Softer input cost, good start to kharif season boost Dhanuka Agritech prospects
Jun. 12, 2020
> Management is confident of maintaining double digit revenue growth this fiscal
> With the monsoon making a timely onset and IMD forecasting good rains, farmers' sentiment has been upbeat
Shares of Dhanuka Agritech Ltd were up 2.8% in Thursday's trade after the company reported strong performance for the March quarter and guided for double digit revenue growth for the current fiscal.
Revenue in the quarter ended March (Q4 FY20) grew 18%, helped by a good rabi harvest and and product offtake, while sales volumes grew an impressive 19%. Thanks to a favourable product mix, profit margins improved. Consequently operating earnings grew at a faster pace of 38.6% from the year ago quarter.
In an earnings conference call with analysts, the company's management expressed confidence of maintaining double digit revenue growth this fiscal. With the monsoon making a timely onset and the weather office forecasting good rains, farmers' sentiment has been upbeat.
"With this year’s favourable monsoon forecast coupled with a slew of initiatives announced by the government we are hopeful of much positive performance in the fiscal year 2020-21," Mahendra K Dhanuka, managing director, Dhanuka Agritech, said in a statement.
The lockdown had curbed Dhanuka Agritech’s operations in the initial days, delaying dispatches of certain products to retailers in March. With the government subsequently easing restrictions, the company is confident of recouping those revenues in the Q1 FY21 (April-June).
More importantly, the company has started the kharif season with a strong product pipeline. It launched five new products last fiscal and two so far in the current quarter. According to analysts, the company plans to launch two more products in the rest of the fiscal.
"We believe that Dhanuka Agritech has built portfolio of innovative products over FY14-19, which are yet to scale up and an exciting pipeline over medium term," brokerage Antique Stock Broking Ltd said in a note.
The strong product pipeline, positive demand outlook and soft raw material costs have been driving earnings expectations.
"As management is confident about double-digit revenue growth in FY21, we estimate Dhanuka Agritech’s various cost measures and gross margin improvement to boost Ebitda margin 100 basis points to 16.5% in FY21. With improved visibility amid covid-19 concerns, we revise up FY21/22E earnings per share (EPS) 12%/11%," analysts at Edelweiss Securities Ltd said in a note.
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