HDFC Securities

Aries Agro (Buy)

CMP: ₹119

Target: ₹171

Aries Agro (AAL) was founded in 1969. AAL, together with its five subsidiaries, manufactures and sells micronutrients and other nutritional products for plants and animals in India. Triggers: a) Backward integration through acquisitions/ setting up of foreign companies abroad; b) Diversified product portfolio to cater to different requirements of farmers in India; c) Strong consumer connect to enable AAL to increase its market share; d) Widespread distribution network and nationwide manufacturing units with enough capacity; e) Unique business model helps reduce receivables to a decent extent; f) Targeting new markets abroad through UAE subsidiary. Risks/concerns: a) Requirement of working capital is substantial; b) Foreign exchange fluctuation and raw material availability and price fluctuation; c) Growing competition from existing players and new entrants. Recommendation: Despite its slow growth in topline and bottomline over the last few years, we feel that this could accelerate going forward and the stock remains a value buy.