Karvy Stock Broking

Camson Bio (Buy)

CMP: ₹123.05

Target: ₹189

Camson Bio Technologies (CBTL) is an R&D-led organisation, which is into developing crop protection chemicals and higher yield hybrid seeds. CBTL’s uniqueness lies in the fact that it has developed bio-pesticides, bio fertilisers and natural fertilizers using secondary metabolites of microbes. CBTL has a library of more than 4,018 microbes. Qualitative assessment of product strength was done by mapping to the mode of action of conventional products.

As part of its R&D effort, CBTL has developed proprietary manufacturing process that is light on capex and high on scalability. It is increasing its capacity from 2.7 million litres to 16.7 ml by just expending ₹40 crore. CBTL’s gross margins are expected to be 61 per cent and 66 per cent for biocides and proprietary seeds in FY16E and FY17E respectively. We have valued CBTL by estimating a suitable PE multiple for FY17E EPS, by mapping it to RoE.