Buy Dhanuka Agritech; target of Rs 1900: Anand Rathi

Anand Rathi's research report on Dhanuka Agritech

Broadly in line with consensus and our estimates, Dhanuka Agritech’s Q1 revenue/EBITDA/PAT grew 7%/16%/14% y/y. Key highlights: a) Subdued revenue growth was largely due to lower offtake in cotton and soybean portfolio in the present kharif season on lower acreage in key regions. b) The gross margin expanded 130bps y/y to 36% led by superior product mix, c) lower opex (down 10bps y/y); incl. added reimbursement (Rs90m) in royalty from Bayer AG (for the two new products), resulted into expanding the EBITDA margin 120bps y/y to 15.7%, d) Rs30m EBITDA burn at Dahej in Q1. e) The Q1 innovationturnover index was 13.4% (19% in FY25), f) The company launched one 9(3) molecule, Dinkar (a paddy herbicide) in Q1, with promising feedback till now. g) Guided to higher double-digit revenue growth with a 100bp y/y drop in FY26e EBITDA margins.

Outlook

Expecting a normal monsoon, management guided to high double-digit revenue growth, with absolute EBITDA likely to be retained at the FY25 range. Further, it expects EBITDAM to decline 100bps y/y. It intends to launch eight 9(3) products. That said, we trim our FY26e/27e by 5% each. We introduce FY28e and roll forward valuations to H1 FY28. We maintain a Buy, with an unchanged TP of Rs1,900, 21x H1 FY28e EPS.