(BYRCS IN) Rating: ACCUMULATE CMP: Rs4,258 TP: Rs4,517 February 4, 2019 Q3FY19 Result Update Change in Estimates Target Reco Change in Estimates Current Previous FY20E FY21E FY20E FY21E Rating ACCUMULATE ACCUMULATE Target Price 4,517 4,517 Sales (Rs. m) 31,030 34,443 31,030 34,443 % Chng. - - EBITDA (Rs. m) 5,523 6,441 5,523 6,441 % Chng. - - EPS (Rs.) 107.8 129.2 107.8 129.2 % Chng. - - Key Financials FY18 FY19E FY20E FY21E Sales (Rs. m) 27,099 28,467 31,030 34,443 EBITDA (Rs. m) 4,094 4,783 5,523 6,441 Margin (%) 15.1 16.8 17.8 18.7 PAT (Rs. m) 2,671 3,102 3,700 4,437 EPS (Rs.) 77.8 90.3 107.8 129.2 Gr. (%) (5.4) 16.1 19.3 19.9 DPS (Rs.) 17.5 18.1 21.6 25.8 Yield (%) 0.4 0.4 0.5 0.6 RoE (%) 13.9 16.4 17.2 18.0 RoCE (%) 19.6 23.4 24.0 24.6 EV/Sales (x) 5.2 5.0 4.5 3.9 EV/EBITDA (x) 34.7 29.9 25.3 21.0 PE (x) 54.7 47.1 39.5 32.9 P/BV (x) 8.2 7.3 6.4 5.6 Key Data BAYE.BO BYRCS IN 52-W High / Low Rs.4,800 / Rs.3,635 Sensex / Nifty 36,583 / 10,912 Market Cap Rs.146bn/ $ 2,039m Shares Outstanding 34m 3M Avg. Daily Value Rs.57.92m Defying industry slowdown BYRCS reported strong results with ~30% topline growth defying industry slowdown. The numbers were better than our estimates and there was visible improvement on all key parameters. According to the management, strong performance in Paddy, Fruits and Vegetables were the key drivers of growth for the company. BYRCS is a compelling play in the Indian Crop protection space given 1) broad based product portfolio (Insecticides/ Fungicides/ Herbicides are 47%, 27% and 18% of revenues) 2) 14% market share (86% domestic sales) 3) aggressive new launch pipeline (50 new products by 2022) 4) most extensive and professionally planned distribution network and 5) Rs1.2bn synergy benefits from Monsanto Merger. we estimate that MCHM merger will be EPS accretive by 30% for BYRCS shareholders (7% dilutive for MCHM shareholders). We estimate 18.5% PAT CAGR over FY18-21 and expect premium valuations to sustain given strong parentage and growth visibility. Maintain Accumulate with a target price of Rs4517 based on 35x FY21 earnings. Healthy 30% topline growth amidst industry slowdown: In the current scheme of things when the industry growth is struggling due to high inventory, lower pest infestation and decline in acreages in Rabi crop, 30% topline growth is commendable. The same may have been driven by placement of new products given that BYRCS has strong launch pipeline for 2019. EBITDA doubles YoY: BYRCS reported 5 th straight quarter of gross margin expansion with 126 bps to 42.0% in Q3. EBITDA more than doubled YoY to Rs 466 mn and margins expanded by 279 bps to 7.5% led by better product mix and operating leverage benefits. Other Income surged from Rs 29 mn in Q3FY18 to Rs 110 mn in Q3FY19. PAT grew 1.6x YoY to Rs 275 mn. Shareholding Pattern (%) Promoter s 68.69 Foreign 3.65 Domestic Institution 15.61 Public & Others 12.05 Promoter Pledge (Rs bn) - Stock Performance (%) 1M 6M 12M Absolute 0.3 (3.2) 2.9 Relative (2.1) (0.6) (1.3) Prashant Biyani prashantbiyani@plindia.com 91-22-66322260 February 4, 2019 1
