Hold Dhanuka Agritech Ltd For Target Rs.1,800 by Axis Securities Ltd
Est. Vs. Actual for Q1FY26: Revenue - MISS; EBITDA - MISS; PAT - MISS
Change in Estimates post Q1FY26
FY26E/FY27E: Revenue: 0%/0%; EBITDA: -5%/0% ; PAT: -5%/0%
Recommendation Rationale
Modest Start to FY26; Signs of Recovery in Q2: Dhanuka commenced FY26 on a cautious note, posting a 7% YoY revenue growth in Q1, driven by 5% growth in volumes and a 7% improvement in realisations. The delayed and uneven onset of the southwest monsoon impacted the timely sowing of kharif crops, leading to softer demand for agri-inputs, particularly herbicides. Additionally, farmer sentiment remained conservative due to rainfall uncertainties and lower price realisations from the previous harvest. Channel inventories also remained elevated in select regions, impacting primary sales. However, the return of favourable rainfall conditions towards the end of June has improved agricultural prospects, setting the stage for a meaningful recovery in Q2.
New Product Launches Gaining Traction: The company introduced a new 9(3) product—Dinkar, a herbicide for paddy—which has received a positive response, particularly in southern markets. Dhanuka also remains on track to roll out additional products from its Dahej facility in H2FY26, including Kinzan, a Japanese fungicide (licensed from Nissan Chemicals) targeted at grapes and potatoes. Furthermore, it plans to launch Melody Duo—a product acquired from Bayer CropScience—along with at least two more new products in FY26, which should support growth momentum.
Sector Outlook: Cautiously Optimistic
Company Outlook & Guidance: The company maintained its guidance of double-digit revenue growth for FY26, driven by contributions from recently acquired fungicides, upcoming product launches, and a favourable monsoon outlook. However, management has reiterated that rising raw material costs—after a favourable trend last year—may lead to a 100 bps contraction in gross margins, resulting in a similar 100 bps decline in EBITDA margins for the year.
Current Valuation: 18x FY27E (Unchanged)
Current TP: Rs 1,800/share (Unchanged)
Recommendation: We downgrade our rating from BUY to HOLD on the stock as the current valuations provide limited room for further appreciation.
Financial Performance: The company reported revenue of Rs 528 Cr, up 7% YoY and 20% QoQ, missing our estimate of Rs 553 Cr. EBITDA came in at Rs 83 Cr, up 16% YoY but down 24% QoQ, missing our estimate of Rs 91 Cr. The company achieved EBITDA margins of 15.7%, elevated YoY due to better operating performance, compared to 14.5% in Q1FY25 and 24.8% in Q4FY25. PAT stood at Rs 56 Cr, up 14% YoY but down 26% QoQ, missing our estimates by 11%.
Outlook: We anticipate Dhanuka to deliver on its revenue growth guidance, driven by robust domestic demand, a healthy pipeline of new product launches, and its foray into international markets. Moreover, the Dahej facility—currently operating at a negative EBITDA—is expected to contribute meaningfully to both revenue and margin expansion as capacity utilisation ramps up over the next two years.
Valuation & Recommendation: We continue to value the stock at 18x FY27E and downgrade
our rating from BUY to HOLD with an unchanged TP of Rs 1,800/share, implying an upside of 9% from the CMP
For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home
SEBI Registration number is INZ000161633
