The agrochemicals sector in India has grown significantly over the last decade. The agrochemical market size reached over $6 billion in 2022 and is expected to rise at an 8.5% compound annual growth rate between 2023 and 2028, reaching almost $9.82 billion by 2028.
Supportive domestic laws, a favorable investment environment, and increasing production capacity and infrastructure development by Indian corporations are linked to the growth of the sector.
The key driver of India’s growth in the agrochemical sector is the backward integration of production processes. Indian companies have been investing in the production of off-patent compounds to reduce their dependency on Chinese imports.
HSBC has given a buy rating on agri-chemical stocks, analysts anticipate that the agri sector to revolve in the second half of the Financial year 2024 led by normalizing the investors as well as the demand led by the pesticide price stability and higher crop prices.
Analysts anticipate strong growth in the agri stocks based on the company’s expertise in backward integration strategies in the business, additionally, backward integration allows the company to enjoy stronger earnings growth.
Here is a list of three Agrochemical stocks for which HSBC has set a 29% upside.
PI Industries Ltd
With a market capitalization of Rs 51,900 crores, On Friday, PI Industries shares were trading at Rs 3,419 a share, down 0.12 percent from the previous close price.
HSBC has given a buy rating on P I Industries Ltd. The brokerage has given the target price of Rs 4100, representing an upside of 20 percent from Friday’s trading price of Rs 3,419.
PI Industries Ltd is a leading player in the agro-chemicals space having a strong presence in both Domestic and Export markets.
The company’s revenue has increased by 19 percent yearly, from Rs 1,770 crore in Q2FY23 to Rs 2,117 crore in Q2FY24. During the same timeframe, Net profit has jumped by 43 percent from Rs 335 crore to Rs 480 crore.
UPL Ltd
On Friday, UPL Ltd shares were trading at Rs 582 per share, up 0.93 percent from the previous close price. The company has a market capitalization of Rs 43,740 crore.
UPL is primarily engaged in the business of agrochemicals, industrial chemicals, chemical intermediates, specialty chemicals, and the production and sale of field crops and vegetable seeds.
HSBC has given a buy rating on UPL Ltd. The brokerage has given the target price of Rs 750, representing an upside of 29 percent from Friday’s trading price of Rs 582.
The company’s revenue has decreased by 18 percent yearly, from Rs 12,507 crore in Q2FY23 to Rs 10,170 crore in Q2FY24. During the same timeframe, Net profit has reduced from a profit of Rs 969 crore to a loss of Rs 293 crore.
Dhanuka Agritech Ltd
On Friday, Dhanuka Agritech Ltd shares were trading at Rs 1,043 per share, up 2.24 percent from the previous close price. The company has a market capitalization of Rs 4,755 crore.
Dhanuka Agritech manufactures a wide range of agro-chemicals like herbicides, insecticides, fungicides, and plant growth regulators in various forms liquid, dust, powder, and granules.
The Company has 300+ product registrations across Herbicides, Insecticides, Fungicides, and Plant growth regulators. About 90 Products across all segments.
HSBC has given a buy rating on Dhanuka Agritech Ltd. The brokerage has given the target price of Rs 1,200, representing an upside of 15 percent from Friday’s trading price of Rs 1,043 per share.
The company’s revenue has increased by 14 percent yearly, from Rs 543 crore in Q2FY23 to Rs 618 crore in Q2FY24. During the same timeframe, Net profit has increased by 40 percent from Rs 73 crore to Rs 102 crore.
Written by Omkar Chitnis
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