Dharmic Bull

New Portfolio Entry: Dhanuka Agritech

Buy Price: 1047

Reasons for buying:

  1. Company manufactures a wide range of herbicides, insecticides, fungicides, and plant growth regulators.
  2. It has over 90 products, 7000+ distributors and 80000+ retailers. Company is a leading player in the domestic market and has negligible export revenues.
  3. Company has doubled fixed asset base this year. This should support growth going forward. Company has done backward integration to secure and lower cost of raw materials. The benefits are expected to follow through from next year.
  4. Company has minimal debt and decent level of investments giving it ample cash reserves as and when required.
  5. Company has long standing associations with MNC technical manufacturers like Nissan Chemicals, FMC Corporation, and Hokko Chemicals. This gives them access to specialty molecules (currently forming 40-50% of their sales). This is expected to grow going forward meaning margins and profitability will increase.
  6. As per charts, stock price seems to be breaking out of a 2.5 year consolidation and stock is fairly valued at 19.5 PE.
  7. Promoters are technocrats with second generation involved.
  8. While other agrochemical players are struggling due to destocking amidst heavy dumping by Chinese players, company has guided for double digit sales growth and improvement in EBITDA margins.
  9. Several DIIs own a stake in the firm like LIC, DSP, HDFC, Kotak etc.


  1. Like other domestic focused agrochemical players, company is vulnerable to agro climatic conditions. It is well diversified in terms of crop application, chemical type and geography but if there is a major drought or poor harvest, it is bound to get affected.
  2. Agro chemical sector is also vulnerable to government intervention which is actively seeking reduction of harmful chemicals and lower price of inputs for farmers.
  3. Company is dependent on foreign sources for import of 20-30% of raw materials. Additionally, if any MNC tie-ups are discontinued it will have an impact on the company’s prospects.

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