Dhanuka: Healthy revenue growth in Q3FY13; margins contract
CRISIL Research has come out with its report on Dhanuka Agritech (Dhanuka). The research firm has maintained fundamental grade of 4/5, indicating that the fundamentals are superior relative to other listed securities in India.
March 15, 2013 / 18:38 IST
CRISIL Research has come out with its report on Dhanuka Agritech (Dhanuka). The research firm has maintained fundamental grade of 4/5, indicating that the fundamentals are superior relative to other listed securities in India.
Dhanuka's Q3FY13 earnings were below CRISIL Research's expectations while revenues were in line. Unfavourable climatic conditions in some of the big agricultural states as well as high level of inventories with dealers affected demand for pesticides during the quarter. Change in Dhanuka's sales mix in favour of low-margin products resulted in lower-than-expected EBITDA margin. We have lowered FY13 earnings estimate and expect Dhanuka to close the current fiscal with a comparatively modest EPS growth (6.5 percent). While our estimates for FY14 are unchanged, Dhanuka's performance going ahead will depend on a normal monsoon. We maintain our fundamental grade of 4/5, indicating that the fundamentals are superior relative to other listed securities in India.Unfavourable climatic conditions in large agricultural states affected demand
Large agricultural states such as Punjab, Haryana, Gujarat, Uttar Pradesh and central Maharashtra witnessed deficient rainfall during Q3. Some of the southern states were affected by cyclone Neelam, which affected the paddy crop harvest. This led to subdued demand for pesticides. Also, while sowing has been higher for major rabi crops this year (except paddy), high level of inventories with dealers affected fresh sales by manufacturers.Dhanuka registers 26.5 percent revenue growth y-o-y
Dhanuka's Q3FY13 revenues grew by 26.5 percent y-o-y to Rs 1.4 bn, led primarily by growth in sales volumes. We note that the company had reported revenue decline during Q3FY12 on account of drought-like conditions in southern and western states. During the quarter, Dhanuka launched ‘Lustre', a fungicide for application on paddy, chilly, grapes and groundnut; this is in tie-up with DuPont and the product will be exclusively marketed by Dhanuka in India.EBITDA margin lower than expected due to change in product mix
Dhanuka's EBITDA margin of 11.3 percent is lower than the 14-17 percent registered in the previous three quarters. This is on account of change in the sales mix in favour of low-margin products. PAT margin expanded by 127 bps to 8.4 percent due to lower interest cost and effective tax rate. Dhanuka registered an EPS growth of 49 percent y-o-y in Q3FY13.Revising FY13 earnings estimates
We have revised our FY13 EPS estimate downwards by 6.1 percent to Rs 12.1 per share. While revenue estimates have been marginally revised, operating margin has been lowered to reflect Dhanuka's performance in 9MFY13. We continue to use discounted cash flow (DCF) method to value Dhanuka. We have rolled forward the valuation by one year to FY15 and arrived at the revised valuation of Rs 132 per share. At the current market price of Rs 122, the assigned valuation grade is 3/5.To read the full report click on the attachmentDisclaimer: 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.© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"
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