Sharda Cropchem Ltd – #DARKHORSESTOCK

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Cmp-309Rs

Sharda crop is 100% debt free 45 years old company engaged in xport of agrochemicals (technical grade and formulations) and non-agro products such as conveyor belts, rubber belts/sheets, dyes and dye intermediates to various countries across the world. 

Established in 1989 , Sharda cropchem has been a fast growing global agrochemicals company in the generic crop protection chemicals industry. The company has made deep inroads in the highly developed European and US markets which are characterised as high entry barrier markets. It also has a significant presence in other regulated markets such as LATAM and Rest of the World.

Business 

The Company has an asset-light business model whereby it focuses on identifying generic molecules, preparing dossiers, seeking registrations, marketing and distributing formulations through third party distributors or it’s own sales force. The Company’s core competence lies in developing product Dossiers* and seeking product registrations in different countries. The Company not only has an extensive distribution network of third party distributors but has also setup its own sales force in various countries in Europe and in Mexico, Colombia, South Afirca and India. The Company’s strategy of sourcing through a global network of suppliers provides it with flexibility and nimbleness.

Dossiers-: Manufacturers and importers have to collect all existing available information on the intrinsic properties of a substance as well as on its manufacture, uses and exposure. The technical dossier contains information about: The identity of the substance. Information on the manufacture and use of the substance.

The company is capable of providing a wide bouquet of products to its customers. Its product portfolio in agrochemical business comprises of formulations and generic active ingredients in fungicide, herbicide and insecticide segments for protecting different kind of crops as well as serves turf and specialty markets and in biocide segment as disinfectants thereby allowing us to offer varied range of formulations and generic active ingredients.

The product portfolio in non-agrochemical business comprises of Belts, general chemicals, dyes and dye intermediates which enables the Company to cater to varied demands.

The company had 500+ third party distributors as of 2019 with sales force present in 40+ countries. Apart from that the company has operational presence in more than 80 countries across the globe.

Strong registrations in Pipeline Sharda Cropchem currently has 2,297 registrations, out of which 89% are formulations and the remaining 11% are active ingredients. The Company has a pipeline of 1,028 registrations across Europe, NAFTA, Latin America and Rest of World. Historically, the Company received 100-150 registrations each year and these registrations came from a portfolio of over 150 molecules. It continues to focus on adding more registration and these registrations will act as a catalyst in the growth of the Company. It has more than 41 subsidiaries spread across the globe.

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Product Segments

AGROCHEMICALS 

INSECTICIDES are pesticides that are formulated to kill, harm, repel or mitigate one or more species of insect.

FUNGICIDES are biocidal chemical compounds or biological organisms used to kill parasitic fungi or their spores. A fungistatic inhibits their growth. Fungi can cause serious damage in agriculture, resulting in critical losses of yield, quality, and profit.

FUMIGANTS are gaseous pesticides that control pests in agricultural fields, structures like buildings and apartments, storage houses and various other sites. Fumigants are generally biocides—chemicals that can kill/injure living organisms with which they come in contact.

HERBICIDES  is a pesticide used to kill unwanted plants. Selective herbicides kill certain targets while leaving the desired crop relatively unharmed.

PLANT GROWTH REGULATOR : Plant hormones affect gene expression and transcription levels, cellular division, and growth. They are naturally produced within plants, though very similar chemicals are produced by fungi and bacteria that can also affect plant growth.[12] A large number of related chemical compounds are synthesized by humans. They are used to regulate the growth of cultivated plants, weeds, and in vitro-grown plants and plant cells; these manmade compounds are called plant growth regulators

RODENTICIDES are pesticides that kill rodents. Rodents include not only rats and mice, but also squirrels, woodchucks, chipmunks, porcupines, nutria, and beavers

AEROSOL A.I.:  An aerosol is a suspension of fine solid particles or liquid droplets in air or another gas. Aerosols can be natural or anthropogenic. Examples of natural aerosols are fog, mist, dust, forest exudates and geyser steam.

VETERINARY DRUGS are used to cure and prevent diseases in animals, including animals used for food production. Veterinary drugs are given to animals via feed or drinking water, or by injection. The use of veterinary drugs may result in residues of these drugs in animal products like milk, eggs and meat.

Conveyor Belts

Sharda Cropchem Limited is engaged in the supplying a variety of Conveyor belts, V-belts, etc. These belts are used mainly in mining projects followed by Steel plants, quarries, grain silos, cement manufacturing facilities, ports, tunnelling projects, etc. The company caters to markets across Europe, NAFTA, Latin America and Rest of the World. The company supplies this product range from its partners in china.

