.] for CDMO to be finalized by Dec 2023 and commissioned by ~Dec 24.

→ Concerns: Unfavorable and erratic weather patterns | Unavailability of raw materials | Foreign currency volatility and interest rates | Contingent liabilities: ~ 200 Cr.

→ Valuation Snapshot:

Sources: FY23 AR, Agrovet’s Conference Calls of Q3 and Q4FY23, Q1FY24
Disc: No position