Dhanuka Agritech Ltd. share price target

We are initiating coverage on Dhanuka Agritech Limited (DAGRI) with a BUY recommendation and a Target Price of Rs 880 which implies 27% upside from the current levels.

We have upgraded DAGRI's Topline/EBITDA/APAT estimates for FY21 and FY22 by 6%/12%/12% and 6%/8%/9%. Despite factoring in higher earnings growth we downgrade the stock to HOLD (from Buy) given very sharp run up in stock price. We roll forward to Sept'22E earnings and revise our target price to Rs857 (previous Rs656) based on 18x (previous 16x) Sept'22 EPS of...

Dhanuka Agritech reported a healthy Q4FY20 performance with Sales/EBITDA/PAT growing at 18.1/38.6/45.8% to Rs 2.2bn / 458mn / 390 mn. Sales were in-line (D.est: Rs 2.31bn) with our estimates...

interstate trade thereby giving freedom to farmers for selling at an attractive enable much needed formalisation of the sector leading to better pricing of produce, more predictability in cropping pattern and generate better income for farmers. For agri-inputs industry, agriculture reforms do not entail any immediate benefit however they help to enhance long term structural growth. Formulating a Central law for Inter-state trade- Earlier reform measures of the Modi govt (like creating a model law for the states to deregulate marketing of fruits and vegetables, creating an electronic unified national market for agricultural...

Total Industry volume is up 11% to 4.4 mn tons. Urea/NPK/DAP sales are @ 2.5 mn tons/0.8 mn tons/0.5 mn tons, up 3%/28%/26% resp. SSP volumes grew 10% to 0.3 mn tons. Domestic phosphatic fertiliser sales...

Dhanuka Agritech reported mixed set of results. Benefits of higher than Change in Estimates | Target | Reco anticipated topline growth of 25% (PLe- 15%) was off-set by continued gross margin contraction (11th straight quarter) of 146 bps. Higher other income (up...

Dhanuka agritech reported a muted 1QFY20 performance, Sales/EBITDA grew by 2.8/25.9% YoY to ` 2.19bn/200mn respectively. PAT de-grew by 8.6% YoY to ` 148mn. Results were below our estimates on all fronts. Gross margins continue to be under pressure as rising prices of certain technicals (Cartap Hydrochloride technical for Caldan') could not be passed on. Though gross margins saw a contraction of 110bps YoY to 34.1%, EBITDA margins expanded by 170 bps YoY owing to lower employee costs (down 7.9% YoY) and other expenses (down 7.1% YoY)....

After seeing a 370bps yoy contraction at the operating level, we believe that Dhanuka Agritech (DAGRI) is geared for a 200bps yoy margin recovery along with an acceleration in revenue growth (8%/9% in FY20E/FY21E vs. 2% yoy in FY19). FY18-19 was one of the most unpredictable years for agro-chemical intermediate prices. As a result, the prices of key raw-materials such as metribuzin, lamda, and bifenthrin increased in the range of 150-400%....

Dhanuka Agritech (DAGRI) maintained that the launch of new products will continue to drive growth for the company in FY20. It is also increasing its distribution reach as newer markets have emerged in the deep interiors of the country. Channel inventory for the industry is 20-30% higher than normal, due to tepid demand. Despite tepid performance we remain bullish on the stock led by 1) 15 product introductions in FY17 and FY18 2) renewed focus on efficient marketing and 3) planned launch of ~5-6 new products in FY20. Additionally, its focus on herbicides (32% of sales) and fungicides (15%)...

Gross margins contracted 670bps yoy to 36.6% on inflated RM cost, which the company was unable to pass on due to poor agronomics. This resulted in an EBITDA margin contraction of 603bps yoy to 9.9% (lower than our estimate of 15.1%). (up 30-40% yoy) for the industry. Dhanuka remains at a comfortable position as they have already taken a sales return of Rs490mn in Q3FY19 and Rs1.0bn in 9MFY19. We cut our EPS estimates by 20%/11% for FY19/20E and introduce FY21 estimates while rolling forward our valuations to FY21E. Maintain Buy and reduce our TP to Rs450 (earlier...