With a return of 525% in past 12 months the company has proved to be a multibagger. Despite having weak business environment for the industry this company is creating wealth for the investors. Lets see what are the points contributing in the growth and which are acting as a speed breaker.
- The subsidiary 3b blackbio biotech india ltd. has made a wide range of diagonostic kits ranging from infectious decise to oncology, which are being accepted by big name in the diagnostic market. In time to come this subsidiary would become a market leader. Its sales grew by 60% and EBITDA grew from Rs 49.39Lakh to Rs 150.56Lakh; Net profit grew from Rs14.79Lakh to Rs90.2Lakh.
- Current government is paying attention to agriculture sector, it has levied a “Krishi Kalayan Cess” of 0.5%. Government has also announced to double farmer’s income by 2021-22. This is expected to help agrochemical industry.
- This year climatic condition was better and favourable than past two years. Financial results are also showing that, net profit of Kilpest India rose 87.32% to Rs 1.33 crore in the quarter ended September 2017 as against Rs 0.71 crore during the previous quarter ended September 2016. Sales rose 28.38% to Rs 7.87 crore in the quarter ended September 2017 as against Rs 6.13 crore during the previous quarter ended September 2016.
- Govermnet has launched a soil health card programme. The card will show the mineral, productivity, yield of the soil. With the help of this experts will guide farmers about which type of chemical to use for different crops. In long term whit more government initiative and education farmers will get benefit from this and it will help agrochemical companies to produce a region wise customised solution and effective use of R&D.
- 3b blackbio biotech india ltd. has made a wide range of diagonostic kits ranging from infectious disease to oncology. Infectious disease test is season dependent and this segment is highly competitive from foreign as well as domestic player. Whereas, on the other hand oncology segment has steady growth throughout the year and is still new with few serious competitions. Keeping this in mind company is tapping oncology segment it will be launching few test in this category in FY-18 along with infectious disease test.
- Consolidated cash flow shows that company is generating cash from operating activity which it is using for financial activities and investment.
- Stock prices has increased by 525% in past 12 months. Whereas NIFTY has given a return of 31% in same period.
- Agrochemical industry faces challenges from climate uncertainty. Last year due to drought crop yields have been impacted and farmer’s net realization was also affected badly. Therefore, company also faced problems from the climate and tough market condition.
- Sales turnover is Rs.13 Crore lower by 17.5% as compared to last year which was 15.7Crore and PBT stands at 0.27crore higher by 7% as compared to last year which was .25 crores.
- Due to rise in prices of crude which essential raw materials for manufacturing of technical are derived like the second and third derivatives of crude, chlorine, yellow phosphorus and bromine etc. It is expected to create price pressure and may deteriorate already weak margins.
- Company has paid a dividend of Rs 22,94,302 where as it has borrowed a total of Rs 69,54,417. Companies which are going through adverse business environment, which are not generating enough cash to pay their bills should keep the cash. Standalone cash flow shows that company is having a net cash outflow from operating activity. Dividend has been considered when companies are doing good business and have excess cash to pay their investor. There is double taxation on dividend, first income tax is deducted and then dividend distribution tax. Kilpest had PAT of Rs 22,99,245. After dividend distribution amount transferred to reserve and surplus is only Rs 4,943.
- Standalone interest coverage ratio (EBIT/Interest expense) is 0.36 times. Which means company is not generating enough profit to repay its interest obligation. Despite this fact company has distributed dividend. Company is borrowing money to repay its interest obligation.
- Net profit margin of the company at 1.76% in FY-17 and 1.19% in FY-16 whereas that of industry is 6.5% in FY-16. However, margins are improving but margins are not in good position. Return on equity is 2.08% where as that of industry is 12.28 in FY-16.
- Company has spent 27,38,809 in marketing expenses. Whereas company has PBT of Rs. 27,13,563. It shows that the industry is highly competitive and to survive companies have to spend a large chunk of their revenue in marketing.
- Export is at decline with a total export of 1,69,90,866 in FY-17 from Rs. 1,82,14,115 in FY-16.