Edelweiss Securities has maintained 'Buy' on Bayer Cropscience with target price of Rs 2,170 as against current market price (CMP) of Rs 1,550 in its report.

Commenting on the investment rationale, Edelweiss Securities said, ''Bayer Cropscience (Bayer) reported a subdued set of numbers for Q3FY14, though domestic business posted impressive growth of 20% YoY compared to 15-20% by competition. EBITDA margin was marred by higher marketing expenses and forex loss. The company has received registration (u/s 9(3)) of three exclusive/innovative products along with three label extension of existing products YTD.

Further, we believe recent approval of field trials of genetically modified (GM) crop will be a big positive for seed sector as well as Bayer over the long term. We do not expect sale of Ankaleshwar plant to materially impact the company. We believe a comprehensive distribution network, branded portfolio, launch of innovative products and parent’s (Bayer AG) R&D capabilities to effectively anchor the company to outpace Indian agrochemical and seed markets.

These attributes equip it to post sales and PAT CAGR of 16.2% and 22% over FY14-16E versus 17.0% and 34.5% CAGR during FY08-13, respectively. We expect it to generate free cash flow of Rs 7 billion over FY14-16E (excluding sale proceeds of Ankaleshwar plant) with FY16E net cash/share rising 1.6x to Rs 300 (20% of current market price). We maintain 'Buy'.''

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