Insecticides India A stock with good Opportunity size

Nikhil_Dahiya · September 3, 2018, 1:59pm

While all sounds good (including the R&D, new product launches, positive sales and PAT growth), the red flag at the moment appears to be the generation of ZERO Free Cash Flow by the Company over the period of last 9 years.

If the sales and/or profits are not translating to cash despite revenue growing from 250 crores to 1100 crores+, appears to be a cause of concern.

Moreover, the business is cyclical in nature and depends a lot on normality of monsoon season coz company derives ~40% of its revenue from Jul-Sep quarter. Considering the volatility, working capital is required to maintain inventory which is reflected in the financial numbers of annual reports.

Considering that UPL Limited also caters to crop protection segment, it generates huge free cash flows.

Could not comprehend why Insecticides does not have the same trend.

Disclosure: Not holding

Nikhil_Dahiya · September 9, 2018, 9:53am

Had been digging more about the finer aspects of the business and found this document apparently provided to BSE for a QIB offer:

Though a bit outdated, gives unique insights into the business including the break-up of sales of ‘navratna’ products and the capacity utilization (as at March 31, 2015).

For ready reference, have jotted down the pointers including the bear case (refer PDF attachment).Analysis - Insecticides India.pdf (484.6 KB)

bhaskarbora67 · January 6, 2020, 9:30am

Agrochemical maker Insecticides India Ltd (IIL) has received an environment clearance for setting up a pesticide manufacturing unit in Bharuch, Gujarat that will entail an investment of Rs 40 crore, according to an official document.

The union environment ministry has given the go-ahead to IIL’'s proposed project after taking into account the recommendations of a green panel.

The clearance, however, has been given with some conditions, the document added.

As per the proposal, IIL wants to set up a pesticide and pesticide intermediates manufacturing unit with a production capacity of 2,500 tonne per month at Dahej in Bharuch district in an area of 52,000 square metre.

The estimated project cost is Rs 40 crore and will generate direct and indirect employment for 150 persons.

IIL has six formulation units in Chopanki (Rajasthan), Samba and Udhampur (Jammu & Kashmir), Dahej (Gujarat). It also has technical synthesis plants at Chopanki and Dahej to make technical grade chemicals.

bhaskarbora67 · June 17, 2020, 7:57am

https://darkhorsestock.wordpress.com/2020/05/31/insecticides-india/ good blog post

Akshay_Lulla · October 8, 2020, 2:45am

What are you trying convey via the image of you can explain would be helpful to all?

Invested at current levels waiting for bumper results due to very positive commentary by management in the last quarter and also release of new products.

Irs007 · November 10, 2020, 4:57am

In the first half, company generated profits of 66 crores vs 87 crores in FY20. Debt reduced to 62 crores with Cash & Cash Equivalent of 82 crores. It is available at 870 crores Mcap, 12 PE compared to peers trading at ~20 PE.

Irs007 · November 10, 2020, 11:49am

Q2 21 Concall:

Many areas suffered due to floods, heavy rains particularly North eastern areas. Heavy rains also impacted the Central zone. Despite having good rainfall, opportunity to use pesticides was lower
Operations were impacted due to lockdown restrictions on travelling(being in touch with customers/distributors/farmers)
Total branded sales declined by 15% due to uneven rainfall and less pest infestation. Maharatna sales decreased by 4% while other branded sales decreased by 25% y-o-y
Institutional sales increased by 9%
During the qtr, company was more focussed on cash sales. Working on Cash & Carry basis, small credit given to certain areas. Credit days were 100-150 days. Trying to reduce this to 120 days. Focusing now on converting into cash sales. More than 50% of business will be in Cash & Carry Model. Debtors will be lower going forward.
Focused on improving WC cycle, WC cycle reduced to 115 days in 1H21 vs 184 days in 1H 20
156 crore cashflow generated from operations
Debt reduced by 128 crores
Interim dividend of 2/share. 20th Nov - record date
10 new products will be launched in the next half. 3 products launched in Q2- Master stroke, dominant and Mahir. These 3 products contributed 10.6 crores to topline during the qtr. Launched 5 products in first half.
Lethal Granules received good response
Kadaki (partnership from Japan) - will be launched this month. Supremo will come in next 3-4 months time.
By next year, loss in Thimet will be recovered by these 3 products i.e Supremo, Lethal and Kadaki
Will strengthen manufacturing units at both the plants, also strengthening formulations at all locations
60000+ retail outlets
Capex guidance- 50 crores for this year, 50 crores for next year. Expanding majorly at 3 locations. Things will be up in phases. Some plants will be completed this fiscal. Biggest expansion is in Dahej(technical synthesis), it will be completed in next fiscal. Chopanki plant expansion(formulations & technical plant) will get completed in this fiscal. Benefits will start accruing from next FY.
Most of the funds generated from operations will be used towards capex, working capital and in registrations.
Once registrations are done, will start with trials and be ready for the next Kharif season.
Export target of 100 crores, will not reduce the target. 1H 21 exports - 22.2
Will be positive in topline and bottomline for FY21.
Do not see much improvement in margins. From next fiscal, focusing on bringing new products.
Inventory days is on a declining trend as Thimet is completed liquidated and Nuvan inventory will be liquidated by November 2020
On 10 crores exceptional item(fraud committed) : Head of business was the main culprit behind the fraud. He was working with the company for 20 years. Made 3 settlements so far, recovery of 4 crores with a discount being given of 60-70 lakhs. Legal process is still going on, would like to close this case as early as possible. Adopted control mechanism, reduced credit period, multiple checks from finance team and from auditors. Certain suggestions given by auditors will be implemented soon. Invoices will be audited and checked on monthly basis.
Do not import any technicals from China. Only for exports, company does buy technicals from China. For some major products, working on backward integration for intermediates for 2-3 products. By the time expansion is complete, will make intermediates for 3 more products.
Have to pay MSME suppliers within 45 days.
12 patents received, 18 patents pending

harsh.beria93 · April 25, 2022, 6:05pm

Latest management interview (link)

Management is upbeat on margins improving in the next few quarters on back of new products introduced

Company has had one of the highest number of domestic launches in their peer group (data below).

Launches	FY15	FY16	FY17	FY18	FY19	FY20	FY21
PI Industries	2.00	3.00	1.00	5.00	2.00	3.00	2.00
Dhanuka Agritech		5.00	7.00	8.00	3.00	7.00	6.00
Insecticides India	3.00	2.00	5.00	5.00	8.00	8.00	7.00
Rallis India			3.00	3.00	1.00	3.00	4.00

Exports have also been growing at a very fast pace, having crossed 100 cr. in FY22.

Agrochemical exports (cr.)	FY16	FY17	FY18	FY19	FY20	FY21
Insecticides India	9.00	12.00	34.00	60.00	64.00	61.00

Disclosure: Not invested

Gautam_Chopra · February 7, 2024, 4:52pm

Gautam_Chopra · February 27, 2024, 11:34am

Insecticides India usually do 60-65% business in Kharif season

Gautam_Chopra · June 13, 2024, 3:36am

ranvir · June 13, 2024, 9:42am

Insecticides India -

Q4 and FY 24 highlights -

Current manufacturing capabilities -

02 Active ingredient plants
06 Formulation plants
01 Biologicals plant
04 R&D centers, Team of 60+ scientists

Capacities -

Active Ingredients ( AIs ) - 15,800 MTPA

Formulations -

Granules - 80,750 MTPA
Powder - 24,770 MTPA
Liquids - 30,900 MTPA

Company is currently making 21 AIs and over 120 formulations

Product wise sales breakup -

Insecticides - 45 pc
Herbicides - 40 pc
Fungicides - 11 pc
Biologicals and PGRs - 4 pc

Segment wise sales breakup -

Branded formulations - 68 pc
B2B sales - 27 pc
Exports - 5 pc

Company is setting up a new AIs + Formulations facility at Behror in Rajasthan. Should go commercial in CY 24

FY 23 saw extreme pressure on profitability due - collapse in export demand ( due overstocking situation ) and inventory write down that company had to take due steep fall in AI and RM prices. Both these factors have reversed to a great extent ( though not fully ) by the end of FY 24

