Bhagiradha Chemicals - Rs.139.00

Incorporated in 1994, Bhagiradha Chemicals Ltd. (BCL) is one of India’s largest manufacturers of Chlorpyriphos, the best-selling insecticide that is used on a wide variety of crops such as cotton, chilli, rice, sorghun, soyabean, sugarcane, groundnut, vegetables, ornamentals, flowers and plantation crops like citrus, mango, grapevines etc. apart from use in the preservation of wood & timber. Thus BCL manufactures agrochemical actives for the domestic market and exports two insecticides viz. Chlorpyriphos and Imidacloprid and two herbicides viz, Triclopyr and Fluroxypyr. It also has a facility to make bulk formulations for which it has already generated authentic chemical and toxicological data for Chlorpyrifios Ethyl Technical, Chlorpyrifos Methyl Technical, Triclopyr Butoxy Ethyl Ester Technical and formulations for registration of these products in importing countries.

Its plant with an installed capacity of 2000 TPA is located near the eastern coastal town of Ongole, 300 kms north of Chennai. It exports to Australia, South Africa, China, Germany, Singapore, Spain, U.K. Belgium, Greece, Italy, Malaysia, Taiwan, Indonesia, Peru, Brazil, etc. The company is now entering contract manufacture of high-value agrochemicals and has entered into an exclusive contract manufacturing agreement with Dow Agro Sciences, Europe, for supply of 200 to 250 tonnes of Fluroxypyr or Methyl Ester Intermediate for 4 years from 2006. This deal is an important milestone for BCL since Dow AgroSciences is the original inventor of Fluroxypyr and was its sole producer till now and chose BCL as its partner despite the fact that the two are competitors in the Triclopyr and Chlorpyriphos market. More such deals are expected as large MNCs want to outsource some of their global requirements from India.

For future growth, BCL is arranging marketing tie-ups and is planning to expand its manufacturing facilities as opportunities for export of pesticides are increasing cost competitive manufacture and as products coming out of patent. Besides, the usage of weedicides and fungicides is growing in India although the consumption of insecticides is declining with increased cultivation of genetically modified (GM) crops. Due to better product mix, BCL has reported encouraging results for H1FY07. Sales improved by 35% to Rs.48 cr. whereas net profit jumped 80% to Rs.6.20 cr. For full year FY07, it can clock sales of Rs.100 cr. with NP of Rs.12.75 cr. leading to an EPS of Rs.25 on its equity of Rs.5.05 cr. That means at CMP of Rs.135, the scrip is trading at a P/E ratio of less than 6 times. Investors can buy with a price target of Rs.200 (50% return) in 15-18 months.