Dhanuka Agritech Ltd. Elite

Dhanuka Agritech manufactures a wide range of agro-chemicals like herbicides, insecticides, fungicides, plant growth regulators in various forms liquid, dust, powder and granules.

The company has a strong presence in southern and western regions which contributes 64% to its revenues.

Key Highlights:

  • Dhanuka has shown stellar performance in 1HFY21 with revenue/EBITDA/PAT growth of 31%/65%/63% YoY. Revenue of the company increased by 11.36% from 1006 Cr. in FY19 to 1120 Cr. in FY20.
  • The company has registered 9% YoY revenue growth in Q3-FY21 led by growth in  herbicide and fungicide categories. EBITDA margins improved from 12.65% in Q3FY20 to 16.98% in Q3FY21 led by strong operating leverage.
  • In Q3FY21 the Board of directors of the company has approved setting up a plant for Technical Manufacturing of Pesticides. Setting up of this unit will involve an investment outlay of approx. Rs. 200 Crores and will reduce the dependency of the Company on other players for procuring the raw molecules. It will help the Company to expand its market Share
  • Dhanuka Agritech plans to launch 10 new molecules over next 2 years.The company has launched 6 new products so far in FY21. Out of this, 2 products Kirari and Nissodium are launched in Fungicide category and two products Dabooch and Dozo Maxx in Herbicide Category. The company envisaged to launch 4-5 products per annum going forward.
  • Dhanuka has three state of art manufacturing facilities in Rajasthan, Gujarat and J&K with well-equipped Quality Testing Facilities. Dhanuka is setting up its 4th formulation unit in GIDC, Dahej with capex of INR 0.5-0.6 bn and it is expected to come on stream over 12-18 months. It could have asset turnover of 5-6x at optimal utilisation. Moreover, Dhanuka is planning to set up API manufacturing unit in Dahej. However, it is at early stage of consideration and is expected to be finalised in the next 3-4months.

Outlook:

Dhanuka Agritech is a leading player in India in the Agrochemical sector in India. The agrochemical sector’s revenue is likely to grow 12-14 per cent in FY21. Herbicides are emerging as the fastest-growing segment in agrochemical hence company’s Focus is on expanding the share of fast growing ‘Herbicides’ segment in the medium term. Dhanuka expects to grow 10%+ YoY in 2HFY21 and confident to achieve revenue growth guidance of 22% YoY in FY21. Regular product launches are expected to help the company sustain the robust growth trajectory. Having launched five products in the 9MFY21, the company is likely to offer one more soon. On performance front we expect company to report EPS of Rs.51.4 for FY22E, at CMP of Rs.753 PE works out to be 14.6x. Hence, investors can buy the stock at CMP of Rs.753 for target price of Rs.950. Time frame should be 9-12months.

Stock Details

Market Cap. (Cr.) 3428.86
Face Value 2.00
Equity (Cr.) 9.32
52 Wk. high/low 935.00/261.00
BSE Code 500227
NSE Code DHANUKA
Book Value (Rs) 177.61
Industry Agrochemicals
P/E 17.7

 

Share Holding Pattern %

Promoter

75.18
FIIs 1.86
Institutions 11.98
Non Promoter Corp. 0.81
Public & Others

Government

10.17

0.00

Total 100.00

 

Price Chart

Dhanuka Agritech Ltd.Price Charts

Product Range:

Insecticide  – Insecticide are the chemicals which controls insects. Similarly, the chemicals used to control mites (Acarina) are called as Acaricides or Miticides. Key Products in this category are EM-1, Cover liquid, Caldan 4G, Largo, Caldan SP, Cover granules.

Herbicide – Weed is a plant considered undesirable, unattractive or troublesome especially growing where it is not wanted. Weed management through any chemical that kills it or inhibit its growth is known as Herbicide. Key Products in this category are Targa Super, Weedmar Super

Pesticide – Several organisms like Fungi, Bacteria, Virus, Phytoplasma, Protozoa and Nematodes cause deformities in the plants, which are referred as diseases. The chemical components or bio agents used to kill or inhibit the fungi or fungal spores are termed as Fungicides.

