Good numbers:
Finally company turns +ve EBIDT
I think a price based on your edelweiss price will be calculated and LTCG will be applied.,
Eg:say at feb 2022 your Edelweiss at rs 70 , then Nuvama price will be rs 1900 during demerger
Hi Everyone. Requesting your input on analysis conducted for DHANUKA
Dhanuka Agritech Ltd
A company operating in Insecticides, Fungicides and Herbicides sector. These sectors are cyclical sectors but the company due to its asset light model, strategic partnership with global technology leader and product innovation has demonstrated continuous EPS growth. The company is expected to grow by 2.4 times in upcoming 3 year with 34% CAGR
Date of report: | 03-05-2024 | Competitor PE | 34.2 | Sector | Agriculture |
---|---|---|---|---|---|
CMP: | 1373 | Current PE | 25.4 | No of Years | 39 |
Market Cap: | 6258 Cr | Highest PE | 37.8 | Key Products | Pesticides |
ROCE / ROE | 27% / 21.3% | Lowest PE | 8.1 | Key Competitor | PI Industries |
Business Model and Analysis
Overview:
Domestic Player in Pesticide sector where major revenue comes from Herbicides and Insecticides. Southern and Western region contributes to 67% of revenue. The company has partnership with global innovators which helps to release new products. More than 50% of revenue comes from specialised formula sale which makes it non vulnerable to cyclical changes. Dhanuka has solutions for all major crops grown in the country including cotton, paddy, wheat, sugarcane, pulses, fruits & vegetables, plantation crops and others.
Industry Growth:
Industry for pesticide is expected to grow around 6.6% CAGR till 2028. Next year the forecast for rainfall in southwest zone is above normal which is a high sale signal for the company. Indian agriculture industry is poised to grow at 4.5% CAGR till 2028. Indian agriculture industry is shifting towards scientific and modern farming and company tie ups with global innovators help to launch technology advance product in Indian Market.
Capacity Utilisation:
The company has 3 plants in northern region namely in Rajasthan, Gujrat and J&K. Company has setup a new plant in Dahej (Rajasthan). This year the new plant has generated negative returns due to manufacturing of low margin chemicals. The company has extended tie ups to introduce high margin product and produce the same in new plant.
Opportunities:
The biggest opportunity exist in export market where company does not have any presence. The company is planning to set up new plants to act as contract manufacturer and tap export market. The world agrochemical market is expected to grow at 4%CAGR and this will act in addition to current topline. Around US$6Mn worth formula will go off patent by 2030 and this will help company to foray into this products. The companying is venturing into biological products using natural molecular formula by setting up JV with biotech Kimitech. The company has also launched its product range with name of BiologiQ and entered agri biological segment. This segment helps in enhancing crop and soil health
Risk:
The company has biggest threat is from rainfall as Indian agriculture is rain dependant industry. Further volatility in raw material prices poses margin risk. The company success is dependant on strong tieups with global innovators. Changes in this will affect sales growth potential.
Future Expansion:
Competion:
The biggest competitor for Dhanuka is PI Industries. PI Industries is a company which in agrochemical sector as well as pharma. PI industries derives 77% of its revenue from exports. Being into export market, PI industries has a OPM of 26% wheras Dhanuka operates at around 18%. PI Industries sales declined YoY in domestic market wheras Dhanuka was able to increase its revenue
Management:
The company is a home run company where Executive Directors are withdrawing salary of around 9% of Net Profit. The management is forward looking and invests in upcoming new technologies and thus has been able to increase EPS YoY. The company has not entered into any material RPT. Promoters hold 70% of share capital and no share is pledged.
Institutional Investor:
Institutinal investor are holding a steady 20% share in the company with DSP (~9%), LIC (~3%), HDFC (~3%) holding
Historical Data and Financials
Profit N Loss Account:
Balance Sheet:
Cash Flow:
Valuation:
Particular | Current | 52W High | 52W Low | Historical High | Historical Low | Industry Average |
---|---|---|---|---|---|---|
Price | 1369 | 1369 | 641 | 1405 | 17.6 | |
PE Ratio | 25.4 | 25.4 | 13.4 | 37.8 | 8.1 | 35.96 |
EPS | 53.8 | 53.8 | 47.1 | 53.8 | 11.42 | 8.05 |
Price/Book | 5.3 | 5.4 | 3 | 10.1 | 2 | 2.8 |
EV/EBITDA | 17.4 | 17.8 | 9.6 | 27.5 | 6.3 | 17.97 |
ROCE | 27% | 36% | 30% | 36% | 27% | 16.3% |
Future Growth:
Amt (INR Cr) | 20/21 | 21/22 | 22/23 | 23/24E | 24/25E | 25/26 E | 26/27 E |
---|---|---|---|---|---|---|---|
Sales | 1,387 | 1,478 | 1,700 | 1836 | 2038 | 2344 | 2695 |
GP | 269 | 264 | 279 | 330 | 377 | 445 | 512 |
Net Profit | 211 | 209 | 234 | 278 | 317 | 374 | 430 |
EPS | 45 | 45 | 51 | 61 | 70 | 82 | 95 |
PE | 16 | 17 | 13 | 22 | 34 | 34 | 34 |
Price | 720 | 765 | 663 | 1342 | 2380 | 2811 | 3233 |
Sales Growth :
Gross Profit:
Gross Profit has been increased by 0.5% yoy till FY 25/26 as Dahej Plant which is currently making EBITDA loss is projected to breakeven by FY25/26
Net Profit:
Conversion rate of 84% from gross profit to net profit is maintained as per historical trend
PE Calculation:
PE of competitor PI Industries is used for calculation of market price estimate
Disc: Not Invested
Agree with this view. This should be seen as positive. This stock is not having many institutional investors. Of late, there is a lot of attention on the recycling industry and big investors have started tracking the sector. I expect many institutional investors enter into the stock in the coming months.
