Buy Dhanuka Agritech; target of Rs 910: Emkay Global Financial

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Emkay Global Financial's research report on Dhanuka Agritech

Dhanuka Agritech (DAGRI) beat our EBITDA/PAT estimates by 21%/27% due to better-than-expected cost control and 200bps yoy improvement in gross margins. Revenue increased 8.9% yoy to Rs2.96bn, marginally above our estimate (Rs2.90bn). Management guided that some of the cost savings in 9MFY21 were related to travelling and marketing restrictions due to Covid-19 and would return in FY22E. We have factored in a 104bps decline in EBITDA margins to more normalized 17.6% (mgmt. guidance of 16-17%). DAGRI also announced that it will foray into technical manufacturing at its Dahej site. This would help DAGRI reduce import of certain technical and also help build the export segment in future. We have not factored in the new capex in our estimates as we await more details on the potential impact on margins and additional revenue. We raise our FY21E EBITDA/PAT by 11%/14% to factor in Q3 beat. We also increase our FY22/23E EBITDA/PAT by 7%/3% to incorporate higher revenue momentum and EBITDA margin. Maintain Buy with a revised TP of Rs910/sh (Rs890 earlier) based on 19x FY23E EPS.

Outlook

We maintain Buy on DAGRI with a revised TP of Rs910/sh based on 19x FY23E EPS.

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