Prabhudas Lilladher IPO report on India Pesticides
We recommend subscribe to India Pesticides Limited (IPL), a niche play in manufacturing of pesticides technical (79% of rev) and formulation (21%). Our positive stance emanates from 1) it is the sole manufacturer of 5 technical in India and leading manufacturer of certain molecules like Captan, Folpet and Thiocarbamate herbicide and 2) none of its technical molecules are classified under “Red triangle”. IPL reported a topline/EBITDA/PAT CAGR of 38%/67%/75% over FY19-21. we expect growth momentum to sustain led by 1) 6-8 molecules to be commercialized at its new 10000 MTPA capacity expansion (commencement of production in FY22E; 38% of existing capacity) and 2) Greenfield expansion at a new site for which IPL is currently in discussion with UP government to acquire land.
Valuation and Outlook
At upper end price band of Rs 290-296, the issue comes at an indicative rough estimate P/E multiple of 17.1x FY23E EPS of Rs 17.3. On TTM basis, the issue is priced at 24.7x FY21 earnings which is at median valuation compared to its listed peers i.e. Rallis (@30x FY21 earnings), Heranba Inds (@ 18.5x FY21 earnings) and Astec Lifescience (@ 40.9x FY21 earnings). Hence, we recommend investors to ‘SUBSCRIBE’ to the issue.
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