Buy Dhanuka Agritech; target of Rs 953: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Dhanuka Agritech

DAGRI reported better than expected EBITDA growth of 46% to Rs 502 mn (PLe Rs 405 mn) driven by better sales mix and sharp growth in fungicides segment. Q4 is expected to be another good quarter driven by demand, due to deferment of season from Q3 and low base effect due to lockdown in Q4. Its robust pipeline of 10 new products will drive growth for the next 2 years. DAGRI plans to invest Rs 2 bn to set up a technical manufacturing plant at Dahej for backward integration and venturing into exports. The announcement highlights the intent and project specification will be finalised in the next 6 months. The plant is likely to be commercialised after 2.5-3 years. We have not factored any impact on the financials as budget of the project is yet to be finalised. Moderation in dividend payout is likely for next 2 years, as DAGRI would fund capex with internal accruals. Return ratios may also be impacted post commencement of investment in the technical plant. We believe that this is the right time for investment, as it will secure raw material supply and open up export markets at a time when MNCs are diversifying away from China.

Outlook

We upgrade DAGRI to BUY (from Accumulate) with revised target price of Rs 953 (Previous 868) based on 18x FY23 EPS of Rs 53 as we roll forward to FY23 estimates. We have also increased our PAT estimates for FY21-23 by 4-5%.

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