Nagarjuna Agrichem Ltd - Rs.114.00

(Code No: 524709) Established in 1994, Nagarjuna Agrichem Ltd (NACL) belongs to the reputed Nagarjuna Group of Hyderabad. Producing technical grade Monocrotophos since inception, NACL has grown substantially and manufactures a comprehensive range of pesticide technicals, formulations and custom manufactured fine chemicals of international quality standards and specifications. Today, the company has an impressive range of over 40 formulations of Insecticides, Fungicides & Herbicides to supplement its crop protection and speciality agronutrients business. NACL is among the few companies in India exporting technical grade pesticides and formulations to as many as 15 countries including Argentina, Australia, Greece, Italy, Japan, Oman, Portugal, Saudi Arabia, South Africa, Spain, etc. It has one of the largest dealer networks spread across India with sales and marketing offices in addition to extensive warehousing and Logistics infrastructure to handle operations in 19 States. In fact, it is the largest seller of High Performance Speciality Fertilizers in India, which are sourced through an exclusive tie-up with HAIFA Chemicals, Israel.

NACL operates one of the most modern and comprehensive Technical Agrochemical manufacturing plants situated in Srikakulam district of Andhra Pradesh. This unit is among the few to have integrated multi-line facilities capable of producing a variety of pesticide formulations such as liquids, wettable powders and granules simultaneously in a single location. This unit has the formulation technology to produce dry flowables and water based emulsions. The R&D / Process Development Department of NACL is the second largest of any Indian Agrochemical Company in terms of size and scope of operation. Currently research is being carried out to develop Bio-pesticides and Fermentation metabolites. Interestingly NACL also does Toll manufacturing of Agrochemicals and Intermediates for MNCs and Indian Pesticide majors who wish to outsource a part of their product requirements. In addition to the above, it also custom synthesises several Fine Chemicals for reputed customers.

Given the higher GDP growth, the government’s thrust on agriculture and better monsoons will lead to increased usage of crop protection products and increase in sales for NACL. For the nine months ending 31 Dec. 2004, its net sales was up 40% to Rs.227 cr. and profit after tax has more than doubled to Rs.22 cr. Due to its improved performance the company is expected to declare 15% final dividend taking the total to 30% dividend compared to 12% in FY04. For FY05, it may report a turnover of Rs.280 cr. and NP of Rs.26 cr. leading to an EPS of Rs.18. For FY06, it can report an EPS of Rs.22 in anticipation of better monsoons and higher export realization. Investors can accumulate this scrip at declines with a price target of Rs.180 over the next 15~18 months.