New Delhi [India], July 8 : Early arrival of monsoon, 10-15 days ahead of its schedule, will boost crop production as acreages are up 11 per cent as of now, noted a report by AnandRathi.
The report further adds that the early arrival has led to a shift of crop patterns, which have particularly led to more maize acreage. However, Lower carried-over stocks create headroom for further inventory push in the season.
In the process of crop shift, maize acreages are being replaced by cotton particularly in western and southern India.
Additionally, domestic and global prices are largely stable and near-term price hikes seem improbable, which is a reflection of a bumper season for the technical manufacturers, led by volumes and stable prices.
According to the report, domestic agrochemicals is likely to grow by 8 per cent year on year, while a 20 per growth in maize hybrid seeds.
"We believe, however, that the worst is largely behind and the sector is heading toward a gradual recovery. The sentiment is positive because of the early arrival this year of the monsoon, which in turn should boost growth for domestic companies" noted the report.
Furthermore, "We expect modest 8 percent y/y revenue growth, partly supported by domestic volume growth in the kharif season. We pencil in 6/11/10 percent y/y growth in domestic agrochemicals/ exports/ seeds. We expect a 13.2 percent EBITDA margin in Q1 due to a better product mix and focus on greater efficiencies."
It also highlights that the agrochemicals sector is under recovery, which was earlier under immense pressure in the recent past, largely due to adverse climatic conditions in key regions, higher global channel stocks dumping by China, piling pressure on prices; heightened geopolitical uncertainties and tariff uncertainties.
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