Prime beneficiaries of the Paraquat ban in Thailand and Brazil. Paraquat, a deep rooted herbicide primarily used for weed and grass control, was banned in Thailand and Brazil in 2020 after being classified as a Class-1 poison as it was widely used for suicidal purposes. The ban has sparked strong export sales (primarily to Thailand) for ANCOMNY’s two formulations, Dasaflo and Monex HC, which are deemed as close substitutes to Paraquat. From our findings, the Paraquat replacement in Thailand is estimated to range from USD60-80m annually, while the global market size of Paraquat was estimated to be around USD850m in 2020. With the group aiming to capture half of Thailand’s former Paraquat market by 2026 (from 10% market share in 2020), the export sales to the said market is expected to burgeon in FY23-24. Additionally, the group is also working on getting both formulations to Brazil for the soybean industry, which has a Paraquat replacement market of about 5x larger than Thailand.

New Active Ingredients (AIs) to fuel further growth. Going into FY24-25f, ANCOMNY’s earnings growth will be underpinned by the rollout of new AIs that commands better pricing. Having already introduced Bromacil and Ester in FY22-23, ANCOMNY is now aiming to roll out two new AIs (product T and product S) in FY2024. Of the two, Product T, which is expected to roll out in 1QFY24 is anticipated to be particularly potent in driving ANCOMNY’s FY24 earnings thanks to its more lucrative pricing and larger market size. According to the group, product T has an estimated sales potential of c.RM64M, which is significantly higher than Bromacil and Ester's combined sales potential of RM36m (#Figure1). All in, we are projecting ANCOM’s FY23-25f core PATAMI to register an impressive CAGR of 28%. We reiterate a BUY call on ANCOMNY with a TP of RM1.73.

Pending flag pattern breakout. After our successful call on ANCOMNY in Oct 2022 (report), the stock rallied to a YTD high of RM1.28 (3 Feb), and slid to a low of RM1.13 (1 Mar) before gradually inching up to end at RM1.18 yesterday, forming a flag pattern. A successful breakout above RM1.21 resistance will indicate a start of a new up-leg and spur the price to retest RM1.28-RM1.36 levels. Cut lost at RM1.07

Source: Hong Leong Investment Bank Research - 8 Mar 2023