Insecticides India’s Q1FY22 institutional sales increased by  28.7% increase and ~180% increase in exports resulted in revenue growth of 14.3%, YoY. However, branded product sales grew just 2.1%, the working capital investments increased due to higher inventory levels, and EBITDA margin declined due to increased employee and other expenses.

While the company did not launch any new product during the quarter, it plans to launch 5-6 products in FY22. We remain positive on Insecticides due to focus on increasing farmers’ penetration, removal of generic products from the portfolio and focus on differentiated products and  backward integration of technical.

Q1FY22 result: Revenue, EBITDA and PAT grew 14.3%, 7.9% and 8.9% YoY, respectively. While Gross margins were flat, EBITDA margin declined 70bps. EBITDA margins were impacted due to higher employee and other expenses. However, with higher other income, PAT margins were flat YoY.   

Segment-wise performance: Sales of branded products increased 2.1% in Q1FY22, YoY, driven by Maharatna products sales growth of 6.4%, contributing 41.5% of branded sales. Institutional sales were up 28.7% YoY. Exports registered strong growth of 179.4% YoY, during the quarter. B2C, B2B and exports contributed 65%, 27% and 8% of the company’s revenues in Q1FY22, respectively.

Higher working capital investments: The inventory and debtor levels increased in Q1FY22, resulting in higher working capital requirements. Higher inventory levels are attributed to higher stocking of raw materials, due to supply disruption. We expect the situation to normalize in coming quarters.

Guidance maintained: The company maintained its guidance of 10-12% revenue growth in FY22. It guided for Rs600mn capex for the year. While the company did not launch any product during Q1FY22, it plans to launch 5-6 new products during the year.