5th straight quarter of gross margin expansion; EBITDA doubles YoY Y/e March Q3FY19 Q3FY18 YoY gr. (%) Q2FY19 9MFY19 9MFY18 YoY gr. (%) Net Sales 6,210 4,797 29.5 11,041 25,569 24,097 6.1 Expenditure Raw Materials 3,602 2,843 26.7 6,638 14,186 14,292 (0.7) % of Net Sales 58.0 59.3 60.1 55.5 59.3 Employee Cost 804 645 24.7 731 2,264 1,950 16.1 % of Net Sales 12.9 13.4 6.6 8.9 8.1 Other Expenses 1,338 1,083 23.5 1,486 4,169 3,598 15.9 % of Net Sales 21.5 22.6 13.5 16.3 14.9 Total Expenditure 5,744 4,571 25.7 8,855 20,619 19,840 3.9 EBITDA 466 226 106.2 2,186 4,950 4,257 16.3 Margin (%) 7.5 4.7 19.8 19.4 17.7 Depreciation 85 84 1.2 84 256 243 5.3 EBIT 381 142 168.3 2,102 4,694 4,014 16.9 Interest 37 52 (28.8) 36 96 91 5.5 Other Income 110 29 279.3 98 319 325 (1.8) PBT 454 119 281.5 2,164 4,917 4,248 15.7 Tax 179 12 NA 737 1,743 1,448 20.4 Tax Rate (%) 39.4 10.1 34.1 35.4 34.1 RPAT 275 107 157.0 1,427 3,174 2,800 13.4 APAT 275 107 157.0 1,427 3,174 2,800 13.4 Source: Company, PL February 4, 2019 2
Financials Income Statement (Rs m) Y/e Mar FY18 FY19E FY20E FY21E Net Revenues 27,099 28,467 31,030 34,443 YoY gr. (%) (3.3) 5.1 9.0 11.0 Cost of Goods Sold 16,006 15,942 17,377 19,116 Gross Profit 11,093 12,526 13,653 15,327 Margin (%) 40.9 44.0 44.0 44.5 Employee Cost 2,639 2,904 3,165 3,444 Other Expenses 4,360 4,839 4,965 5,442 EBITDA 4,094 4,783 5,523 6,441 YoY gr. (%) (1.0) 16.8 15.5 16.6 Margin (%) 15.1 16.8 17.8 18.7 Depreciation and Amortization 331 340 358 377 Balance Sheet Abstract (Rs m) Y/e Mar FY18 FY19E FY20E FY21E Non-Current Assets Gross Block 4,156 4,356 4,586 4,836 Tangibles 4,063 4,252 4,477 4,691 Intangibles 93 104 109 145 Acc: Dep / Amortization 812 1,152 1,510 1,887 Tangibles 761 1,080 1,415 1,769 Intangibles 51 72 95 119 Net fixed assets 3,344 3,204 3,076 2,949 Tangibles 3,302 3,172 3,061 2,922 Intangibles 42 32 15 27 EBIT 3,763 4,442 5,166 6,064 Margin (%) 13.9 15.6 16.6 17.6 Net Interest 113 133 110 90 Other Income 388 252 386 551 Capital Work In Progress 361 430 445 445 Goodwill - - - - Non-Current Investments 174 4,121 4,136 4,157 Net Deferred tax assets (104) (104) (104) (104) Other Non-Current Assets 708 712 776 861 Profit Before Tax 4,368 4,561 5,441 6,525 Margin (%) 16.1 16.0 17.5 18.9 Total Tax 1,367 1,460 1,741 2,088 Effective tax rate (%) 31.3 32.0 32.0 32.0 Profit after tax 3,001 3,102 3,700 4,437 Minority interest - - - - Share Profit from Associate - - - - Adjusted PAT 2,671 3,102 3,700 4,437 YoY gr. (%) (8.2) 16.1 19.3 19.9 Margin (%) 9.9 10.9 11.9 12.9 Extra Ord. Income / (Exp) 330 - - - Reported PAT 3,001 3,102 3,700 4,437 YoY gr. (%) 3.1 3.4 19.3 19.9 Margin (%) 11.1 10.9 11.9 12.9 Other Comprehensive Income - - - - Total Comprehensive Income 3,001 3,102 3,700 4,437 Equity Shares O/s (m) 34 34 34 34 EPS (Rs) 77.8 90.3 107.8 129.2 Current Assets Investments - 200 800 1,300 Inventories 7,399 7,409 7,821 8,304 Trade receivables 6,588 6,473 6,801 7,172 Cash & Bank Balance 4,178 3,165 5,910 9,348 Other Current Assets 2,095 1,566 776 - Total Assets 25,348 27,849 31,161 35,224 Equity Equity Share Capital 343 343 343 343 Other Equity 17,440 19,783 22,579 25,936 Total Networth 17,784 20,126 22,923 26,279 Non-Current Liabilities Long Term borrowings - - - - Provisions 842 854 931 1,033 Other non current liabilities - - - - Current Liabilities ST Debt / Current of LT Debt - - - - Trade payables 2,838 2,808 2,890 3,020 Other current liabilities 3,780 3,957 4,313 4,788 Total Equity & Liabilities 25,348 27,849 31,161 35,224 February 4, 2019 3
