BUY. EXCEL CROP CARE LTD Result Update (PARENT BASIS): Q2 FY15 SYNOPSIS. CMP Target Price NOVEMBER 26 th 2014 ISIN: INE223G01017

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1 BUY CMP Target Price EXCEL CROP CARE LTD Result Update (PARENT BASIS): Q2 FY15 NOVEMBER 26 th 2014 ISIN: INE223G01017 Index Details Stock Data Sector Agrochemicals BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg. Q.) 2399 Market Cap (Rs. in mn.) Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) 1 Year Comparative Graph EXCEL CROP CARE LTD BSE SENSEX SYNOPSIS Excel Crop Care Ltd is engaged in the business of agrochemicals comprising insecticides, weedicides, fungicides, acaricides, fumigants and rodenticides. Also includes soil and plant nutrition products, biopesticides and plant growth promoters. In Q2 FY15, Net profit jumps to Rs million an increase of 23.05% y-o-y against Rs million in the corresponding quarter of previous year. The company s net sales registered 9.93% increase and stood at Rs million in Q2 FY15 as against Rs million in Q2 FY14. For 2 nd quarter of FY15, Operating profit grew by 2.05% y-o-y and stood at Rs million as compared to Rs million in the same period Last year. Profit before tax at Rs million in Q2 FY15 compared to Rs million in Q2 FY14, registered a growth of 7.49% y-o-y. The company has reported an EPS of Rs for the 2 nd quarter of current financial year as against Rs in the corresponding quarter of the previous year. Net profit grew by 44.10% to Rs million for the end of H1 FY15 from Rs million for the end of H1 FY14. Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 78% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Excel Crop Care Ltd Atul Ltd Dhanuka Agritech Ltd PI Industries Ltd

2 QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY15, Rs. In million SEP-14 SEP-13 % Change Net Sales PAT EPS EBITDA The company has achieved a turnover of Rs million for the 2 nd quarter of the financial year as against Rs million in the corresponding quarter of the previous year. EBITDA of Rs million in Q2 FY15. Net profit jumps to Rs million in Q2 FY15 against Rs million in the corresponding quarter of the previous year. The company has reported an EPS of Rs for the 2 nd quarter of current financial year as against an EPS of Rs in the corresponding quarter of the previous year. The business of the company is seasonal in nature and its performance depends on monsoon and other Climate Conditions. Break up of Expenditure During the quarter, total Expenditure rose by 12 per cent mainly on account of increased Employee benefits Expenses 7% and Depreciation by 33% are the primary attribute for the growth of expenditure. Total expenditure in Q2 FY15 stood to Rs million as against Rs million in Q2 FY14. Break up of Expenditure (Rs. In millions) Q2 FY15 Q2 FY14 Cost of Materials Consumed Depreciation Employees Benefit Expenses Other Expenditure Purchase of Stock-in-Trade

3 COMPANY PROFILE Excel Crop Care Limited was established in 2002, has risen out of the demerged portfolio of the agricultural products segment of Excel Industries Limited. It has realized its pride of being the supplier of choice by reaching out to millions of farmers in more than 50 countries. Excel Crop Care enables in providing proper solutions in soil health, seed treatment, crop protection, pest management and also offers effective post-harvest treatment that has ensured smooth supply and trade in agricultural commodities in many countries. The company extends solutions developed through backward integration of technology. Research and Development are approved by the Department of Technology of the Government of India and acquired more than 15 patents. The company invests in developing new means and ways for guiding farmers to nurture and protect crops, right from the sowing stage to the final storage in warehouses. Brand Products Excel Acetecel Metrex Triblast Excel Mera71 Mighty Trizocel Excel Bipex Mobilcel Acefex Excel Merit Excel Nutri S-90 Azaoil Excel Plus Phoscel Azacel Excel Lalkar Phosinetrocalcium Celcorn Excel Pyromite Propinex Commando Excel Sure shot Sarvada Celphos Excel Pyromite Seedcel Crotocel Hexzol Gold Sugam Ct50 Karilex Sulfex DZire Madhyam Super Glow Emisan-6 Metacel Tercel Enhancecel

