Active Stocks
Fri Sep 29 2023 15:59:14
  1. Tata Steel share price
  2. 129 1.78%
  1. NTPC share price
  2. 245.65 3.3%
  1. Power Grid Corporation Of India share price
  2. 199.85 -0.45%
  1. State Bank Of India share price
  2. 598.7 1.48%
  1. Wipro share price
  2. 406.25 0.11%
Business News/ Market / Mark-to-market/  Dhanuka Agritech bucks domestic agrochemical market downtrend

Dhanuka Agritech bucks domestic agrochemical market downtrend

The growth is driven by specialty molecules (which generate two-thirds of revenue) and new products that Dhanuka Agritech launched in recent years

Sales increased 15% from a year ago.Premium
Sales increased 15% from a year ago.

Shares of agrochemical company Dhanuka Agritech Ltd gained 3.7% on Tuesday after the firm surprised the Street by reporting a strong performance for the December quarter.

Sales increased 15% from a year ago. Three domestic brokerage firms had forecast sales to rise in the range of 10-12%, so the revenue beat is not much. But it should be seen in the context of a weak agrarian economy. For instance, UPL Ltd, a large agrochemical company, reported a 17% drop in India revenue last quarter. Rallis India’s domestic business also suffered due to poor demand.

The outperformance did not stop there. Dhanuka Agritech also delivered superior operating performance. Margins expanded 1.5 percentage points and operating profit or Ebitda (earnings before interest, taxes, depreciation and amortization) jumped 27%. Compared with this, UPL’s operating profit increased just 9%, while Rallis India’s Ebitda slumped 30%.

However, the three companies are strictly not comparable. UPL is diversified across the globe and Rallis India was hit by an export slump last quarter.

But if one looks at the agro-chemical sector, Dhanuka Agritech stands out with its strong revenue growth in the December quarter. Volume growth was even stronger at 20%. In a call with analysts, the management said the company gained market share and registered good growth despite price erosion in generic products last quarter.

The growth is driven by specialty molecules (which generate two-thirds of revenue) and new products that Dhanuka Agritech launched in recent years. The share of new products in total revenue increased from 15% a year ago to 20% in the nine months till December.

The management expects the new products to drive growth in the next few quarters also. A molecule which helps improve sugar cane crop yield received good response. The firm also plans to increase market reach and commercialize three-four new molecules next fiscal year.

Encouraged by the strong product pipeline, the management retained the 6-7% revenue growth guidance for the current fiscal year, implying double- digit growth in the current quarter also. Revenue had dropped 5% in the September quarter and increased just 3% in the quarter ended June. If monsoon rains turn out be normal, then the company may as well see double-digit (15-20%) revenue growth next fiscal year, the management told analysts.

While the commentary is encouraging, investors would do well to wait for more clarity on the next crop season. Though Dhanuka Agritech is benefiting from its strong product pipeline, the industry faces headwinds like high inventories and changing weather patterns. If the coming crop season also fails due to some reason, then the sector can see a repeat of pricing pressures and sluggish volume growth next fiscal year too.

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 10 Feb 2016, 01:58 AM IST
Next Story
Recommended For You
Switch to the Mint app for fast and personalized news - Get App