Plant Growth Regulators  – In order to have optimum plant growth and production, it is essential that all the essential major nutrients and micro nutrients are available to the plants in required quantity. The availability of plant nutirents depends on the type of soil and also biotic and abiotic stresses. Plant Growth Regulator helps in providing different enzymes to the plant, along with growth and yield.

Dhanuka Product Segement

Company’s Subsidiary

 Dhanuka Agri-Solutions Pvt. Limited

 At present your Company has only one Wholly owned Subsidiary namely, M/s. Dhanuka Agri Solutions Private Limited, incorporated in Bangladesh. Operations of this Wholly owned Subsidiary have not yet started.

Industry Overview

The Indian market largely comprises of Insecticides which consists of 60% of the overall demand followed by Fungicides at 18% and Herbicides at 16% and other categories comprise the remaining 6%, as per Ministry of Chemical and Petrochemical Statistics. Herbicides as a segment has grown steadily in recent years with changing weather conditions (warmer), rising labour costs and increasing cultivation of rice, soybean and wheat crops. Fungicide has grown relatively slower with increasing cropping areas of rice, fruits and vegetables.

Bio Pesticides has not seen significant growth yet, but its usage is likely to accelerate over the longer run as environmental awareness grows and farmers cut down on usage of chemical based Pesticides. Also, potential incentives provided by government to encourage the use of Bio Pesticides will decide the segment’s long-term growth trajectory

India agrochemical market to grow fast with an expected CAGR 8 %. Increasing population, decreasing per capita availability of arable land & focus on increasing agricultural yield are major factors driving India’s agrochemical market. Growing demand for food grain’s, need for increased land productivity, the government is encouraging the use of the decontrolled fertilizers, new policies are launched to encourage maximum production of fertilizers are major growth factors of India agrochemical market.

Opportunities

India’s per hectare consumption of pesticides is one of the lowest across the globe and stands at 0.6 kg/ha as against 5-7 kg/ha in the UK and 13 kg/ha in China. Farming community at large has limited understanding of the benefits of pesticides which results in lower consumption in India. There is an opportunity for the government and private players to increase awareness amongst the farming community about the economic gains that arise out of sustained use of pesticides.

Typically, pests and diseases take away close to 15-25% of food production. It is proven that usage of effective agrochemicals can increase productivity for farmers by 25-50%, hence diminishing losses caused due to pest attacks.

Threats

NGOs across the Countries revolt against the use of Agrochemical products citing harmful impact on the environment. Manufactures along with industry representatives time and again provide constructive responses in the scenario of government action. The Committee formed based on Anupam Verma recommendation began its review on 27 pesticides in November 2019 and submitted its findings after consultation with pesticide associations and other stakeholders in May 2020. The draft order proposed bans on 27 pesticides commonly used by farmers. If the ban is not overturned, farmers would be deprived of several effective and affordable products.

Financial Performance

Particulars (in Rs. Cr.) 202012 202003 201912 YoY (%) QoQ (%
Revenue from Operations 295.67 442.39 271.48 9% -33%
Other Income 9.38 8.22 7.84 20% 14%
Total Income 305.04 450.62 279.33 9% -32%
Raw Material Consumed 124.91 263.48 134.09 -7% -53%
Stock Adjustment 18.55 -44.11 5.23 255% 142%
Purchase of Finished Goods 42.42 54.92 36.76 15% -23%
Employee Expenses 26.71 33.91 26.41 1% -21%
Other Expenses 32.87 45.22 34.65 -5% -27%
Total Expenditure 245.45 353.41 237.14 4% -31%
PBIDT 59.59 97.21 42.18 41% -39%
Interest 1.01 0.28 0.36 181% 261%
PBDT 58.58 96.93 41.82 40% -40%
Depreciation 4.12 3.22 4.2 -2% 28%
PBT 54.46 93.71 37.62 45% -42%
Tax 12.95 23.4 9.6 35% -45%
Deferred Tax 1.46 0.22 0.36 306% 564%
Profit After Tax 40.04 70.09 27.67 45% -43%
EPS (in Rs. Cr.) 8.54 14.73 5.82 47% -42%
PBIDTM (%) 20.15 21.97 15.54 461 bps -182 bps
PATM (%) 13.54 15.84 10.19 335 bps -230 bps

