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Dhanuka Agritech: Volumes to pick up but margin pressure to sustain

The stock valuation offers little margin of safety for investors. Earnings drivers such as margin improvement as well as the benefits of backward integration with the commissioning of the Dahej plant would be available only in the next fiscal

August 03, 2022 / 04:45 PM IST
Dhanuka Agritech: Volumes to pick up but margin pressure to sustain

PRO Only Highlights
Quarterly performance largely backed by improved realisations
Medium-term triggers China plus and protectionist measures for tyre industry
Valuations not inexpensive; but improved medium-term outlook

Dhanuka Agritech (DAL; CMP: Rs 698; Market cap: Rs 3,250 crore) has posted lower-than-expected operating performance in Q1FY23, as higher raw material costs and a rise in other expenses led to a steep drop in margins. While the monsoon pick-up and the increase in the kharif-sowing area would lead to a healthy volume growth from Q2FY23, margin pressure is expected to sustain. Liquidation of high-cost inventory as well as increase in travelling expenses due to the resumption of field trials and...

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