Su­per Crop Safe Ltd

Money Times - - Bull’s Eye - By Pratit Nayan Pa­tel

(BSE Code: 530883) (CMP: Rs.152.65) (FV: Rs.10)

Com­pany Back­ground: In­cor­po­rated in 1987, Su­per Crop Safe Ltd (SCSL) man­u­fac­tures and sells agro chem­i­cals and bio prod­ucts. It man­u­fac­tures a broad spec­trum of tech­ni­cal grade pes­ti­cides and for­mu­la­tions of in­sec­ti­cides, fungi­cides and weed­i­cides for crop pro­tec­tion. It holds Cen­tral In­sec­ti­cides Board (CIB) reg­is­tra­tions for 10 Tech­ni­cal Grade Pes­ti­cides and sup­plies 65+ prod­ucts un­der var­i­ous brand names. Its Tech­ni­cal Grade Pes­ti­cides man­u­fac­tur­ing and for­mu­la­tion units are lo­cated at Hi­mat­pura in Bilo­dra (near Ahmed­abad) on an area of 20,000 sq.yd. Its dis­tri­bu­tion net­work spans across Gu­jarat, Ra­jasthan, Pun­jab, Haryana, Mad­hya Pradesh, Ma­ha­rash­tra and Ch­hat­tis­garh.

Prod­uct Cat­e­gories:

SCSL pri­mar­ily op­er­ates in three prod­uct cat­e­gories:

1) Agri­cul­ture: This cat­e­gory in­cludes three seg­ments -

a) Pes­ti­cides: SCSL re­cently launched a high mar­gin prod­uct ‘Com­man­der’. Other brands in­clude Su­per Coat, Su­per Tara, Spi­der Plus and Ar­tica.

b) Fungi­cides: The main brands in this ver­ti­cal in­clude Su­per Safe and Su­per Su­rak­sha.

c) Her­bi­cides: The main brands in this ver­ti­cal in­clude Su­per Kill and Su­per Penda.

2) Bio-pes­ti­cides: It has two prod­ucts in this cat­e­gory - Spinosyns and Neem.

3) Nu­traceu­ti­cals: It has di­ver­si­fied into Mi­cro­bial biotech­nol­ogy (My­c­or­rhiza, Spir­ulina), which is de­vel­oped by its in­house R&D team.

Spir­ulina is the only nu­tri­ent supplement, which is a com­plete food as per World Health Or­ga­ni­za­tion (WHO). It is used as a food supplement all over the world in dif­fer­ent forms like Tablets, Cap­sules, Pow­der, Health drink, Noo­dles, etc. The prod­uct is HACCP (Haz­ard Analysis & Crit­i­cal Con­trol Points) and FSSAI (Food Safety and Stan­dards Au­thor­ity of In­dia) cer­ti­fied. It has also ob­tained the GMP (Good Man­u­fac­tur­ing Prac­tice) cer­tifi­cate from Royal Stancert Inc. SCSL has started sup­ply­ing Spir­ulina to its in­sti­tu­tional part­ners. Dabur, Amway, Patan­jali, Hi­malaya, E.I.D. Parry etc to sell 100-120 tablets priced at Rs.400-1000. It is a high mar­gin prod­uct and is ex­empted from GST. SCSL plans to en­hance its pro­duc­tion ca­pac­ity to 1 MMT per month and also launch its own ‘Su­per­lina’ brand in the near fu­ture. Su­per Gold (My­c­or­rhiza Bio Fer­til­izer) is a li­censed prod­uct with man­u­fac­tur­ing ca­pac­ity of 2,000 TPA. Its pro­duc­tion from the root level to for­mu­la­tion is done in SCSL’s Bio divi­sion, which is done by very few com­pa­nies in In­dia. This prod­uct re­duces the us­age of chem­i­cal fer­til­iz­ers and wa­ter, which in turn re­duces the cost of farm­ing. It re­duces the use of chem­i­cal fer­til­iz­ers up to 50% and en­hances the yield of the plants up to 40%. The GST coun­cil has re­duced GST rates on fer­til­iz­ers from 12% to 5%, which is a pos­i­tive for farm­ers as well as man­u­fac­tur­ers. In FY17, SCSL had en­tered into a mar­ket­ing ar­range­ment with Ma­ha­rash­tra Agro In­dus­tries De­vel­op­ment Cor­po­ra­tion Ltd (MAIDC) for sup­ply­ing My­c­or­rhizal Bio Fer­til­izer. It has started ca­ter­ing to MAIDC this year and ex­pects good sales or­ders, which will boost its rev­enue and prof­itabil­ity.

