Agribusiness becomes ‘COVID-proof sector

The unprecedented COVID-19 pandemic has severely hampered the global economy. However, there are a few sectors that were spared by the wrath of COVID-19 namely the pharmaceutical sector, consumer goods sector, and agricultural sector.

Agriculture and allied industries have recorded positive profit numbers for June during FY20-21. Factors like the early onset of monsoon, 19 per cent higher Kharif sowing, and agricultural inputs being an essential commodity, these companies carried out their operations during the COVID-19 lockdown period.

Considering the economic slowdown, a few agrochemical stocks like Godrej Agrovet, Sumitomo Chemicals, and Coromandel International gave strong Q1 performance.

Godrej Agrovet, animal feed, and agribusiness companies, backed by research and development, booked a consolidated profit of Rs 100.59 crore by registering a growth of 29 per cent YoY. Despite lower sales during the quarter, the company has a comfortable liquidity position. The sales of the company have a three-year compounded average growth rate (CAGR) of 12 per cent and a profit growth of 13 per cent. The company has a price-to-earnings multiple of 29.47. 

Sumitomo Chemical India Limited, a major Japan-based chemical company recorded a consolidated net profit of Rs 79.4 crore after witnessing 49 per cent growth YoY. The company has a pan India distribution network, having a strong presence with both retailers and farmers. It has more than 13,000 distributors across 23 states in the country. With a three-year sales CAGR of 45 per cent and a profit CAGR of 54 per cent, the share has a P/E of 60.61.

Coromandel International, having a business of fertilisers, pesticides, and speciality nutrients, registered a consolidated net profit of Rs 251 crore with a stellar growth of 301 per cent YoY. The company’s crop protection segment registered a growth of 54 per cent YoY. It is the second-largest manufacturer and a marketer of Phosphatic fertiliser in India. The company has a P/E multiple of 17.18 along with a three-year sales CAGR of 9 per cent and a profit CAGR of 31 per cent.

However, the benchmark index of Nifty 50 gave negative returns of 9 per cent since the beginning of the year 2020 to date.