Excel Crop Care
From Rs 150 in 2011 to 4200 in 2018
Hidden Gem !
12 reasons you should think about it
2800% growth in 7 years !
Why it is a hidden gem :
- Agrochemicals market in India is growing at > 10% annum and * it would gain speed* due to following reasons :
a) Manual labor shift to other high paying attractive sectors ( mfrg, construction etc ). Less availability of manual labor means more dependence on chemicals
b ) Farmers kids getting educated. Farming won’t be core business for next generation kids , it would be a side business. They would like to outsource farm management to consultants, technologies. Hence higher chances of chemical usage as manual involvement would go down.
c) Farmers are aging very fast in the world , India has a higher younger population . In next 10 years , there would be less farmers in the world , so chances of higher exports from India . Higher export means higher margins so high chances of spending on high value chemicals .
Excel is involved in generics and speciality chemicals .
After acquisition by Sumitomo, Excel Crop has now access to speciality chemicals . Generics help to grow it business in existing markets whereas speciality chemicals would make it capable of competing in emerging opportunities.
Sumitomo Chemicals track record in India
the company’s agrochemical business grew from 30 crores to 900 crore in 7 years .It is the fastest growing company in India in agrochemical sector. If it transfers its marketing know-how to Excel Crop Care , the growth of this company can be much higher .
Distribution channel of Sumitomo Chemicals
Check last year results of Excel Crop Care .
Sumitomo chemicals in India has a bigger and dynamic distribution channel than Excel Crop . If Excel Crop Products can be sold by Sumitomo in India , the growth for Excel Crop Care would be much higher . In last year , Excel Crop sold 114 crores material to Sumitomo in India . That is 10% biz and 10% growth for Excel Crop . And that was the first year . If this continues , Excel Crop would keep getting growth from Sumitomo Chemical .
- Old to new management
Excel Crop was managed by local Indian promoter who were not keen on too fast growth . UPL and other companies took advantage of a growing market whereas promoters at Excel Crop were happy with the status quo .
Sumitomo Chemical might change that management style and may bring fresh blood and fresh thinking in the organisation.
- Chances of de-listing or demerger
That would give other opportunity of value re-creation .
- Export opportunities
Bharat Rasayan, UPL all have grown many fold in last 10 years by becoming a global exporter whereas Excel was sleeping . Now after acquisition by Sumitomo Chemicals , chances of it becoming a global supplier as very visible as Sumitomo has footholds in every country .
8.Supplier to Sumitomo Chemicals
Most of the Japanese companies are changing their production base from Japan to China or India . There are high chances that Sumitomo may shift their production to India .Excel Crop Care would benefit from that .
- Less Cap-ex requirement
Excel Crop spends huge money on r & d . That may not be required as new molecules would come from parent company . Growth with reduced cap-ex would help it to realise better margins
- Good corporate governance
Being a MNC , we can expect a good corporate governance from new management.
- Focused Approach
Whereas other MNCs are focusing on too many parts of the agriculture market , Excel Crop is focused on chemicals . As many MNCs are shifting their r & d money towards seed research , this leaves a big vacant space for Sumitomo & Excel to be a strong , solo player for innovating future
- Herbicide resistant crops
In near future, India may give permission to herbicide resistant crops . Monsanto could not get permission due to certain image issues but now it has been merged with Bayer . Chances of Bayer getting permission are higher. Excel Crop is 2nd largest player in producing that specific herbicide. If herbicide resistant crops in India come , it would be big lottery for Excel Crop investors.
Check the last quarter results