 

Cash Flow Statement

Particulars  in Rs. Cr) H1FY21 FY20 FY19 FY18
Cash and Cash Equivalents at Beginning of the year 25.23 0.48 10.61 3.53
Net Cash from Operating Activities 130.38 162.08 13.3 137.7
Net Cash Used in Investing Activities -147.45 -44.32 63.18 -111.02
Net Cash Used in Financing Activities -5 -93.01 -86.61 -19.6
Net Inc/(Dec) in Cash and Cash Equivalent -22.07 24.75 -10.13 7.08
Cash and Cash Equivalents at End of the year 3.15 25.23 0.48 10.61

 

Extracts:

Revenue from operations  of the company grew 9% YoY in Q3FY21 While PAT grew by 45% YoY.

Profit before tax is up 45% YoY at Rs. 54.46 Crore.

Operating Profit margin of the company  improved 461 bps YoY to 20.15% in Q3FY21.

Profit after Tax margin improved  335 bps to 13.54% in Q3FY21.

Net cash flow from operations from increased to Rs. 162 Crore in FY20  from Rs.137.7 crore in FY18

ROE and ROCE stands at 22% and 28% in Q3FY21 respectively.

Key Financial Ratios
Particulars H1FY21 FY20 FY19 FY18
Debt to Equity Ratio 0.00 0.01 0.03 0.01
Current Ratio 2.54 3.37 3.64 3.84
Return on Equity (%) 14.7 19.97 17.52 19.92
Return on Capital Employed (%) 20.3 24.78 23.03 24.97
Interest Coverage Ratio 305 116.95 173.42 192.22
Operating Profit Margin (%) 20.4 17.3 16.3 18.6
Net Profit Margin (%) 14.6 12.6 11.19 12.9

 

Extracts:

Debt to Equity ratio of the company reduced to 0 in H1FY21

Current Ratio  of the company reduced 2.54 in H1FY21 from 3.84 in FY18

Operating Profit Margin of the copmany increased to 20.4% from 18.6% in FY18

Company has good track record of RoE and RoCE

Balance Sheet

Particulars (in Rs. Cr.) 202003 201903 201803
SOURCES  OF  FUNDS :
Share Capital 9.52 9.52 9.82
Reserves Total 698.07 632.7 623.54
Total Shareholders Funds 707.59 642.22 633.36
Secured Loans 7.98 22.21 4.72
Total Debt 7.98 22.21 4.72
Other Liabilities 21.69 17.74 25.38
Total Liabilities 737.26 682.17 663.46
APPLICATION OF FUNDS :
Gross Block 170.86 155.38 159.94
Less: Accumulated Depreciation 53.41 38.49 29.01
Net Block 117.45 116.89 130.93
Capital Work in Progress 3.67 0.99 0.08
Investments 158.87 120.27 181.99
Current Assets, Loans & Advances
Inventories 249.86 206.83 204.99
Sundry Debtors 242.41 218.68 207.97
Cash and Bank 26.29 1.35 11.44
Loans and Advances 88.09 137 60.33
Total Current Assets 606.65 563.86 484.72
Less : Current Liabilities and Provisions
Current Liabilities 189.34 140.67 145.63
Provisions 0.26 0.28 0.25
Total Current Liabilities 189.6 140.95 145.88
Net Current Assets 417.05 422.91 338.85
Deferred Tax Assets 2.53 1.86 0.54
Deferred Tax Liability 7.87 14.07 13.88
Net Deferred Tax -5.34 -12.21 -13.34
Other Assets 45.56 33.32 24.94
Total Assets 737.26 682.17 663.45

 

DISCLOSURE IN PURSUANCE OF SECTION 19 OF SEBI (RA) REGULATION 2014

Elite Wealth Limited does/does not do business with companies covered in its research reports. Investors should be aware that the Elite Wealth Advisors Limited may/may not have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as read more


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