BSE ID : 533138 NSE ID : ASTEC
RECOMMENDED PRICE 140.60
PEAK FROM RECO 694.80 394.17%
CURRENT PRICE 602.45 328.49%
Astec LifeSciences is an Indian manufacturer of agrochemical active ingredients, formulations and intermediate products. We initiate coverage on Astec LifeSciences as a BUY with a Price Objective of Rs. 210.
Astec LifeSciences Ltd. (ASL) is an Indian manufacturer of agrochemical active ingredients, formulations and intermediate products. Until FY12 Astec operated only in one segment i.e. Enterprise Sales where it produced and sold active ingredients and bulk formulations. The company stepped up its expansion journey in FY13 when it broadened its business activities by venturing into two new verticals viz, Contract Manufacturing Operations and Enterprise Sales.
Contract Manufacturing Operations (CMO): Under this segment Astec manufactures key Fungicide and Herbicides outsourced by other major companies. It is a high margin segment and Astec expects this segment to drive the growth in coming years. Sales from CMO are expected to grow at 63.4 percent CAGR from 35.4 crores in FY14 to 153.48 crores by FY17E.
Enterprise Sales (ES): Contributing 75 percent of the Total Revenue, ES is currently the mainstay of ASL. The revenue from ES is expected to grow steadily at 9.3 percent CAGR on higher base as company expects to develop and market technically advanced products in coming years.
Expansion of business activities coupled with margin improvement leads us to believe that the growth momentum of Astec LifeSciences will continue. We expect Astec LifeSciences to report three year net revenue CAGR of 23.4 percent to `388.8 crores by FY17. We expect PAT to increase at a 3 year CAGR of 54.5 percent to `32.0 crore in FY17 and the company to report an EPS of `17.8 in FY17.
We initiate coverage on Astec LifeSciences as a BUY with a Price Objective of Rs. 210 representing a potential upside of approx. 50 percent over a period of 24 months. The target price is arrived at by assigning a PE multiple of 12x on FY17 EPS of `17.8. At the CMP of Rs. 140, the stock is trading at a PE multiple of 7.9x FY17E.
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