CRISIL maintains fair value of Rs 109 to Dhanuka Agritech

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CRISIL maintains fair value of Rs 109 to Dhanuka Agritech

CRISIL Research has come out with its report on Dhanuka Agritech. The research firm has maintained the fundamental grade of 4/5 to the company in its February 16, 2012 report.

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CRISIL Research has come out with its report on Dhanuka Agritech . The research firm has maintained the fundamental grade of 4/5 to the company in its February 16, 2012 report.

Dhanuka Agritech Ltd's (Dhanuka's) Q3FY12 results were below CRISIL Research's expectations as both revenue and profitability declined compared to Q3FY11 on account of a lean rabi season. Deficient rains in the key pesticides consuming states, such as Andhra Pradesh, Maharashtra and Karnataka, resulted in lower farm acreages and yields leading to lower demand for pesticides. Also, drop in prices of key crops, such as cotton, dented farmers' sentiments, further adversely impacting pesticides offtake. However, on account of our positive stance on the industry and Dhanuka's established position, we maintain fundamental grade of 4/5.

Q3FY12 result analysis
• Revenues declined by 3.7% y-o-y led by ~6% decline in sales volumes. Fungicides and herbicides segments were most impacted due to unfavourable climatic conditions.

• EBITDA margin declined by 531 bps y-o-y to 11.5% primarily on account of increased raw material costs. As a percentage of sales, raw material costs increased by 754 bps to 52.6% y-o-y as the company was unable to pass through the raw material price increases to farmers.

• The company reported PAT of Rs 78 mn against Rs 124 mn in Q3FY11. Accordingly, EPS was Rs 1.6, lower by 37% y-o-y.

• 9MFY12 revenues grew by 9.3% over 9MFY11 to Rs 3,995 mn, which is modest in comparison to growth rates registered by Dhanuka in the previous years. The company reported an EPS of Rs 7.8 compared to Rs 7.5 in 9MFY11.

Earnings estimates - revised downwards
The management has guided for a revenue growth of ~8-10% in FY12 which we believe is achievable. Consequently, we have lowered our FY12 and FY13 revenue projections. We have also lowered our EPS estimates by 18% and 8% for FY12 and FY13, respectively.

Valuations: Current market price has upside
We continue to use the discounted cash flow method to value Dhanuka. We maintain our fair value at Rs 109 per share. Consequently, the assigned valuation grade is 4/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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