Excel Crop Care has a varied product mix and a sizeable presence in the global agrochemicals market

Agrochemicals companies have derived substantial gains from the spill-over effects of poor monsoons. One beneficiary of the erratic rains last year was Sabero Organics, a company we recommended (at Rs25) that has gone up 171% in less than eight months. Excel Crop Care is another agrochemicals company worth a look.

Excel Crop Care is a manufacturer and exporter of agrochemicals like insecticides, fungicides, herbicides and other products like biologicals, organic fertilisers and bio-pesticides. The products are used in protection and enhancement of crops like cotton, mango, paddy, soyabean, tur (pigeon pea) and vegetables. Excel has developed a seeds business which is proposed to be hived off and carried on through a proposed subsidiary.

Excel Crop Care was carved out of Excel Industries in 2003 and the parent company claims to have achieved over 100 product and process breakthroughs with several firsts to its credit. Excel Industries is the first company in Asia and third in the world to make endosulfan technical, the first in Asia to make butenediol and the second in the world to develop glyphosate technical. It is also the third company in the world to develop aluminium phosphide.

Excel Crop Care acquired the business of marketing agri-input products like soil enrichers, bio-pesticides and plant growth promoters of Excel Industries in 2007. Over the years, its sustained efforts to increase the share of branded formulation products in its turnover have yielded good results.

Its strength lies in its integrated approach to manufacturing; it combines integrated nutrition management (INM) and integrated pest management (IPM). This gives it the ability to cater for diverse Indian conditions and a range of crops. To ensure quality and continuity of supply, it produces key raw materials on its own or sources them from associate companies. Such initiatives, coupled with its investment in brand promotion and developing closer ties with farmers, are expected to help it maintain its position of strength.

Excel also has a sizeable presence in global markets, with its technical actives, bulk and branded formulations currently registered and marketed in Asia Pacific, South Asia, West Asia, Africa, Europe (West & East, including CIS countries) Central & South America and the USA. The company has a subsidiary in Antwerp, Belgium. Its exports account for about 25% of the turnover and are expected to contribute more in the future. In 2009, Excel set up and commissioned a water dispersible granule manufacturing plant. It also commercialised its new liquid formulation of ammonium glyphosate.

The company’s financials reflect the steady growth in its business. For the December 2009 quarter, sales jumped 25% over the corresponding year-ago quarter while operating profit zoomed 885% on account of a low base. For the full year (ending March 2010), net profit is likely to be Rs48 crore which would mean an EPS of around Rs45. At the current market price of Rs145, this means a P/E of around 3. With a market-cap of 0.26 times sales and 2.47 times operating profit for the December quarter, the stock is cheap.

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