Buy Dhanuka Agritech Ltd For Target Rs.1,780 by Axis Securities
New Launches to Strengthen the Portfolio; Maintain BUY
Est. Vs. Actual for Q3FY25: Revenue: Broadly Inline; EBITDA: MISS; PAT: MISS
Change in Estimates post Q3FY25
FY25E/FY26E/FY27E: Revenue: -3%/-1%/-1%; EBITDA: -4%/-5%/-2%; PAT: -6%/-5%/-1%
Recommendation Rationale
* New products continue to drive growth: During the quarter, the company experienced margin expansion on a YoY basis, primarily driven by a favorable product mix and new product introductions, strong sales, and liquidation of key products such as LaNevo and MYCORe Super. Both these products, launched this year, have been well received by farmers across India. Additionally, the company introduced a new 9(4) product, “Roxa” – Pyroxasulfone 85% WG, aimed at controlling weeds in wheat crops, which has garnered a positive market response. Looking ahead, in the next FY, Dhanuka plans to launch two 9(3) products—one for rice herbicides and another new fungicide for grapes and horticultural crops—along with several additional 9(4) products.
* Acquisition of Global rights for 2 Fungicides from Bayer: The company has secured global rights to the active ingredients Iprovalicarb and Triadimenol (invented by Bayer AG). This acquisition positions Dhanuka to extend its presence in over 20 countries, marking a significant step in its global market expansion strategy. As part of this, Dhanuka plans to shift the manufacturing of at least one of the products to India, leveraging the capabilities of its manufacturing unit at Dahej, Gujarat. The overall market potential for these two molecules has a revenue potential of Rs 250 Cr. By FY27, the contribution from these two products to the top line is projected to be in the range of Rs 175-200 Cr, with a 10-15% CAGR growth thereafter.
Sector Outlook: Causiouly Optimistic
Company Outlook & Guidance: The company revised its revenue growth guidance for FY25 from 16% to 14%, while maintaining its margin guidance of an improvement of 100 bps. The management remains optimistic about delivering healthy growth in FY26 and improving EBITDA margins, driven by a favourable product mix and stable/improving prices. Additionally, Dhanuka is taking steps to optimise its inventory levels and expects normalisation by the end of the next quarter.
Current Valuation: 18x FY27E (Unchanged
Current TP: Rs 1,780/share (Earlier TP: Rs 1,810/share
Recommendation: We maintain our BUY rating on the stock
Financial Performance: The company posted revenue of Rs 445 Cr, up 10% YoY and down 32% QoQ, largely in line with our estimate of Rs 458 Cr. EBITDA came in at Rs 76 Cr, up 22% YoY but down 53% QoQ, missing our estimate of Rs 86 Cr. The company achieved an EBITDA margin of 17.0%, elevated YoY due to better operating performance, compared to 15.4% in Q3FY24 (24.4% in Q2FY25). PAT stood at Rs 55 Cr, up 21% YoY and down 53% QoQ, missing our estimates by 8%
https://vid.investmentguruindia.com/report/2025/2025-Graph/Dhanuka Agritech Ltd_02.jpg
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