Aries Agro Research Report By HDFC Securities

AAL is a leader in nutritional products for plants, manufactures a wide range of products under 65 Brands of plant nutrients crop protection chemicals. It’s diversified product portfolio and wide distribution network enables it to have an upper edge over its peers. Its product mix with multiple products targeting various strata of farmer is a huge entry barrier. The strategy of billing only the distributors and maintaining a relation with the farmers only on non financial parameters have been working pretty well for AAL over the past few years. This is expected to continue going ahead and ensure smooth flow of business for the company.

Despite its slow growth in topline and bottomline over the last few years, we feel that this could accelerate going forward and the stock remains a value buy. It is available at 0.7x FY16E consolidated BV. At the current market price (of Rs 111) the company is trading at 6.4x its FY15E consolidated EPS of Rs 17.3 and 5.8x its FY16E consolidated EPS of Rs 19.0. Investors could buy the stock at the CMP and add on declines to Rs.86-95 band (4.5-5x FY16 EPS) for sequential targets of Rs 143-171 (7.5-9x FY16E EPS) for the next 2-3 quarters.

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