MARKET UPDATE
Nifty had hit 52 week high and since then it had failed to cross the top indicating that it should be consolidating and moving towards lower levels in the coming weeks. Is this an indication of some big correction? Well, honestly we have no idea about it, however we would caution investors to book partial profits in companies where there have been significant gains in recent periods. We expect nifty below 17500 to further fall to 16800 level. Please note this is not meant for trading we have been wrong in past while predicting the broader markets (indices) and we can be wrong this time too. This note is provided just for the reference to the users who we asking if they should start to average down on the stocks that have fallen. Therefore please do not jump on quickly to start averaging.
Current Market Price-: 325 Rs
Sharda Cropchem Limited a 100% debt free , 45 years old company is one of India’s leading agriculture innovation companies. It is engaged in export of agrochemicals (technical grade and formulations) and non-agro products such as conveyor belts, rubber belts/sheets, dyes and dye intermediates to various countries across the world.
Established in 1989 , Sharda cropchem has been a fast growing global agrochemicals company in the generic crop protection chemicals industry. The company has made deep inroads in the highly developed European and US markets which are characterised as high entry barrier markets. It also has a significant presence in other regulated markets such as LATAM and Rest of the World.
Business
The Company has an asset-light business model whereby it focuses on identifying generic molecules, preparing dossiers, seeking registrations, marketing and distributing formulations through third party distributors or it’s own sales force. The Company’s core competence lies in developing product Dossiers* and seeking product registrations in different countries. The Company not only has an extensive distribution network of third party distributors but has also setup its own sales force in various countries in Europe and in Mexico, Colombia, South Afirca and India. The Company’s strategy of sourcing through a global network of suppliers provides it with flexibility and nimbleness.
Dossiers-: Manufacturers and importers have to collect all existing available information on the intrinsic properties of a substance as well as on its manufacture, uses and exposure. The technical dossier contains information about: The identity of the substance. Information on the manufacture and use of the substance.
The company is capable of providing a wide bouquet of products to its customers. Its product portfolio in agrochemical business comprises of formulations and generic active ingredients in fungicide, herbicide and insecticide segments for protecting different kind of crops as well as serves turf and specialty markets and in biocide segment as disinfectants thereby allowing us to offer varied range of formulations and generic active ingredients.
The product portfolio in non-agrochemical business comprises of Belts, general chemicals, dyes and dye intermediates which enables the Company to cater to varied demands.
The company had 500+ third party distributors as of 2019 with sales force present in 40+ countries. Apart from that the company has operational presence in more than 80 countries across the globe.
Strong registrations in Pipeline Sharda Cropchem currently has 2,297 registrations, out of which 89% are formulations and the remaining 11% are active ingredients. The Company has a pipeline of 1,028 registrations across Europe, NAFTA, Latin America and Rest of World. Historically, the Company received 100-150 registrations each year and these registrations came from a portfolio of over 150 molecules. It continues to focus on adding more registration and these registrations will act as a catalyst in the growth of the Company. It has more than 41 subsidiaries spread across the globe.
Product Segments
AGROCHEMICALS
INSECTICIDES are pesticides that are formulated to kill, harm, repel or mitigate one or more species of insect.
FUNGICIDES are biocidal chemical compounds or biological organisms used to kill parasitic fungi or their spores. A fungistatic inhibits their growth. Fungi can cause serious damage in agriculture, resulting in critical losses of yield, quality, and profit.
FUMIGANTS are gaseous pesticides that control pests in agricultural fields, structures like buildings and apartments, storage houses and various other sites. Fumigants are generally biocides—chemicals that can kill/injure living organisms with which they come in contact.
HERBICIDES is a pesticide used to kill unwanted plants. Selective herbicides kill certain targets while leaving the desired crop relatively unharmed.
PLANT GROWTH REGULATOR : Plant hormones affect gene expression and transcription levels, cellular division, and growth. They are naturally produced within plants, though very similar chemicals are produced by fungi and bacteria that can also affect plant growth.[12] A large number of related chemical compounds are synthesized by humans. They are used to regulate the growth of cultivated plants, weeds, and in vitro-grown plants and plant cells; these manmade compounds are called plant growth regulators
RODENTICIDES are pesticides that kill rodents. Rodents include not only rats and mice, but also squirrels, woodchucks, chipmunks, porcupines, nutria, and beavers
AEROSOL A.I.: An aerosol is a suspension of fine solid particles or liquid droplets in air or another gas. Aerosols can be natural or anthropogenic. Examples of natural aerosols are fog, mist, dust, forest exudates and geyser steam.
VETERINARY DRUGS are used to cure and prevent diseases in animals, including animals used for food production. Veterinary drugs are given to animals via feed or drinking water, or by injection. The use of veterinary drugs may result in residues of these drugs in animal products like milk, eggs and meat.
Conveyor Belts
Sharda Cropchem Limited is engaged in the supplying a variety of Conveyor belts, V-belts, etc. These belts are used mainly in mining projects followed by Steel plants, quarries, grain silos, cement manufacturing facilities, ports, tunnelling projects, etc. The company caters to markets across Europe, NAFTA, Latin America and Rest of the World. The company supplies this product range from its partners in china.
Various types of Conveyor belts are
- Textile Ply Conveyor Belts
- Rough Top Conveyor Belts
- Cotton Transmission Belts
- Steel Cord Conveyor Belts
- Chevron / Pattern Conveyor Belts
- Pipe Conveyor Belts
- PVC / PVG Solid Woven Conveyor Belts
- Elevator Conveyor Belts
- Sidewall Conveyor Belts
- PVC and Polyurethane Light Duty Belting
Industrial Chemicals
Chemicals developed or manufactured for use in industrial operations or research by industry, government, or academia.
The main industries – that Sharda crop is currently catering to are:
– Water Treatment
– Food & Food ingredients
– Other Industrial applications
And last Sharda Biocide
Sharda Biocide Europe is a Business Unit from Sharda Cropchem Ltd. that develops, manufactures and markets biocide products for pest control in Public Health.
Pharmaceuticals / Intermediates
Due to the rising problems of COVID 19 PANDEMIC , SCL has now started to aid in the distribution and supply of PHARMACEUTICAL & INTERMEDIATES , used world wide to counter the multiple illnesses faced by people around the world
- Prothioconazole
- Azoxystrobin
- P-nitrophenol – Parathion-Methyl
- 2,4-dichloroacetophenone – Propiconazole
- Cyclopropanecarboxylic Acid – Trinexapac-Ethyl
- P-fluorobenzaledehyde – Cyfluthrin
Financials
For the Year Ended March 2021
The total revenue of Sharda Cropchem grew by 19.6%, from Rs2003 crores in FY20 to Rs2395 crores in FY21. The agrochemicals division of the Company surged by 22.2% from Rs 1685 crore in FY20 to Rs 2058 crore in FY21. The revenues from non-agro division grew by 6% from Rs 318 crore in FY20 to 337 crore million in FY21.
The revenue contribution in agro-business is driven primarily by European Union region constituting 50.6% of the agro revenues, followed by NAFTA region, LATAM and rest of the world with 35.2%, 7.3% and 6.9%, respectively
The total Agro business revenue grew by 22.2% .The region wise Agro business revenue in Europe, NAFTA,LATAM and Rest of the world grew by 20%, 26%, 24.6% and 17.1% respectively. The agrochemicals business contributed 86% and non-agrochemicals contributed 14% to the revenues in FY21. EBITDA excluding foreign exchange gain / loss and write off of intangible assets and intangible assets under development, grew by 29.8% from Rs 350 crore in FY20 to Rs 455 crore in FY21. Net profit after tax increased by 39.2% YoY from Rs 164 crore to Rs 229 crore. PAT margin stood at 9.6% in FY21.
For Q1FY22
- Revenues grew by 60.1% year-on-year (YoY) from Rs. 389 crores in Q1 FY21 to Rs. 623 crores in Q1 FY22 led by strong volume growth across the geographies.
- Gross profits, grew by 57.1% on a quarter-on-quarter basis from Rs. 116 crores in Q1 FY21 to Rs. 183 crores in Q1 FY22.
- Gross margins were marginally lower at 29.3% for Q1 FY22 mainly due to the product mix impact
- In terms of geographical mix, the Europe region was the highest contributor followed by NAFTA and Latin America.
