Aimco pesticides in an Agro chemicals company and is one of the major players in Insecticides, Pesticides, Herbicides and fungicides. Aimco was also the first company in india to produce Chlorpyrifos, Triclopyr and is a leader in its formulations. Aimco is founded by a well-known industry leader Pradeep Dave who has been a president of PMFAI, chairman of CAPMA etc. The company got into trouble because of debt and the entire last decade and earlier part of this decade was taken away by this. In FY13-14 Aimco went ahead with one time settlement with the banks and settled its obligations. After this whatever little debt was left with Aimco, it has now managed to pare it and is now completely debt free. I think the best thing to do to understand the industry and business is to go through the AR (no need for me to repeat everything here).
The financial ratios are also pointing towards a strong and sustained business growth.
In the last five years the revenues have grown from 49cr to 96cr and bottomline has gone up from a loss of 6.7 cr to profit of 4.25cr in FY16. Importantly, the Operating margins are increasing consistently for last
few years and even in this FY, it is much better than previous FY. I also want to highlight the aberration that we had in the last FY when the topline had significantly de-grown. Their main export market brazil, was severely affected because of crude crashing and causing significant damage to its economy and
currency. A few quarters earlier with crude stabilizing, the exports to Brazil normalized and its realization have also started going up. Aimco derives around half of its revenues from exports with Brazil being its biggest export market. It has completed an expansion this quarter and plans to commence another expansion in next two quarters.
Aimco is the only Debt free Agro-chemicals company (as far as i know). It is also now diversifying into speciality chemicals and through its subsidiary, moving into micro-nutrients and bio-nutrients which is even higher margin and
growth area. Aimco expects FY17 to be an important year for its subsidiary where the visibility has now built up and expects a 100% grown in its turnover (of its subsidiary) from FY18-20, starting with 3cr, in next FY.
One other significant thing that I want to highlight is the rise of Sameer and Ashit dave, where one is technically brilliant and the other is a very good capital allocator. Their business acumen also seems to be good.Most of the turnaround started in the last decade when these two assumed more significant roles within the company. Their role in OTS settlement negotiations was also the highlight of entire settlement episode.
- Dave family bought their stake back from Excel family and is now the sole owner of the company.
- Debt-free and looking to grow with a hawk eye on profits.
- The new breed of top management is very capable as i am told.
- The subsidiary is a dark horse.
- Specific focus on EPS accretion as mentioned in AR. Always a good sign.
- Right now around half of exports are to brazil. should diversify for risk mitigation.
- Being a small company, its not very well covered and not much information is accessible.
- May not give scroaching growth as company intents to grow only profitably with commensurate increase in EPS.
Basically my investment thesis is simple here, the business is doing good and is getting better with every quarter. With increasing cash balance every year plus RoE and RoCE of around 75%, I think it deserves serious attention. Most importantly, the stock is roughly valued at 9-10 FY17 PE and is available at just 74cr market cap. Given the high valuations of the markets, I believe people will start looking for such value cum growth stocks with high margin of safety.
Disclosure- Invested & looking to add more