Astec Lifesciences
CMP 57.5
Astec Life sciences is engaged in manufacturing and sale of intermediates, active ingredients and formulations in the off patent [generics] category, with main focus on agrochemical [85%] and rest from Pharma segment. It is having full backward integration for its key products, which helps in maintaining better control over costs. It has a strong and experienced management team.
Company is working on contract manufacturing basis and is in negotiations with a couple of large players for long term contracts for its products. It is expected to clinch sizeable deals - which can lead to significant upside in revenue generation from FY 11 onwards.
Increasing registration activities indicates that the company likely to get increasing business from global players, particularly in regulated markets, which will boost margins. Currently Astec has pipeline of 70 registrations in 30 countries. With its strong R&D, it is targeting more & more registrations across the world.
Astec has good clientele network domestically and internationally with world's top 20 agrochemicals companies which gives them the opportunity to expand their product portfolio based on their demands. [Domestic clients include Syngenta India, Indofil chemicals, Atul Ltd, Krishi rasayan exports and international clientele includes Irvita Plant Protection, Nufarm UK ltd, An Nong Co., handelsgesellschaft, Detlef Von Appen etc.]
The company is doing extremely well and has reported around Rs 8 EPS in FY 10, while estimates for FY 11 EPS are much better around Rs 12. Looking to this, this quality stock, available at below 5X of FY11 earnings appears good for investment. BUY with target of Rs 80 in 3-4 months.
[Company came out with IPO in Nov.'09 at Rs 82/-, so one is buying stock at below IPO price and thus will get better returns in shorter period compared to original allottees.]
