Astec Lifesciences hits record high in a weak mkt; stock up 24% in 3 days

Shares of Astec Lifesciences surged 14 per cent to hit a record high of Rs 2,274.55 per share in Thursday’s intra-day trade, in an otherwise weak market. The stock of pesticides & agrochemicals company surpassed its previous high of Rs 2,178.85, which it had touched on July 20, 2022. In the past three trading days, the stock soared 24 per cent.

At 10:28 AM; it traded 7 per cent higher at Rs 2,145, as compared to 0.65 per cent decline in the S&P BSE Sensex. Further, it zoomed 76 per cent in a year, as against 6 per cent decline in the benchmark index.

Astec is engaged in the manufacturing of agrochemical active ingredients (technical), bulk, formulations, and intermediate products. Astec has a healthy sales mix of both exports and domestic sales. They export to over 25 countries including the United States and countries across Europe, West Asia, South East Asia and Latin America and Africa.

For July-September quarter (Q1FY23), Astec reported robust 44.4 per cent year-on-year (YoY) growth in total income at Rs 187 crore, driven by higher sales price realisations and CMO volumes. CMO sales, on the other hand, contributed 16 per cent to the total revenues in Q1FY23. The company did not have any CMO sales in the first quarter last year.

However, the strong topline performance was dented due to deferment of sales to the next quarter, to the tune of around 20 per cent of Q1 revenues. Consequently, profit after tax declined by 12.2 per cent YoY to Rs 11.4 crore in Q1FY23.

Astec is one of the leading players in triazole fungicides and well placed to capitalise on opportunities arising in the domestic as well as the international markets with well-established market credentials coupled with newly commissioned herbicides plant.

The company’s work on new R&D center remains on track and is expected to be completed by FY23. The company will also commercialise 2 new CMO products this year. Once commissioned, it will provide strong impetus to cater to rapidly growing contract development and manufacturing (CDMO) business and attract large numbers of innovators across the globe.

While healthy demand scenario, especially in the overseas markets, provided a fillip to the company’s revenues, cost optimisation measures such as backward integration, steady supply of raw material at cost effective rates supported the improvement in operating profit margins (OPM), believe analysts at ICRA.

Going forward, analysts expect the increasing share of exports in the revenue pie, and Astec’s plans to attain higher business diversification.

Moreover, the company commercialised its herbicides plant in August 2021. Therefore, incremental revenue contribution from this new business division is expected to provide higher diversification to the company over the medium term.

Astec has an established track record in the agro-chemicals business, which spans for more than two decades. On the back of strong technical competency, the company has established itself as one of the preferred suppliers of technical grade fungicides to reputed clientele, which comprise of large MNCs in the domestic and export markets.

"Furthermore, the company’s investments in the new state of art R&D center are expected to significantly enhance its R&D capabilities, enabling it to develop new products and also benefit from the opportunities that the global demand shift from China may present for the Indian entities. Besides that, the efforts undertaken by Astec to attain higher business diversification by entering herbicides manufacturing are expected to provide incremental revenue growth over the medium term," ICRA said in a