Accumulate Dhanuka Agritech; target of Rs 868: Prabhudas Lilladher

Prabhudas Lilladher's research report on Dhanuka Agritech:

We have marginally tweaked our PAT estimates for FY21-23 by 0- 3%. Dhanuka Agritech reported inline set of results. Excess rains in AugustSeptember impacting sprays, lower pest attacks and crop damage in various states limited topline growth to 10% YoY (PLe- 9%). EBITDA margin expansion of ~351 bps (ex-one offs) is commendable. Rabi season is expected to be good courtesy on-going robust agriculture activity, remunerative crop prices and adequate water availability. 

The company plans to set up a new formulation facility at Dahej while decision of venturing into technical manufacturing will be finalised soon. Compared to last 6 years, FY21 is expected to be the best year for domestic agchem industry and an India focused company like Dhanuka Agritech is expected to be the biggest beneficiary.

Outlook

Upgrade DAGRI to ACCUMULATE from Hold (due to correction in stock price) with revised target price of Rs868 (Previous- Rs857) based on 18x Sep’22 EPS of Rs 48.2.