7 Agri Stocks Investors Should Buy For Long-Term

Sharekhan has come-up with its latest report on the agri sector. Here are 7 stocks that are its preferred picks from the space. Among these include names like UPL, PI Industries, Sumitomo Chemical India, Coromandel International, SRF, NOCIL and Vinati Organics.

Stocks to buy from the agri and speciality chemicals space according to Sharekhan

Name	Current market price	Target price
UPL	724.65	930
PI Industries	3277	4200
Sumitomo Chemical India	486	570
Coromandel International	900.35	1155
SRF	2247	2960
NOCIL	231.65	305
Vinati Organics	2037	2500

Agri-inputs: Challenges exists for domestic companies

According to Sharekhan, given inventory overhang; export-oriented players to likely to fare well. "We expect growth for domestic agrochemical to remain muted at mid-single digit as channel inventory remain high post Kharif season, impact on demand given erratic weather conditions and Q3 is seasonally weak quarter for India agrochemicals. Export oriented companies to fare well supported by healthy demand in the international market while fertilizer companies would benefit from higher subsidy from the government," the brokerage has said.

Agri inputs: Pressure on product price and margin

Return of products amid muted demand is expected to put pressure on product price/margin for players purely focused on domestic while overall high-cost raw material inventory is also a margin concern for the sector, the brokerage has observed. "We expect our coverage universe to see aggregate margin contraction of 65bps y-o-y to 18.8%. Overall, we expect our agri-input coverage universe to deliver 14%/7% y-o-y revenue/earnings growth with outperformance from PI/Sumitomo Chemical India/Coromandel International," the brokerage has said.

Speciality chemicals

Sharekhan sees gross margin improvement given fall in basic chemical prices; however, benefit on EBITDA margin front would depend upon quantum of pass through of decline in raw materials cost and impact on operating leverage as volume may remain muted due to demand concerns. "Overall, we expect specialty chemical companies under our coverage to post PAT de-growth of 12%/24% y-o-y/q-o-q. Vinati Organics would do well with robust 47% y-o-y PAT growth," the brokerage has said.