Cash Flow (Rs m) Y/e Mar FY18 FY19E FY20E FY21E Key Financial Metrics Year Y/e Mar FY18 FY19E FY20E FY21E PBT 4,368 4,561 5,441 6,525 Per Share(Rs) Add. Depreciation 331 340 358 377 EPS 77.8 90.3 107.8 129.2 Add. Interest 113 133 110 90 CEPS 87.4 100.3 118.2 140.2 Less Financial Other Income 388 252 386 551 BVPS 518.0 586.2 667.6 765.4 Add. Other (66) (153) (397) (686) FCF 22.6 108.8 112.3 128.7 Op. profit before WC changes 4,746 4,882 5,512 6,306 DPS 17.5 18.1 21.6 25.8 Net Changes-WC (2,248) (147) (542) (594) Return Ratio(%) Direct tax (1,284) (730) (871) (1,044) RoCE 19.6 23.4 24.0 24.6 Net cash from Op. activities 1,214 4,006 4,099 4,668 ROIC 17.2 19.4 23.7 29.6 Capital expenditures (419) (269) (245) (250) RoE 13.9 16.4 17.2 18.0 Interest / Dividend Income 183 252 386 551 Balance Sheet Others 619 (4,134) (638) (551) Net Debt : Equity (x) (0.2) (0.2) (0.3) (0.4) Net Cash from Invt. activities 383 (4,151) (498) (250) Net Working Capital (Days) 150 142 138 132 Issue of share cap. / premium (5,049) - - - Valuation(x) Debt changes - - - - PER 54.7 47.1 39.5 32.9 Dividend paid (721) (723) (746) (890) P/B 8.2 7.3 6.4 5.6 Interest paid (41) (133) (110) (90) P/CEPS 48.7 42.5 36.0 30.4 Others 2 (12) - - EV/EBITDA 34.7 29.9 25.3 21.0 Net cash from Fin. activities (5,809) (868) (856) (980) EV/Sales 5.2 5.0 4.5 3.9 Net change in cash (4,212) (1,013) 2,745 3,438 Dividend Yield (%) 0.4 0.4 0.5 0.6 Free Cash Flow 777 3,737 3,854 4,418 Quarterly Financials (Rs m) Y/e Mar Q4FY18 Q1FY19 Q2FY19 Q3FY19 Net Revenue 3,002 8,318 11,041 6,210 YoY gr. (%) 39.4 19.2 (10.4) 29.5 Raw Material Expenses 1,714 3,946 6,638 3,602 Gross Profit 1,288 4,372 4,403 2,608 Margin (%) 42.9 52.6 39.9 42.0 EBITDA (163) 2,298 2,186 466 YoY gr. (%) (172.1) (1,509.8) - - Margin (%) (5.4) 27.6 19.8 7.5 Depreciation / Depletion 88 87 84 85 EBIT (251) 2,211 2,102 381 Margin (%) (8.4) 26.6 19.0 6.1 Net Interest 22 23 36 37 Other Income 63 111 98 110 Profit before Tax (210) 2,299 2,164 454 Margin (%) (7.0) 27.6 19.6 7.3 Total Tax (81) 827 737 179 Effective tax rate (%) 38.6 36.0 34.1 39.4 Profit after Tax (129) 1,472 1,427 275 Minority interest - - - - Share Profit from Associates - - - - Adjusted PAT (129) 1,472 1,427 275 YoY gr. (%) (64.3) 87.0 (25.1) 157.0 Margin (%) (4.3) 17.7 12.9 4.4 Extra Ord. Income / (Exp) - - - - Reported PAT (129) 1,472 1,427 275 YoY gr. (%) (64.3) 87.0 (25.1) 157.0 Margin (%) (4.3) 17.7 12.9 4.4 Other Comprehensive Income - - - - Total Comprehensive Income (129) 1,472 1,427 275 Avg. Shares O/s (m) 34 34 34 34 EPS (Rs) (3.8) 42.9 41.6 8.0 February 4, 2019 4
Price Chart (Rs) 5000 Recommendation History No. Date Rating TP (Rs.) Share Price (Rs.) 1 7-Jan-19 Hold 4,523 4,261 4542 4084 3626 3168 Feb - 16 Aug - 16 Feb - 17 Aug - 17 Jan - 18 Jul - 18 Jan - 19 Analyst Coverage Universe Sr. No. CompanyName Rating TP (Rs) Share Price (Rs) 1 Hold 4,523 4,261 2 Dhanuka Agritech BUY 605 418 3 Insecticides India BUY 896 572 4 P.I. Industries Accumulate 924 864 5 Rallis India BUY 242 164 6 Sharda Cropchem BUY 444 305 7 UPL BUY 975 764 PL s Recommendation Nomenclature (Absolute Performance) Buy : > 15% Accumulate : 5% to 15% Hold : +5% to -5% Reduce : -5% to -15% Sell : < -15% Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly February 4, 2019 5
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Marg, Worli, Mumbai-400 018, India Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209 www.plindia.com Bloomberg Research Page: PRLD <GO> February 4, 2019 6