Bayer CropScience (BCS) is a subsidiary of the Euro35bn Bayer AG, Group, which is a world leader in Agrichemicals.
We estimate BCS’s FY2010E Sales to be muted on account of the prevailing drought-like conditions though Exports over FY2009-11E are expected to be stable.
The EBITDA Margins are set to improve from 11.1% in FY2009 to 13.1% in FY2011E owing to its ongoing restructuring exercise. We also expect BCS’s RoE to remain robust over FY2009-11E at around 24% levels.
At Rs310, the stock is quoting at 10.2x FY2010E and 8.4x FY2011E EPS. We have arrived at an SOTP target price of Rs501 by assigning a target P/E multiple of 10x for BCS’s core business and adding 50% discounted value of the Thane land, which translates into Rs101/share (post tax).
We recommend a BUY on the stock.
Click here for a detailed report