Long term prospects for agrochemical exports from India remain positive - due China + 1. Even the GoI is pushing for increased manufacturing of AIs in India

FY 24 outcomes -

Revenues - 1966 vs 1801 cr, up 9 pc ( new product sales @ 512 cr ie the products launched over last 5 yrs )

EBITDA - 163 vs 122 cr, up 33 pc (margins @ 8 vs 7 pc YoY. Margins in FY 22 were at 11 pc)

PAT - 103 vs 63 cr, up 62 pc

Working capital days @ 150 vs 169

Company has a range of Value Added ( company calls them Maharatna products ) which contribute 60 pc of branded formulation sales. These products grew by 27 pc in FY 24

Total product launches in FY 24 @ 8 products. These products clocked a sales of 50 cr for FY 24

Exports continued to be weak in FY 24 as well. Expecting a recovery in FY 25 as over stocking issues are completely resolved

Aim to take EBITDA margins into double digits inside next 1-2 yrs ( opinion : if this happens, PAT may get a big kicker )

FY 24 volume growth was 20 pc. Topline growth was only 9 pc due price deflation in most products

Aim to take value added sales ( Maharatna products ) beyond 65 pc before FY 26

Company’s domestic formulations mkt share @ 5.5 pc

75 pc of company new product introductions are 9(3) registrations. This improves their pricing power ( incrementally ). Also intend to launch at least 1 product each / yr for next 4-5 yrs in collaboration with Nissan Chemical corporation. These JV products have a gross margins of around 30 pc ( avg of new + old JV products ). Generally, Nissan gives each product to 2-3 players for distribution

Avg gross margins for Maharatna range of products is 35 pc ( varies from 30-40 pc - varying from product to product ). Company level gross margins are currently at 25 pc. Company expects them to inch upto 30 pc - as the agrochemicals mkt recovers in FY 25,26

Seeing much better demands trends in Q1

Disc: initiated a tracking position, hoping for a margin recovery in Q1, Q2. This may provide a 20-30 pc bump in the stock price, biased, not SEBI registered

Gautam_Chopra · July 18, 2024, 7:10am

Lot of domestic launches

ranvir · August 13, 2024, 8:35am

Insecticides India -

Q1 FY 25 results and concall highlights -

Revenues - 657 vs 640 cr, up 3 pc ( volume growth was 15 pc, lower topline growth is due to fall in RM and end product prices )

Gross Margins @ 27 vs 21 pc YoY ( pure generic products have a GM of around 15 pc )

EBITDA - 72 vs 46 cr, up 57 pc ( margins @ 11 vs 7 pc - massive improvement YoY )

PAT - 49 vs 29 cr, up 68 pc

Product wise sales breakup -

Insecticides - 33 pc
Herbicides - 61 pc ( doing very well vs LY )
Fungicides - 4 pc
PGRs - 2 pc

Channel wise sales breakup -

B2C - 71 pc ( vs 66 pc LY - good improvement )
B2B - 26 pc
Exports - 3 pc

In B2C category, 60 pc of sales in Q1 FY 25 came from premium products vs 57 pc LY vs 51 pc in FY 23 ( company calls them Maharatna and Focus Maharatna products ). These r higher margin products vs pure generics. At the company level, they contributed to 42 pc of sales. Gross margins in these products are > 40 pc vs around 15 pc for pure vanilla generics

The monsoon distribution has been good this season + the reservoir levels are healthy. This makes the Industry outlook positive

Company is working with Nissan Chemicals on half a dozen products ( these tech - transferred products obviously have higher margins )

Products launched after 2020 are already contributing to > 500 cr on the topline ( this is a very encouraging sign )

Q2 looks promising across India. Should exit the FY25 with double digit EBITDA margins

For most of the new products that the company is launching, AIs ( or technicals ) for them are made In-House

At present, company has 11 Focus Maharana products. These r high growth, high margin products ( mostly with Pan India presence ). Aim is to keep graduating more products from Maharatna to Focus Maharatna category. Maharatna products are currently smaller with regional presence

Pricing pressures continue to remain in B2B and Exports mkt. Reversal of this scenario may take some more time

Will be launching 04-05 new products this FY. All these will be differentiated products in the Maharatna category

