Agribusiness becomes ‘COVID-proof sector

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Agribusiness becomes ‘COVID-proof sector

Factors like the early onset of monsoon, 19 per cent higher Kharif sowing, and agricultural inputs being an essential commodity, these companies carried out their operations during the COVID-19 lockdown period.

The unprecedented COVID-19 pandemic has severely hampered the global economy. However, there are a few sectors that were spared by the wrath of COVID-19 namely the pharmaceutical sector, consumer goods sector, and agricultural sector.

Agriculture and allied industries have recorded positive profit numbers for June during FY20-21. Factors like the early onset of monsoon, 19 per cent higher Kharif sowing, and agricultural inputs being an essential commodity, these companies carried out their operations during the COVID-19 lockdown period.

Considering the economic slowdown, a few agrochemical stocks like Godrej Agrovet, Sumitomo Chemicals, and Coromandel International gave strong Q1 performance.

Godrej Agrovet, animal feed, and agribusiness companies, backed by research and development, booked a consolidated profit of Rs 100.59 crore by registering a growth of 29 per cent YoY. Despite lower sales during the quarter, the company has a comfortable liquidity position. The sales of the company have a three-year compounded average growth rate (CAGR) of 12 per cent and a profit growth of 13 per cent. The company has a price-to-earnings multiple of 29.47. 

Sumitomo Chemical India Limited, a major Japan-based chemical company recorded a consolidated net profit of Rs 79.4 crore after witnessing 49 per cent growth YoY. The company has a pan India distribution network, having a strong presence with both retailers and farmers. It has more than 13,000 distributors across 23 states in the country. With a three-year sales CAGR of 45 per cent and a profit CAGR of 54 per cent, the share has a P/E of 60.61.

Coromandel International, having a business of fertilisers, pesticides, and speciality nutrients, registered a consolidated net profit of Rs 251 crore with a stellar growth of 301 per cent YoY. The company’s crop protection segment registered a growth of 54 per cent YoY. It is the second-largest manufacturer and a marketer of Phosphatic fertiliser in India. The company has a P/E multiple of 17.18 along with a three-year sales CAGR of 9 per cent and a profit CAGR of 31 per cent.

However, the benchmark index of Nifty 50 gave negative returns of 9 per cent since the beginning of the year 2020 to date.