IGI Logo

Weak Q1 results reflecting adverse weather

Dhanuka Agritech (DAGRI IN) reported a soft Q1, with revenue declining 12.6% YoY to INR 4.6bn as delayed onset of the monsoon postponed sowing across key kharif crops and impacted agrochemical demand. Revenue decline was led by volume (12.7%), with no pricing support. This particularly impacted the herbicide segment in its peak season across soyabean and cotton crops in Western and Central parts of India. Herbicides revenues fell 26.6% YoY. While the stock has corrected by ~13% in the past three months and valuations at 12x Q1FY29E EPS are compelling, earnings outlook depends on the trajectory of monsoon, which seems to be adverse this year. Agrochemical consumption takes a hit with adverse monsoon conditions. Hence, there may be near term underperformance by DAGRI if the situation continues. Maintain Buy for a view of more than 9 months with a revised TP of INR 1,240 (earlier INR 1,372) based on 15x Q1FY29E EPS.

New formulation plant at Nagpur: DAGRI has acquired land at Butibori near Nagpur to set up a greenfield formulation unit, with a capacity of 23,000MT/annum, which is expected to be operational in Q1FY29. The plant carries a capex outlay of INR 2bn, of which INR 1bn+ is expected to be incurred in each of FY27 and FY28. The site was chosen to keep formulation operations separate from chemical synthesis at Dahej. Nagpur is centrally located within the Deccan plateau region, where all surrounding states are relatively prosperous and technologically adaptive in agriculture. The land parcel also leaves headroom for future scale-up beyond the initial capacity and the project carries CGST benefits from the Maharashtra government.

Dahej technical plant sees seasonal ramp-up as losses narrow down: DAGRI’s technical synthesis plant at Dahej posted revenue of INR 0.26bn in Q1FY27 (INR 0.16bn in Q1FY26), with the EBITDA loss narrowing down to ~INR 10mn from INR 30mn a year ago. Despite strong Q1, expected FY27 revenue from the plant is INR 650mn (INR 500mn last year), as Q1 captures peak-season offtake and demand reduces through H2. Full-year EBITDA is expected to stay negative, with breakeven still difficult for now. Royalty fell significantly compared with last year to INR 40mn.

Maintain Buy with lower TP of INR 1,240: DAGRI’s valuation at 12x Q1FY29E EPS is compelling, but earnings outlook depends on the trajectory of monsoon, which seems to be adverse this year. Agrochemical consumption takes a hit with adverse monsoon conditions. Hence, there may be near term underperformance by DAGRI if the situation continues. Maintain Buy with a time horizon for more than 9 months with a revised TP of INR 1,240 (earlier INR 1,372), based on 15x Q1FY29E EPS. We introduce FY29 estimate.

Please refer disclaimer at Report
SEBI Registration number is INH000000933