Per­for­mance Re­view: Dur­ing FY17, SCSL’s net profit zoomed 140% to Rs.2.88 crore from Rs.1.2 crore in FY16 on higher sales of Rs.75.27 crore fetch­ing an EPS of Rs.4.12. PAT has grown at 95% CAGR over the last three years and 32% CAGR over the last five years. Dur­ing Q2FY18, it re­ported sales of Rs.16.16 crore with 48% higher PAT at Rs.1.76 crore against Rs.1.24 crore in Q2FY17 fetch­ing an EPS of Rs.2.28. For H1FY18, PAT soared 75% to Rs.2.56 crore from Rs.1.54 crore in H1FY17 on sales of Rs.34.06 crore fetch­ing an EPS of Rs.3.31.

SCSL has ob­tained the fol­low­ing rat­ings from CRISIL - "NSIC-CRISIL Rat­ing: CRISIL MSE 2"; Fi­nan­cial Strength: High; and Op­er­at­ing Per­for­mance: High­est.

Div­i­dend: SCSL is an in­vestor-friendly com­pany and has reg­u­larly paid div­i­dends over the past 7 years.

Out­look: SCSL’s Su­per Gold prod­uct has done well in the mar­ket, which is ev­i­dent from the H1FY18 re­sults. SCSL has re­cently launched new prod­ucts sold un­der the brands - Ar­tica, Com­man­der, Su­per De­sire, Su­per Swift, Su­per Shoot, Su­per Tab and Su­per Tabu. This growth will be pro­pelled fur­ther with the in­tro­duc­tion of new in­no­va­tive prod­ucts each year. In ad­di­tion, it will strengthen and ex­pand its reach to new un­der­de­vel­oped mar­kets and crop seg­ments. More­over, in­sti­tu­tional tie-ups with the cor­po­rates for sup­ply of agro­chem­i­cals have also started reap­ing ben­e­fits and will con­trib­ute to its growth.

Con­clu­sion: The SCSL stock is avail­able at a P/E of 30x on TTM EPS. At the CMP, its Price Earning to Growth (PEG) ra­tio is just 0.32x based on its per­for­mance in the last three years, which in­di­cates that the stock is highly un­der­val­ued against its peers. Based on its cur­rent go­ing, SCSL is ex­pected to notch an EPS of Rs.6.6 in FY18 and Rs.12 in FY19. At the CMP, the stock trades at a P/E of 23x on FY18E and 13x on FY19E earn­ings re­spec­tively. A rea­son­able P/E of 30.61x (in­dus­try P/E 42.79x) will take its share price to Rs.210 in the short-term and Rs.375+ there­after. In­vestors can buy this stock with a stop loss of Rs.135. The Board has ap­proved split­ting of its eq­uity share from Rs.10 paid-up to Rs.2 paid up. The stock’s 52-week high/low is Rs.180/90.70.

Many stocks in this sec­tor have de­liv­ered mul­ti­fold re­turns in the last one decade. For ex­am­ple - Dhanuka Agritech, which traded at Rs.26 in 2006, made an all-time high at Rs.940 in May 2017. Its sales grew from Rs.54.42 crore in FY06 to Rs.876 crore in FY17 while PAT climbed from Rs.2.95 crore to Rs.120 crore over the same pe­riod. To­day, its mar­ket cap stands at Rs.3215 crore. UPL, Ral­lis In­dia, Ex­cel Crop Care, P I In­dus­tries, Bharat Rasayan have also de­liv­ered mul­ti­fold re­turns in the last 5-10 years.

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