Bayer Cropscience Ltd. share price target

Bayer reported a sharp 50% yoy drop in revenues to Rs2.4bn and below our estimate of Rs4.7bn (after adjusting for Ind-AS) and is also below consensus estimates. Revenue was impacted due to weak season in South India which constitutes 65% of Q4 sales Gross margins improved 430bps yoy to 44.6% benefiting from lower RM cost. However, Company reported EBITDA loss of Rs581mn vs. a profit of Rs 205mn in Q4FY16 Loss at...

Bayer's management expects CY17 to be a challenging year due to lower reservoir levels, high channel inventories and poor farmer liquidity;however, firm commodity prices and one goodagri-seasonare sufficient to address these issues. Despite challenges, Bayer's domestic revenue grew 16% YoY in 9M..

Increasing proportion of manufactured goods in the overall revenue from 43%in FY15 to 44% in FY17E is expected to lead to a 20 basis points jump in grossmargins from 64.8% in FY15 to 65.0% in FY16E & FY17E. It could have been higher, if not for the weak macro-industry environment. This increase is expected to act as a cushion for the EBITDA margins going forward. But, significant dependence on traded goods will continue to act as a ceiling for margins. We expect EBITDA margins to remain stable at lower levels of 11.9% & 12.3% in FY16E & FY17E respectively.