Bayer Crop Science Limited (BCSL), MNC pharmaceutical company with 71% stake held by Bayer AG Group, has reported not so encouraging performance for 15 months ended March 2008.
The company changed its financial year-end from December to March and hence, current financial year – FY2008 is for 15 months.
Investments in expanding marketing for seeds business has steadily increased staff and marketing costs and thus impacted profitability in short-term. Moreover, this period includes 3 weak quarters as against 2 weak quarters in CY 2007.
OPM declined to 7.1% leading to a 26.4% decline it PBT to Rs.79.21 crore. After providing for net extraordinary expenses of Rs11.26 crore mainly on account of VRS, PAT was dragged down by 31.4% to Rs49.10 crore.
Going forward, Bayer AG plans to increase its penetration in Indian market by introducing globally renowned 2-3 new products a year. There is also a possibility that, the parent company will make India an outsourcing hub for its agrochemicals business, providing ample business opportunities.
Another important trigger is unlocking of 108 acres surplus land at Thane plant by FY 2009, which could be more than current market capitalization.
At the current price, the share is trading at 18.6 times FY 2008 annualized EPS of Rs11.6 and 13.5 times FY 2009 expected EPS of Rs16. We recommend a BUY in this counter with a target price of Rs500.