Prabhudas Lilladher is bullish on Dhanuka Agritech has recommended buy rating on the stock with a target price of Rs 624 in its research report dated February 12, 2019.
Prabhudas Lilladher's research report on Dhanuka Agritech
DAGRI's 2.1% decline in revenue (@ Rs 2.2 bn) was inline with our estimates. The company reported volume decline of ~6.0% as it has been pro-active in taking back higher inventory from the channel. Its inability to liquidate high cost inventory and overall pricing pressure led to gross margin contraction of 670 bps YoY to 36.6%. DAGRI has been among the worst affected by the slowdown in the agrochemical industry. Despite tepid performance we continue to like the stock as going forward the company is expected to reap benefit of planned new launches (~5-6 new products in FY20), traction for their recently introduced products (15 products in FY17 & FY18 cumulatively) and renewed focus on efficient marketing. Its focus on high growth categories of herbicides (32% of sales) and fungicides (15%) augurs well as rising labour cost and Govt's emphasis on increasing the production of horticulture crops are driving superior demand for these segments.
Outlook
Topline and bottomline are expected to grow at a CAGR of 9.0% and 9.3% between FY18-21E. Maintain Buy with a target price of Rs 624 based on 18x FY21 earnings.
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