Emkay Global Financial's report on Dhanuka Agritech
Our recent interaction with DAGRI management affirms our positive view on the stock. Management is confident of outperforming industry growth in Q3 and FY22 despite seeing some deceleration in Nov-Dec’20, partly due to the base effect (25% revenue growth yoy in Q3FY20). We remain constructive on DAGRI in view of: 1) four new product launches in H1FY21, with two more slated for launch in H2FY21; 2) above-industry revenue growth - channel checks indicate 5% revenue growth for DAGRI in Q3FY21 vs. 3-4% for industry; 3) solid cash generation; 4) robust RoE (24-25% over FY21-23E); and 5) attractive dividend yield (3.9%/4.3% for FY22/23E). Our estimates do not incorporate any demand upside from Agricultural marketing reforms (link) in the medium-to-long term. We raise our FY21/22/23 profit estimates by 9%/10%/14%. We upgrade EPS estimates by 12%/13%/16% due to the share buyback in FY21. We also increase payout ratios to 70% for FY22/23E from 45% earlier.
We upgrade our earnings estimates for DAGRI and retain Buy as we expect the company to continue to outperform the industry and generate robust cash flow. Accordingly, we raise the TP by 25% to Rs890 (Mar’22), based on 19x FY23E EPS, from Rs715 (Jun’21).
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