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Dhanuka Agritech Q2FY13 results update

Contributed by Nirmal Bang

Dhanuka Agritech reported revenues in line with expectations. The company reported revenue of Rs 139.71 cr which grew by 26.5% yoy. This is led by 23% volume growth and remaining by pricing. EBITDA grew by 25% yoy while EBITDA margins marginally declined to 11.3% v/s 11.5% in Q3FY12. PAT rose by higher rate of 49% yoy on strong operational performance and lower interest expense. Quarterly numbers are not comparable as Q2 being seasonally strong quarter for the company.

9MFY13 sales have grown 14% yoy while PAT grew 19.8% over 9MFY12.

Key Highlights

- Gross margins were down by 3-4% during the quarter because of subdues performance from Targa Super which management expects to normalize in next year (Q4 is a off season quarter)

- Insecticides and Fungicides contribution to sales have increased during the quarter while that of Herbicides has fallen due to poor performance from Targa Super. Insecticides, Herbicides, Fungicides and Others contributed 50.6% (v/s 47.7% in 9MFY12), 26.8% (29.5%), 12.5% (11.7%) and 10.1% (11.1%) respectively to sales in 9MFY13

- North, East West and South zones contributed 19.6% (v/s 18.1% in 9MFY12), 13.9% (13.4%), 29.2% (33.8%)and 32.4% (30.1%) of sales in H1 FY13, with contribution from West zone falling due to drought-like condition in Saurashtra, Gujarat.

- Company has 6-7 products are in pipeline which is novel products. Out of these two products would be launched every year.

Valuation & Recommendation

At CMP the stock trades at 9.3x FY13E and 8.1x FY14E. Dhanuka has reported decent if not good quarter numbers despite poor industry scenario and where other companies have reported poor results. We believe that company is well positioned and can report strong growth as and when industry revives. We have a positive outlook on the stock. Based on 10.0x FY14E EPS of Rs 15.4 target price comes to Rs 154, indicating potential upside of 24% from current levels. We maintain our BUY rating on the stock.