HDFC Securities is bullish on Dhanuka Agritech has recommended buy rating on the stock with a target price of Rs 715 in its research report dated November 14, 2018.
HDFC Securities' research report on Dhanuka Agritech
Dhanuka Agritech (DAGRI) showed a gradual recovery in 2QFY19 after a weak 1QFY19 performance which was marred by higher input costs and inability to pass on RM inflation. Sales/EBITDA/PAT grew by 10.2/0.9/4.2% to Rs 3.8bn/ Rs 756 mn/Rs 550mn respectively. DAGRI had launched 11 new products in FY18 and growth from these products has been significant in 2QFY19. Its top 5 brands contributed 24% to the top line while older brands like Targa-super, Sakura and Sempra gained good traction in key crops like Soyabean, Maize, Paddy and Sugarcane. DAGRI’s sales growth of 10.2% was split between ~6% volume growth and ~4% pricing growth. The management believes that EBITDA margins may not improve hereon (we have cut our EBITDA margins by ~90 bps for FY19 and FY20).
Outlook
We have cut our FY19/20/21 earnings by 3.8/1.0/0.8% to factor in lower EBITDA margins and a lower tax rate. We maintain Buy with a TP of Rs 715/sh (22x Sep’20 EPS).
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