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Various types of Conveyor belts are

  • Textile Ply Conveyor Belts
  • Rough Top Conveyor Belts
  • Cotton Transmission Belts
  • Steel Cord Conveyor Belts
  • Chevron / Pattern Conveyor Belts
  • Pipe Conveyor Belts
  • PVC / PVG Solid Woven Conveyor Belts
  • Elevator Conveyor Belts
  • Sidewall Conveyor Belts
  • PVC and Polyurethane Light Duty Belting

Industrial Chemicals

Chemicals developed or manufactured for use in industrial operations or research by industry, government, or academia.

The main industries – that Sharda crop is currently catering to are:

– Water Treatment

– Food & Food ingredients

– Other Industrial applications

 And last Sharda Biocide 

Sharda Biocide Europe is a Business Unit from Sharda Cropchem Ltd. that develops, manufactures and markets biocide products for pest control in Public Health.

Financial Results -:

For Q4 Fy 2020-:

Revenues grew by 14.7% YoY from Rs.763.3 Crores in Q4FY19 to Rs.875.6 Crores.

Gross profit grew by 34% YoY from Rs.236.8 Crores in Q4FY19 to Rs.317.3 Crores in Q4FY20. The gross margin expanded by 522 bps from 31% in Q4FY19 to 36.2% in Q4FY20.

EBITDA grew by 48.2% YoY from Rs.157.6 Crores in Q4FY19 to Rs.233.6 Crores in Q4FY20 with EBIT margins growing by 603 bps YoY from 20.7% in Q4FY19 to 26.7% in Q4FY20.

Profit after tax grew by 34.1% YoY from Rs.105.6 Crores in Q4FY19 to Rs.141.7 Crores in Q4FY20

For the year ending 2020-:

EBITDA declined by 4.7% YoY from Rs.368.9 Crores in FY19 to Rs.351.6 Crores in FY20

Profit after tax declined by 6.6% YoY from Rs.176.3 Crores in FY19 to Rs.164.7 Crores in FY20 due to increase in the forex loss from Rs.4.5 Crores in FY19 to Rs.15.1 Crores in FY20 and increase in depreciation and amortization from Rs.99.4 Crores in FY19 to Rs.137.1 Crores in FY20. 

PAT margin stood at 8.2% in FY20 as compared to 8.8% in FY19.

Sectorial Outlook

Crop protection chemicals are broadly classified into the following classes:

  • Insecticides: The chemicals that are used to protect plants from insects and pests are known as insecticides. 22% of the global crop protection chemicals market is constituted by the insecticides
  • Fungicides: This class of crop protection chemicals is used to control the spread of fungal diseases in plants. They constitute about 27% of the global agrochemical market
  • Herbicides: Herbicides are chemicals that kill or control the growth of weeds in the cultivation area. Globally, they constitute about 44% of the total agrochemical market
  • Bio-pesticides: They are pesticides of biological origin i.e., derived from animals, plants, bacteria etc.
  • Others: This includes plant growth regulators, nematicides, rodenticides and fumigants. They constitute 7% of the total agrochemical market
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India stands fourth in agrochemicals management and its current market value is $4.1 billion. It has been estimated that the market will reach $8.1 billion by 2025. The exports market is expected to reach $4.2 billion by 2025.

The Global Agrochemicals Market is projected to register a CAGR of 4% during the forecast period(2020-2025). The rising population across the world, accompanied by rising affluence, is seeing a shift in consumption patterns. There is a need to not just increase production to meet demand but also to ensure that the nutritional needs of an increasingly affluent population are met.

Consumption of pesticides is rising steadily in India. In 2018-19, 72,515 metric tons of pesticides were used by farmers all over the country. Data reveals that only eight states consume more than 70 % of the total pesticide. With a growing emphasis on environment and sustainability, the government in the region is enforcing the clean production and environment-friendly agriculture policies, which led to a decline in pesticide usage in the country. The government has encouraged the use of microbial pesticides, which is expected to grow at a rapid rate in the coming years.

Conclusion-:

Being completely debt free , company has grown steadily over 3 and 5 year period with compounded sales growth of 12% and 13.5% respectively. Promoters claim the company to be asset light , company has huge amount of  reserves that is about 1300cr , cash and equivalents of about 153 crore rs and overall book value of 150 rs. The management is confident of achieving sales growth in range of 5-10%.

However the company being engaged in the manufacturing of pesticides and insecticides which kills numerous insects we , on a personal level are staying away from being invested in this type of companies. The report is presented for other users and more importantly for the users to educate them about the dynamics of the fertiliser industry.

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