4 Subsidiaries Excel Crop Care (Australia) Pty. Limited Excel Crop Care (Europe) N.V. ECCL Investments and Finance Limited Excel Genetics Limited Excel Crop Care (Africa) Limited Excel Brasil Agronegocious Ltd

5 FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, E FY13A FY14A FY15E FY16E I. EQUITY AND LIABILITIES: A. Shareholders Funds a) Share Capital b) Reserves and Surplus Sub-Total-Net worth B. Deferred Government Grants C. Non-Current Liabilities: a) Long-term borrowings b) Deferred Tax Liabilities [Net] c) Other Long Term Liabilities d) Long Term Provisions Sub-Total-Long term liabilities D. Current Liabilities: a) Short-term borrowings b) Trade Payables c) Other Current Liabilities d) Short Term Provisions Sub-Total-Current Liabilities TOTAL-EQUITY AND LIABILITIES (A+B+C+D) II. ASSETS: E. Non-Current Assets: Fixed Assets i. Tangible Assets ii. Intangible Assets iii. Capital work-in-progress iv. Intangible Asset under Development a) Total Fixed Assets b) Non Current Investments c) Long Term Loans and Advances Sub-Total-Non-Current Assets F. Current Assets: a) Inventories b) Trade Receivables c) Cash and Bank Balances d) Short Term Loans and Advances e) Other Current Assets Sub-Total-Current Assets TOTAL-ASSETS (E+F)

6 Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Exceptional Items Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 MAR, 2014 to 31 DEC, 2014E Value(Rs.in.mn) 31-Mar Jun Sep Dec-14E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Exceptional Items Profit Before Tax Tax Net Profit Equity capital Face value EPS

7 Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

8 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is at x FY15E and x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 78% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 9.22 x for FY15E and 7.47 x for FY16E. Price to Book Value of the stock is expected to be at 3.62 x and 2.98 x respectively for FY15E and FY16E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment.

9 INDUSTRY OVERVIEW The Indian agrochemicals industry is the fourth largest globally with estimates of its size going up to US $ 4 billion almost 40-50% of production being exported. India has over 400 million acres of land under cultivation and an estimated 60% of its population is largely dependent on agriculture directly and indirectly. It has only 2% of the world s land mass but supports 16% of the world population. India is one of the leading producers of food grains and agriculture produce. It is among the world leaders in producing rice, wheat, cotton, fruits, vegetables, sugarcane, tea, milk and spices. Food shortages, rising food prices, increasing food demand fuelled by increasing population, stagnant land area under cultivation, growing concern for food security and the recently introduced food security law in India underline the importance of food crop production Agrochemicals play an immensely important role in farming and food security The industry comprises of insecticides, weedicides, fungicides, plant growth promoters and regulators, fumigants and rodenticides as the major product segments The industry is highly competitive, dynamic and fragmented It operates both in the organized and unorganized sectors The industry comprises of diverse players ranging from small and medium ones dealing in generic molecules to large multinationals with high-priced new generation and patented molecules.. The industry has players who manufacture only technical grade pesticides as well as those who are pure formulators. It also has some balanced players who produce both - technical grade pesticides and their formulations. Some players also manufacture intermediates for technical grade pesticides. Among the agrochemicals, insecticides have dominated consumption pattern in India However, their share is steadily declining over the years owing to a variety of reasons For the past few years consumption of weedicides and fungicides is increasing Shortage and increasing cost of farm labour and the cost-effectiveness of chemical weedicides in weed control is leading to increasing demand for weedicides. Growth of horticulture owing to increasing demand for good quality fruits and vegetables and growing export of fruits and vegetables are giving rise to higher demand for fungicides Of late, bio-pesticides are gaining popularity and their demand is increasing owing to environmental safety, low toxicity, lower chance of resistance development and non-polluting production process The Company has made foray in this area Cotton and rice account for over 50% of pesticides consumption in India Wheat, soyabean, oilseeds, pulses, plantation crops, fruits and vegetables are the other major consumers of agrochemicals Lately, owing to increasing awareness and better commodity prices, farmers are showing willingness to try new, better quality and expensive pesticides The shift is towards low dosage, more effective and better quality pesticides However, generic pesticides continue to be the mainstay of pesticides usage

