Accumulate Dhanuka Agritech; tgt of Rs 105: Dolat Capital

“DAL’s topline for Q1FY13 grew 14% YoY to Rs 1.08bn, driven by 10% volume growth. Herbicides segment reported a robust growth of 24% YoY. Insecticides, herbicides, fungicides and PGRs contributed 36%, 54%, 6% and 6% to the topline respectively. Top 10 products contributed 50% to the topline. Products launched in last 5 years contribute 15% of the topline. The company launched two co-marketing products (Fluid and Fuzi Super) during the quarter and plans to launch additional two before March 2013. One of them is a tie-up based fungicide - ‘Lustre’ (with DuPont) which will initially be marketed for paddy and DAL will be exclusively marketing this product. The other is a PGR called Dhanzyme Gold under a co-marketing arrangement.”

“EBITDA margins declined 210bps YoY to 14.6% mainly on account of 200bps increase in raw material costs. This was primarily due to higher cost of imports which constitutes 27-30% of raw material cost. Tax rate stood lower at 21.3% compared to 24.1% in Q1FY12. Consequently, PAT grew 11.2% YoY to Rs 112mn. We have lowered our FY14E earnings by 3.9% to reflect lower operating margins on account higher raw material cost (impact of Rupee depreciation) and provided for lower depreciation on the back of deferred capex. The management has guided for a ‘moderate growth’ in revenue for FY13E, lower than earlier 20%, due to the lower-than-expected rainfall.”

“We anticipate 16% CAGR in revenue over FY12-14E, mainly driven by new product launches. Delayed monsoons and low pest incidence could negatively impact volume growth. DAL enjoys high return ratios coupled with quick working capital cycles owing to its asset-light model and we observe a positive transformation in its balance sheet. At CMP, the stock trades at 7.0x FY13E and 6.3x FY14E earnings. We recommend Accumulate with a revised target price of Rs 105 (7x FY13E earnings),” says Dolat Capital research report.   

Non-Institutions holding more than 90% in Indian cos

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