Emkay Global Financial's report on Dhanuka Agritech
DAGRI delivered a healthy performance in Q4FY22, beating consensus EBITDA/PAT estimates by 11%/20%. Revenues grew by 16% YoY, beating street estimates by 4%. Operating profit, on the other hand, grew by only 1% due to RM cost inflation and a 33% rise in other expenses YoY. Top-line growth of 16% was driven by 11% volume growth and the rest through pricing gains. Despite flat EBITDA, Q4 PAT grew by 12% YoY, aided by higher other income (due to insurance claim) and a lower effective tax rate. DAGRI’s topline performance was driven by encouraging double-digit growth across all the regions, except South, which fell ~3% YoY due to cyclones and black thrips attacks. Herbicides registered a robust ~39% YoY growth, followed by Fungicides/Others/Insecticides, up ~22%/~16%/4% YoY. Management has guided for double-digit topline growth in FY23, aided by expectations of a normal monsoon in H1FY23 and a buoyant commodity price environment, which will encourage farmers to use high-quantity crop protection products. Management expects EBITDA margins to remain at the same level as FY22 (17.8%).
Outlook
We maintain Buy with an unchanged Mar’23E TP of Rs1,000, implying FY24E P/E of 19x. Key assumptions: 1) 10.75% cost of equity, 2) 10% PAT CAGR in FY25-35E, and 3) terminal growth rate of 5% starting from FY35E.
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