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Bayer Cropscience - Q4FY22 Result Update - Healthy all round performance - BUY

Posted On: 2022-06-06 18:45:03 (Time Zone: IST)

Himanshu Binani - Research Analyst Prabhudas Lilladher Pvt. Ltd.

Quick Pointers:

- Double digit revenue growth in crop protection business

- Sales break-up for 4QFY22- Domestic/Corn seeds/Exports- 75%/19%/6%

Bayer Crop Science (BYRCS) reported better than expected results during 4QFY22. It reported revenue growth of 31% YoY to Rs9.6bn (FY22, +11% YoY to Rs47.3bn), was better than our estimates of Rs7.3bn. EBITDA surged by 143%YoY to Rs2.0bn and was higher than our as well as consensus estimate. Key highlights are: (a) clocked double digit revenue growth in crop protection business driven by better growth in herbicide category coupled with prudent channel management and demand generation; (b) Lower corn acreages in Kharif coupled with untimely rains in Rabi season offset by recovery in Spring season for maize hybrids (revenue of Rs1.83bn in 4QFY22); (c) gross margins up 590bps YoY to 50.5% which we believe was primarily led by higher price realizations in CP segment and higher maize seed sales (higher margin business); (d) Healthy improvement in gross margins coupled with superior operating leverage resulted into an EBITDA margin expansion of 960bps YoY to 20.8%. We remain positive on BYRCS business model, riding comprehensive distribution network, innovative products pipeline and healthy balance sheet. Factoring in the better 4Q and FY22 performance, we increase our FY23/FY24 EPS by 4%/5% respectively. However due to the recent run-up in the stock, we downgrade our rating to 'Accumulate' from 'BUY' with a revised target price of Rs5,640 (earlier Rs5,350), based on 30xFY24E EPS.

- 4QFY22 - Better growth across business segments: Bayer has reported revenue growth of 31% YoY at Rs9.6bn (PLe- Rs7.9bn) led by strong performance from new product launches like Vayego (insecticide) and Dekalb 9208 (maize hybrid seed) aided by healthy farm sentiments. We believe, better performance in the CP business was also aided by higher realizations in Glyphosate. Healthy revenue growth coupled with price hikes taken in the recent past helped to partially mitigate cost inflation and aided margins. While, other expense was higher led by continuing investment into the strategic initiatives to expand distribution reach. Lower corn acreages in Kharif coupled with untimely rains in Rabi season offset by recovery in Spring season for maize hybrids (revenue of Rs1.83bn in 4QFY22; FY22 Rs5.2bn)

- Superior product mix coupled with better operating leverage resulted into an overall beat: Gross margin increased by 590bps YoY to 50.5%. We believe improvement in gross margins was primarily led by higher realizations in glyphosate, where there has been a multi-fold jump in realizations as compared to last year. We also anticipate market share gains in Glyphosate for Bayer crop science (one of the major player in domestic market), as higher RM prices have in turn made it unviable for the smaller players to pass on this sort of inflated cost. Additionally, higher placements of maize hybrids ahead of the season would have helped the margin expansion. While, healthy improvement in gross margins coupled with superior operating leverage resulted into an EBITDA margin expansion of 960bps YoY to 20.8%. Absolute EBITDA was up 143% YoY (FY22, flat YoY) to Rs2.0bn (PLe Rs924mn). Adjusted PAT came at Rs1.5bn (PLe Rs671mn). For FY22 Revenue/EBITDA/Adj. PAT stood at +11%/flat/-3% YoY respectively.

Shares of Bayer Cropscience Limited was last trading in BSE at Rs. 5307.75 as compared to the previous close of Rs. 5350.80. The total number of shares traded during the day was 413 in over 110 trades.

The stock hit an intraday high of Rs. 5347.00 and intraday low of 5300.90. The net turnover during the day was Rs. 2196846.00.

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