Disc: Plan to invest in a few days.
Anand Rathi Wealth Ltd is a prominent player in the financial services sector, boasting a rich legacy spanning over two decades. Founded on principles of integrity and innovation, the company has established itself as a trusted name in wealth management and investment banking.
With over 20 years of experience , Anand Rathi Wealth Ltd has earned a reputation for reliability. The company offers a comprehensive suite of financial services, including wealth management, investment banking, and advisory services.
They are a leading non-bank wealth solutions firm in India, being ranked amongst the top three non-bank mutual fund distributors in the country. The company offers a wide product portfolio of wealth solutions, financial product distribution, and technology solutions to its clients.
Private Wealth Segment
This is the main vertical of the business. In this segment, the company caters to the HNI and UHNI (5 to 50 Crs).
As of FY24 this Private wealth vertical
**As of FY24, 60% of their clients have been associated with them for over 3 years , representing 79% of total PW AUM, which shows ARWL’s strength in vintage of both clients and their AUM.
Digital Wealth Segment
This segment is a fin-tech extension of their proposition , to address the large mass affluent segment of the market with wealth solutions delivered through a ‘phygital channel’.
Customer Segment : Mass Affluent having existing financial assets: Rs. 10 lakhs – Rs. 5 crores
They have a unique approach to wealth solutions -
**As of FY24, It has an AUM of 1545 Crs and 4862 clients.
Omni Financial Advisor
This is the company’s strategic expansion for capturing the wealth management environment, which leverages technology to cater to the retail segment through a B2B2C model.
They also provide a technology platform to the Mutual Fund Distributors (MFDs) and to their clients. This is their target segment.
Why is this an advantage for OFA segment?
****** As of FY24, this segment comprises 5,994 mutual fund distributors . This segment handles 20.6 lakh clients.
They cater to HNI and Ultra-HNI which have a capital more than 50L-5Cr, 5Cr-50Cr and 50Cr+ segments these are people who need professional money management and don’t want the hassle to individually invest or give their wealth to an individual to manage.
Here is where Anand Rathi comes into the picture they appoint Relationship managers who are well qualified CA, MBA, Financial Planners etc. which HNI’s love as they get personal attention and those managers work specially for them.
HNIs and UHNIs don’t mind shelling out 3-5% Portfolio management fees as they are ultra rich as well as its hassle free for them due to professionals managing their portfolio.
This is a huge blow on Smallcase/Mutual funds managers where people invest on the basis of low expense ratio etc.
It’s a task for MF companies to keep it competitive to gain more traction. Hence Anand Rathi has an upper hand.
Apcotex concall notes from the Audio Recording (Q4FY24):
“Visual Effects services undertaken in India for Foreign Productions can claim upto 30% of the Qualifying Expenses (75% of Contract Value) plus an additional bonus of 5% for Significant Indian Content subject to a maximum of INR 300 Million.”
Has anyone analyzed the benefit from these govt rebates and whether Phantom would be eligible for it. Doing just a back of the envelope calculations for FY24, Phantom Mgm’t has guided for a 140 Cr. Sales and assuming they are guiding for a mix of 55-60% from international, that would lead to around 70-80 Cr International revenue they might have 35-40 Cr costs relating to international projects, which may be eligible for rebate under this scheme. Even if we assume instead of max 30 Cr. available they are able to get a 20 Cr. kind of cash rebate of this amount, their Pat from international mix may go up to 40-45 Cr. Add to it domestic mix PAT of say 20-25% margin of 15-17.5 Cr, they might easily end up with a PAT of 55 - 62.5 and PAT Margin of around 40%. What am I missing here.
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