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Bayer CropScience Stock


Dear investor,

Please find below mentioned short term fundamental stock for delivery purpose.

 

Company

CMP

Target

BSE Code

NSE Code

Bayer Cropscience Ltd

5425

5650

506285

BAYERCROP

 

Bayer Cropscience Limited, a part of German multinational company, operates as Agrochemical Company in India. The Company focuses on preventing, alleviating, and curing diseases, as well as provides adequate supply of food. It offers crop solutions for various crops, such as cotton, fruits, millet, mustard, pulses, rice, soybeans, sugar cane, vegetables and wheat.  Duraiswami Narain is the Vice Chairman and Managing Director since 1.5 years. Aditya Birla Sun Life Trustee Private Limited has the single largest shareholding at 6.01%.
 

Investment rationale

 

Least impacted by Covid-19 - Well, one of the sectors least affected by Covid-19 was Agrochemicals. From the onset of Covid, rural economy has witnessed minimal impact of lockdown as agricultural sector related sectors were classified as essentials. Barring the disruption of supply chain and cross border transfer related issues for a brief period, Agrochemicals were in great demand mainly due to onset of Kharif crop sowing season and 100% rainfall predicted by IMD.

 

Merger with Mosanto to be EPS accretive - Bayers AG acquired Mosanto for a consideration of USD63 billion mega-deal, making it largest global agrochemical and seed chemical company. With this deal, Mosanto gets to retain its brand name.  The Bayer cropscience took one time integration cost of Rs1.8bn during the quareter and a swap ratio of 2:3. We expect Bayer to ain significantly which would lead to EPS accretion led by i) complementary product offering, ii) leadership in maize seeds, and iii) expected synergies.

 

Outlook & Valuation - Agrochemicals is becoming a niche play with robust rural growth and potentially upcoming favourable monsoon. Bayer delivered a strong quarter with revenue growth of 82% YoY, although a lower base. EBITDA margin expanded by 490bps YoY buoyed by better operating leverage. On the balance sheet side, the company holds cash & cash equivalent worth Rs10.7bn as on 31st March 2020. Besides, company has delivered strong return ratios with ROCE/ROE at 30%/24% for FY20. The stock is currently trading at a 1-yr forward PE of 38.7x.

 

Duration of recommendation: Short to Medium term.
 

Best Regards,

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