Company is guiding for volume growth of > 15 pc with a value growth of around 10 pc for FY 25 ( due price corrections in finished products ). Should be able to do an EBITDA of around 220 cr for FY 25

Company’s new Technicals facility at Dahej is expected to start production in 1-2 months time ( awaiting Govt approval ). Company has spent around 150 cr on this plant. This plant has a revenue potential of around 250 cr ( realisable from next FY ). However, if the company chooses to use this plant for captive consumption to lower the costs of its formulations, this revenue potential may come down but the company level margins may increase

Company intends to keep improving the contribution of Maharatna + Focus Maharatna products in its overall revenue pie for the foreseeable future. Hence, there should be continuous margin improvement going fwd - in the medium term

Disc: holding from lower levels, biased, not SEBI registered, not a buy / sell recommendation

ranvir · November 19, 2024, 8:16am

Insecticides India -

Q2 FY 25 results and concall highlights -

Revenues - 627 vs 696 cr, down 10 pc
Gross Margins @ 31 vs 25 pc
EBITDA - 90 vs 82 cr, up 9 pc ( margins @ 14 vs 12 pc )
PAT - 62 vs 53 cr, up 16 pc

Product wise sales breakup -

Insecticides - 61 vs 49 pc
Herbicides - 21 vs 34 pc
Fungicides - 15 vs 13 pc
Biologics - 4 vs 4 pc

Sales breakup by segment -

B2C - 84 vs 71 pc
B2B - 14 vs 26 pc
Exports - 2 vs 3 pc

Premium products : Plain generic product sales in B2C segment @ 64 : 36 vs 61 : 39 YoY ( this is a healthy sign )

Manufacturing footprint -

2 - Active ingredients plants
6 - Formulation plants
1 - Biologics plant
4 - R&D centers

Company’s product basket -

Herbicides - 34 products
Insecticides - 51 products
Fungicides - 13 products
Biologics - 11 products

Some of company’s leading brands include -

Lethal - Anti-Termite ( a leading, 37 yr old brand )
Shinwa - Insecticide ( in-licensed from Nissan )
Torry - Herbicide
Hachiman - Herbicide ( in-licensed from Nissan )
Pulsor - Fungicide ( in-licensed from Nissan )
Green Label - Herbicide
Hercules - Insecticide
Mission - Insecticide

Excessive rains in Q2 led to a lot of spraying opportunity losses in Q2. However, the reservoir levels are very healthy which should mean a good Rabi season

At present, company has 11 Focus Maharana products. These r high growth, high margin products ( mostly with Pan India presence ). Aim is to keep graduating more products from Maharatna to Focus Maharatna category. Maharatna products are currently smaller with regional presence. These Maharatna + Focus Maharatna products have gross margins > 40 pc vs 15 pc for plain vanilla generics

Expect to see descent pick up in B2B and Export sales in H2. B2C sales continue to remain strong

Sales return in Q2 was around 40 cr ( mainly herbicides ). Expecting sales return of another 10 cr ( mainly insecticides ) in Q3. Sales return is a normal phenomenon in the agrochemicals Industry

Inventory levels in the Mkt are at normal levels

According to the management, some of the AI prices have touched their 20-25 yr lows. They don’t foresee prices falling any further ( but with the Chinese dumping, one never knows - personal opinion )

In Q2, Maharatna + Focus Maharatna products witnessed a volume growth of 10 pc. Plain Generics witnessed a volume de-growth of 13 pc

As such, company’s focus is on premium products and they intend to keep increasing their share in the sales

Company is confident of growing both topline and bottomline in H2

Guiding for a flattish topline with double digit margins for full FY

LY exports for full FY were at 105 cr. This FY, company has already received orders worth 105 cr. More orders are likely to flow into the company. Basically - exports should do well in H2

Company has received a new exclusive In-Licensed product from Nissan. Likely launch should be in Mar-Apr 25

As the share of pure vanilla generics keep reducing YoY, company’s margins should keep inching up ( IMO - this can be a positive trigger for the company in medium term )

Have lined up 6 product launches for H2. Three of them are going to be Maharatna products

Dsic: holding, added more recently, biased, not SEBI registered, not a buy/sell recommendation