- EBITDA grew exponentially by 119.4% YoY from Rs. 49 crores in Q1 FY21 to Rs. 107 crores in Q1 FY22.
- The EBITDA margin expanded by 463 bps to 17.1% in Q1 FY22 predominantly driven by better operating leverage.
- Profit after tax grew by 36.4% YoY from Rs. 28 crores in Q1 FY21 to Rs. 38 crores in Q1 FY22.
- Cash profit stood at Rs. 92 crores for Q1 FY22 in comparison to Rs. 63 crores of Q1 FY21.
- Net cash position as on 30th June 2021 is Rs. 361 crores.
Registration of Formulations and New Formulations in Pipeline
Since inception, the Company has procured 2,543 registrations, including 2,270 registrations in Formulations and 273 registrations in Active Ingredients (AIs). With these kinds of numbers, Sharda Cropchem continues to embark on its IP Portfolio expansion with a firm registration pipeline for the future. In addition to its existing portfolio, the Company has filed for 1,128 new applications for registrations globally, pending at different stages. Despite the COVID 19 disruption, Sharda Cropchem Limited has not let up in its investment commitments for their IP registrations
Sector Outlook
Sectorial Outlook
With 3 people per second born every day, more than 9.7 billion people will live on earth by 2050. Consequently, there will be a need to increase the world’s food production by around 70% to support the population by 2050. Most of the world’s suitable farmland is already being used.
Agriculture assumes the highest priority for the government in all the countries. So, there is no drop or no stillness in the demand. The demand for food products is growing rapidly with an increase in the world population. This demand has not been impacted adversely because of COVID-19.
According to Magna Information Centre’s report on Global Crop Protection Chemicals Market, the Asia Crop Protection Chemicals market was valued at $22,903.4 Million in 2021, and is projected to reach $30,491.7 Million by 2030 growing at a CAGR of 3.87% from 2021 to 2030. Herbicide segment is expected to be the highest contributor to this market, with $16,169.2 Million in 2021, and is anticipated to reach $21,089.7 by 2030, registering a CAGR of 3.66%. Insecticide segment is anticipated to reach $3,063.5 Million by 2030 with the highest CAGR of 5.18%. Herbicide and Fungicide segments collectively expected to account for about 84.2% share of the Asia Crop Protection Chemicals market in 2021, with the former constituting around 70.6% share. Insecticide and Nematicide segments are expected to witness significant growth rates at a CAGR of 5.18% and 4.66% respectively, during the forecast period. Presently, share of these two segments is estimated to be around 15.4% in the overall Asia Crop Protection Chemicals market in 2021, and is anticipated to reach 17.1% by 2030.
Europe crop protection chemicals market valued at $8,731 million in 2021 and projected to grow at a CAGR of 2.21% till 2030.
India stands fourth in agrochemicals management and its current market value is $4.1 billion. It has been estimated that the market will reach $8.1 billion by 2025. The exports market is expected to reach $4.2 billion by 2025.
Conclusion
Sharda Cropchem Limited is one of India’s leading agriculture innovation companies. The company is completely debt free having Cash and equivalents of Rs 360 crores as of Q1fy22 and Reserves of Rs 1500 crores. It has presence in more than 80 countries. Company has grown at 14% cagr over past 5 years. Also company has achieved a solid 60% growth in Q1FY22 over Q12FY21 which is a huge jump in top-line. Also if we check the overeall trend of the company over last 2-3 quarters company has been posing 30% Q-o-Q growth despite that management is projecting a conservative future growth of just 15%. The reason for which management has stated that they dont want to disappoint the shareholders in case of worst case scenario which leaves a huge room for future growth prospects. Given that the entire world has been recovering from the pandemnic and the fear of pandemic behind us company expects 15% to 18% growth (Volume plus the profitability growth) in the coming period. Thus this is what makes Charda cropchem amazing company to Explore.
Sharda Cropchem was previously suggested on darkhorsestocks on 25th August 2020 and despite the fact company has posted amazing set of numbers the stock is up just 5% over the same period.
Note-: Our work as compared to other is quite different. Unlike other blogs or others such service providers who provide research reports with a view to provide information or share articles mostly of well known companies, we specialise to bring it to the notice of users most unique and fundamentally strong companies which are known only to few people.
Is Sumitomo also a dark horse. Same business model