Key highlights of the 3QFY24 Result
Performance is weak but better than industry growth
The Company during quarter reported muted 2.5% YoY growth in net sales to Rs 403 cr but profit dropped 1.5% YoY to Rs 45.4 cr. The industry continued to remain sluggish but Dhanuka was able to weather out the situation through rich product mix. The company has registered 9% volume growth during the quarter but price erosion led to flat sales number for 3QFY24. The margin on YoY basis improved 220 bps to 15.4% on account of softening raw material prices.
Invested Rs 10 cr in agritech startup ‘Kisankonnect’; Entering into biological products:
The company, in addition to its strategic investment in drone technology, has invested Rs 10 cr in agritech startup ‘Kisankonnect Safe Food Pvt. Ltd. Kisankonnect delivers farm produce directly to customers through its application and farm stores. It also entered into a non-binding, LoI, with Spain-based Kimitec to explore development and commercialization of biological products using natural molecules & derived from natural sources. The bio-products market size is Rs 5,000 cr and has been currently growing at 15% CAGR.
Expect double digit FY25E growth and high single digit growth for FY24E:
With normal monsoon forecast, management expect a double-digit growth for FY25E and higher single digit growth for FY24E. For 4QFY24, management expect overall EBITDA margin to be improve by 200 bps. Going ahead, new launches especially in Herbicides and Fungicides will help to boost the specialty volume growth. Commercial production of Dahej plant has commenced and management expects it to turn EBITDA positive once utilization picks up.
Valuation still attractive; Maintain buy rating- Target Rs 1,244.0/-
At the current price, the company is trading at 17.9x/14.6x of its FY24E/FY25E earnings respectively. We maintained our buy rating on the stock with upgraded price target of Rs 1,244.0/- thus providing an upside potential of 20.2%.