Reduce Dhanuka Agritech; target of Rs 922: Dolat Capital

Dolat Capital's research report on Dhanuka Agritech

Dhanuka Agritech reported a strong Q1FY21 performance beating our estimates on all fronts. Sales growth of 70.7% YoY to Rs 3.73bn came in due to a strong volume growth of 72.5% YoY (D.Est: Rs 2.67bn). EBITDA and PAT grew by 226.9% and 250.1% YoY to Rs 653mn and Rs 518mn respectively. EBITDA growth was a function of a strong operating leverage, control on other expenses (up marginally by 1.2% YoY to Rs 315mn) and a marginal gross margin expansion of 20bps YoY to 34.3% led to a strong growth in absolute EBITDA. PAT growth was cushioned by a lower tax rate of 25.2% as against 29.0% in 1QFY20 coupled with a growth in other income by 95.4% YoY to Rs 74mn.

Outlook

We are now valuing Dhanuka Agritech at 22.0x FY22E EPS, with a target price of Rs 922/share and revise our rating to accumulate.

Dhanuka Agritech 23072020-dolat