Dhanuka Agritech - GST destocking, slow pick-up in south India dented growth: CRISIL

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26 Aug, 2025 12:21

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CRISIL's research report on Dhanuka Agritech

 
Dhanuka Agritech Ltd’s Q1FY18 results were below our expectations. Revenue increased merely 3.9% y-o-y to Rs. 2,080 mn owing to 1) inventory destocking by dealers in June following GST implementation and 2) poor rainfall in south India (one-third of revenue). These factors impacted revenue growth of other agrochemical players - revenues of Bayer Ltd, Rallis India Ltd, PI Industries (domestic) declined 14%, 5% and 15%, respectively. Dhanuka’s EBITDA margin contracted 246 bps y-o-y to 11.8% bps owing to higher material costs and other expenses. Following lower EBITDA (down 14.1% y-o-y), PAT declined 18.9% y-o-y to Rs. 161 mn. In the coming quarters, we expect 1) settling of GST-led disruption, as the company and dealers start adjusting to the system, 2) pick-up in sowing in south India led by the India Meteorological Department’s (IMD’s) forecast of above-normal rainfall in the southern peninsula, 3) higher sowing of sugarcane and cotton, and 4) steady traction of new products, to boost the company’s sales. We remain positive on the industry’s long-term prospects and maintain our fundamental grade of 4/5.

We maintain our earnings estimates for FY18-19E. Consequently, we maintain the discounted cash flow (DCF)-based fair value of Rs. 821. At the current market price of Rs. 661, our valuation grade is 4/5.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

CRISIL Limited. All Rights Reserved. Published under permission from CRISIL"

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