Insecticides India posts subdued Q1 results; management says company will do well in Q2 FY24

Insecticides India share price: Shares of Insecticides India, a leading agrochemical player, rallied as much as 2.83 per cent to hit a high of Rs 474 apiece on the NSE on Wednesday (August 16). The stock, which hit an all-time high of Rs 792 on the NSE in November last year, has been under pressure since around that time. In the past 12 months, the scrip has slipped over 30 per cent, as per Trendlyne data. The company's June quarter results were also subdued; however, the management believes that it will put up a good show in the September quarter (Q2FY24).

In an interaction with Zee Business, Rajesh Aggarwal, Managing Director of Insecticides India, said on August 16 that the agrochemical sector has not performed well in the past 7-8 months and the prices have been under pressure. However, the MD exuded confidence that the company will do well on top-line and bottom-line fronts in the second quarter of the current fiscal. (Q2FY24). 

Aggarwal added that the company has established many brands this year and expects to witness better sales this time. The MD further said Insecticides India is aiming to lower inventories worth Rs 250–300 crore in the ongoing quarter. Aggarwal also said that it expects 20 per cent CAGR growth in 4-5 years. The company's Gujarat plant will be commissioned by Diwali, the MD added.
 

Agro-chemical sector in India

The India agrochemicals market size is expected to grow from $7.90 billion in 2023 to $12.58 billion by 2028, at a compound annual growth rate (CAGR) of 9.75 per cent during the forecast period (2023–2028), according to a report by Mordor Intelligence.

Agrochemicals are engineered chemical or biological formulations used for improvements in the quality and yield of crops, and they play an important role in the agriculture industry, assisting farmers in enhancing their crop quality as well as quantity.
 

Agrochemical Companies Q1 Results 

Most agrochemical companies—in India as well as overseas—reported weak numbers for the first quarter of the current fiscal year (Q1 FY24) amid continued pressure from channel destocking and generics oversupply. 

"There were very few exceptions (BASF, Best Agro, Godrej and PI), all of which benefited from specific growth drivers. The upcoming September quarter will remain weak for the global industry, though India may fare better amid the monsoon revival," note analysts at Kotak Institutional Equities in a report released on August 16. 

Corteva, a leading American agricultural chemical and seed company, expects the destocking of channel inventories of agrochemicals to last through the whole of CY2023 and, in certain geographies such as Latin America and certain product categories, through 1HCY24. 

"Further, there is no sharp recovery expected in channel demand even after the phase of destocking ends, as the current downturn is an unwinding of the sharp build-up in inventories that happened post-COVID, and channel inventory levels are now reverting back towards the longer-term trendline. In an era of persistently higher interest rates and easy supply availability, channel partners are likely to want to keep their inventory levels low," the analysts added.

Hence, the agrochemical industry should expect no more than normal growth in CY2024 after a sharp decline in industry sales in CY2023 that will likely be in the high single-digits to low double-digits, Kotak Institutional Equities said. 
 

Insecticides India Q1 Results 

Insecticides (India) Ltd posted a 24 per cent drop in its consolidated net profit at Rs 29.14 crore for the quarter ended June 30, 2023, on higher expenses. The company had posted a net profit of Rs 38.30 crore for the corresponding quarter of the previous financial year.

Total consolidated income increased to Rs 639.95 crore during the April-June quarter of the 2023–24 fiscal from Rs 560.68 crore in the year-ago period. However, the company’s expenses were higher at Rs 604.35 crore as against Rs 510.26 crore in the said period.

The company said it incorporated a wholly-owned subsidiary, IIL Overseas DMCC (Dubai), on May 1 this year to carry out the business of trading insecticides, and agricultural and veterinary products, as per a PTI report.
 

Should you buy the stock? 

Prabhudas Lilladher, in a Q1 results review report, mentioned that going forward, management remains confident in achieving revenue growth of 10-12 per cent YoY in FY24E, aided by a) the commencement of new facilities; b) new product launches; and c) significant export registrations.

However, it remains cautious on margins and guides for 9–10 per cent EBITDA margins. "We largely keep our estimates unchanged for FY24/25E. Maintain an ‘accumulate’ rating on the stock with an unchanged target price of Rs 550 per share based on 12XFY25 EPS," the brokerage said in its August 11 report.
 

Insecticides India share price

The stock was listed on bourses on May 30, 2007. Since its listing, the stock has given 1,361 per cent returns till November 30, 2022, the day it hit an all-time high of Rs 792 on the NSE.