10 The fortunes of the agrochemicals industry are interwoven with those of agriculture. The relatively slow pace of agricultural growth in India in the past few decades is reflected in the industry growth. Low manufacturing costs and the ability and expertise in efficient handling of toxic and hazardous products and processes has made the Indian industry one of the large exporters. India is the thirteenth largest exporter of agrochemicals in the world The Indian industry has built large capacities much beyond the domestic needs. Exports account for almost 40-50% of the industry production. Domestic market has been attracting multinationals due to good growth opportunity. The domestic segment has been witness to a steady increase in market acceptance of new generation and patented molecules The agrochemical industry is highly regulated both domestically and internationally. The regulatory framework poses entry barrier to various geographical markets and necessitates large investments in research, data generation and product registration and involves long gestation from conceptualization to actual launch of a new product The R & D costs for development of products and processes are high in the industry. Supply of high quality products at competitive prices, development of new products and innovative formulations and investment in research, data generation and product registration are emerging as key success factors. Opportunities and Threats: Agriculture is the mainstay of the Indian rural economy and supports over two-thirds of the country s population Agriculture continues to receive governmental support in the form of favourable agriculture policies, minimum support price for major farm produce, subsidies, developmental programmes and schemes and availability of low cost credit and finance through various schemes. With attractive minimum support/open market prices for several crops, farmers can afford to spend on quality farm inputs. Private sector also visualises good growth potential for investment in agriculture and agro-based businesses. Rapidly developing food processing industry is helping in a large measure the growth of the farming sector Steady growth of the rural economy is another factor attracting the private sector to rural areas in general and to agriculture in particular According to one industry estimate, India suffers about 30% crop losses owing to pests It is important to prevent or reduce such losses Agrochemicals play a vital role in preservation of crops, growth of agriculture and ensuring food security With the recent introduction of food security law in India, agriculture has come under fresh focus This augurs well for agri input industries. With large food grain stocks being carried by the government agencies and the food processing industry, the importance of and the demand for post-harvest crop protection chemicals is rising Several countries, including India, lose large foodgrain stocks owing to inefficient food grain storage practices Post-harvest crop protection products like fumigants and rodenticides play a vital

11 role in food grain preservation This product segment has been showing good growth in the past several years The Company is one of the few players in this business segment. One expert estimate states that only 35-40% of the cultivated land in India is under crop protection Pesticides consumption in India is very low by the world consumption standards and offers scope for increasing it by educating farmers on safe, appropriate and judicious use of agrochemicals. There is a need to bring awareness among the farmers about optimal use of agro chemicals along with bio-pesticides, agrochemicals application techniques and the pitfalls of over-dosages of agrochemicals with a view to achieve higher yields, better crop quality and desirable cropping patterns and farming practices to ensure sustainability Changing cropping patterns and farm practices also offer growth opportunity to the industry. Amongst the States also there are large disparities in per acre pesticide consumption. Growing population points to growth of agri inputs including crop protection products All these factors underline the growth potential for agrochemicals in the domestic market Genetically modified (GM) cotton crop dominates the cotton acreage in India and new improved GM cotton varieties are being introduced at regular intervals GM cotton has opened up opportunity for growth of weedicides and soil nutrition products Similarly, increasing usage of hybrid and high value seeds is giving rise to demand for high quality and high value agrochemicals Growth of horticulture, which is highly remunerative to the farmers, is also fuelling growth of agrochemicals, especially fungicides and other high priced products Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

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