UPL, PI Industries, Rallis, Sharda Cropchem others: Should you Buy or Sell the stock as monsoon activity catches pace

Stock Market Today: UPL Ltd, PI Industries , Sharda Cropchem , Rallis India share prices have rebounded up to 14% in a month. The monsoon activities catching pace have added to the confidence of investors as they expect pick up inn earnings outlook and share prices of Agrochemical companies.

While the announcements by meteorological departments had been encouraging in past few months, some delay in arrival of monsoon however had left investors anxious on UPL Ltd, PI Industries , Sharda Cropchem , Rallis India share prices. After seeing some deficit in June the rainfall activity nevertheless has picked up pace in July. The delayed sowing activity has also is improving and as of July15, 2024 was up 10% YoY, aided by crops like rice, maize, and pulses being up etc.

Analysts as those at Antique Stock Broking post their channel checks have said that their interactions suggest that the domestic agrochemical industry is poised for strong mid-teens volume growth led by strong placement in primary channel driven by positive monsoon sentiment. The Crop acreages as on July 15, 2024 was up 10% YoY.

Not surprising the investor confidence is increasing. The lower than normal and uneven monsoon in the previous year had impacted the agrochemicals sales in the country. The destocking of channel inventory amidst heightened exports from China, had kept pressure on the global agrochemical industry and had posed challenges for domestic manufacturers too. Only PI Industries with large portfolio of patented products had seen some cushion on earnings.

Thus the good monsoon progress now is supporting investor confidence at least on the domestic focused companies. To be sure while the volume growth prospects are improving, pricing pressure may still continue. Also export oriented companies will gradually see an upticks.

For domestic companies Antique analysts said that they believe that the growth momentum will continue in 1HFY25 as long as rainfall is buoyant, resulting in strong volume growth coupled with margin expansion as companies have retained some benefits of lower raw material prices. For exporters however analysts at Antique expect volume growth to improve sequential demand recovery from 1HFY25 onwards, with margin being under pressure in the near term. Sumitomo Chemicals and Sharda Cropchem are Antique's top picks in the space. They like Paradeep Phosphate in the fertilizer space.

Analysts at Centrum Stock Broking also expect normal monsoon and onset of timely rains to benefit agrochemicals segment with good volume growth. However, generics pricing as per Centrum still remains subdued which is expected to impact agrochemical revenues. Global destocking as per analysts has ended in chemicals albeit still persists in some small sub-segments. The agrochemicals inventories still remain elevated in global arena, as per Centrum analysts.

"After a disrupted 2023, the sector should rebalance in 1HCY24 and may see a revival in 2HCY24" said HSBC Securities ad Capital Markets (India) Private Limited. HSBC maintain Buy on UPL and PI Industries while they have Hold on Bayer Cropscience and have Reduce ratings on Rallis India Ltd and and Tata Chemicals as they have revise target privets on changes to estimates and valuation

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions