Insecticides India operating profit up 34% despite average sales
Moneylife Digital Team 12 February 2013

Insecticides India (one of our Street Beat recommendation) has posted average third quarter results, with both sales and profit trending upwards. We had recommended the stock on 18 October 2012 at Rs 412. The stock closed at Rs405 today, down 2% in four months

We had written about Insecticides India on 18 October 2012 (http://www.moneylife.in/article/insecticides-india-growing-fortunes/29149.html). The company has posted its third quarter results for the 2013 fiscal. It reported just 13% year-on-year (y-o-y) increase in net sales, from Rs105.54 crore to Rs118.83 crore. Despite sluggish sales, its operating profit was impressive as it went up 34% y-o-y to Rs10.52 crore, which showed operating efficiencies. However, its net profit dipped 3% y-o-y to Rs4.65 crore when compared to Rs4.81 crore in the corresponding period last year due to higher financing cost which nearly tripled.
 

A Moneylife analysis showed that the company hasn’t fared too badly, and in fact, matched its three-quarter averages. Net sales grew at 13% y-o-y which was close to its three-quarter y-o-y growth rate of 15%. Operating profit showed better numbers which grew at 34% y-o-y which is higher than its three-quarter y-o-y average of 33%. The return on equity is also impressive which stood at 20%—not too bad for an insecticide company. Its valuation seems fair with market capitalisation quoting at 12 times operating profit.
 

The company operates in two segments: formulations and technical. Insecticide India has more than 110 formulation products and 15 technical products and manufactures all types of insecticides, weedicides, fungicides, etc. Over 90% of the gross turnover came from the formulation segment in the December quarter.
 

An analysis into the shareholding pattern revealed that the company’s promoter holdings as well as foreign institutional investor (FII) holdings have remained unchanged. But domestic institution investors (DIIs) have lapped up the company by increasing the stake from 2.28% to 3.47% during the quarter ended December 2012.
 

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