Astec LifeSciences – A Prominent Player in Agrochem Space, Continually Creating Value for Stakeholders

Astec LifeSciences was incorporated in 1994. Astec is engaged in the manufacturing of Agrochemical Active Ingredients (technical), bulk, formulations, and intermediate products. Astec products are exported as well as sold in Domestic markets. It exports to over 25 countries and have presence in United States, Europe, West Asia, South East Asia, Latin America and Africa.

Given the constraint of limited arable land, rising labour costs, increase in growth of herbicides and fungicides their will be focus on increasing the agriculture yield per hectare. This creates the opportunity for an increased usage of Agrochemicals in India in coming years. It is expected that large number of products will be going off-patent over the medium-term as a result Agrochemicals sector offers immense opportunities for companies which are operating in this segment.

Due to changing Geopolitics, shift in the supply chain is continually happening.  Global disruption of Chinese agrochemical supply chain is shifting the focus towards Indian Market. As a result, contract manufacturing business opportunities are increasing for Indian players. Astec is one of the leading players in triazoles fungicide and is well positioned to benefit from the opportunities arising in the domestic as well as international markets.

Astec LifeSciences Limited has reported very good result for Third Quarter (Q3) ended December 31, 2021. Astec LifeSciences reported consolidated total income of INR.175.3 crore, an increase of 47 % year-on-year. Consolidated EBITDA increased to Rs. 44.8 Crore (compared to Rs.18.9 Crore during Q3 2020) and Profit before tax increased to Rs. 33.2 Crore respectively (compared to Rs.11.3 Crore during Q3 2020).

Commercial production at new herbicide plant started in August 2021. The plant is operating satisfactorily and Astec Management expect to see good pickup in CRAMS business in Q4. Company is on track to introduce 4 new products in CMO and 1 in enterprise segment in current financial year. Company has commenced work on new R&D centre in Q3FY22 and expect it to be operational by Q3FY23, which will further augment your Company’s R&D capabilities. Large backward integration project has been completed during the Financial Year 2020-21, which have further reduced Astec dependence on external raw material supplies and is helping in margin expansion.

Company reported consolidated total income of Rs.408.2 crore, or the first nine months ended December 31, 2021, an increase of 4.9% year-on-year. Consolidated EBITDA and profit before tax also increased to 92.3 crore (Rs 79.7 Crore for 9 Months ended FY 2021) and Rs.62.8 crore (Rs 56.9 Crore for 9 Months ended FY 2021, a year-over-year increase of 15.7% and 10.4%) respectively.

Managing Director, Astec LifeSciences Mr. Ashok Hiremath has said that Third Quarter (Q3) ending December 31, 2021, was one of the best quarterly performances of Astec. Good results were driven by favourable product mix, strategic sourcing and good price realizations in exports as well as in domestic markets. Margins improved due to improved efficiencies as well as above mentioned reasons.

Highlights of Financial Performance (Q3FY22 and 9M FY22)

(Rs. in crore)

ParticularsConsolidated QuarterlyConsolidated YTD
Q3FY22Q3FY21%increase/ (decrease)9M FY229M FY21%increase/ (decrease)
Total Income175.3119.347.0%408.2389.34.9%
Earnings before Depreciation, Interest and Taxes (EBITDA)44.818.9137.7%92.379.715.7%
Profit Before Tax (PBT)33.211.3194.5%62.856.910.4%
Net Profit After Tax (PAT)24.87.1250.4%46.841.113.9%

Key Financial Highlights Include:

  • Gross margin also improved to 46.5% in Q3FY22 from 35.3% in Q3FY21
  • EBITDA margin improved to 25.9% in Q3FY22 from 16.3% in Q3FY21
  • Astec recorded growth in income across key markets
  • Exports accounted for 64.0% of the total income and grew by 38.6% year-over-year
  • Domestic sale was 36% of total sales and grew by 73.4% year-over-year

Astec have a strong prospect to benefit from shift in Global Supply Chain disruption.  China is a big market in agrochemicals space. According to Mr Ashok Hiremath, India stands to befit from China +1 strategy. According to his statement during an earning call in the second quarter of 2021 “ the companies had Chinese sources and they had India as an alternative source and so the first phenomenon that is happening is that if it was 75% China 25% India that 25% is going up to 50%-60% in some cases maybe 75% and 25% China and certainly when it comes to new products and when people are making customers making strategy that looking at having the primary source in India and the secondary source in China”

Approx 50% of the Indian agrochemical industry’s value is derived from exports. Exports are expected to grow at a faster rate in the coming years in comparison to growth in the domestic market. Driven by disruption in supply chain, Global companies will be looking for alternative manufacturing locations outside China. As a result, opportunities available for well positioned players like Astec will be huge. Astec has deep capabilities in technical and intermediate chemistries and are likely to benifit from this shift/diversification of the manufacturing base.

Astec has a strong corporate governance in place. It’s part of the Godrej Group which is known for highest degree of corporate ethics and have constantly created wealth for its Shareholders. Mr. Nadir B. Godrej is the Chairman. Mr Anurag Roy will be the new CEO of the Astec, replacing Mr Ashok Hiremath who will be stepping in March 2022.

Godrej Agrovet Limited is the holding company of Astec LifeSciences and holds 63.31% shares. Mutual Funds and Insurance Holds 13.03 %. ICICI Prudential, Tata Retirement Saving Fund, Nippon Life, ICICI Lombard are key investors.    Godrej Agrovet acquired Astec LifeSciences in 2015 through acquisition of promoter holding of 45.29 % @ RS 190 per share and acquiring balance stake through open offer.

(As on 03 Feb 2022, Astec Lifesciences closing price in BSE @ Rs 1708.85. Total Market Cap Rs 3347.82 (M Cap FF Rs 1171.74 Crore))

(This Article is not an Investment Advice)

Bureau Galactik Views

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