Dhanuka Agritech

Dhanuka Agritech (507717) looks, good in short term play. It is trading around 82.5 and we have targets of 100 rs on it in next 2-3 months and 140 rs in 1 year.

Accumulate 50% at 82/83 and more 50% if it fall to 70 levels.

Dhanuka Agritech Limited have business of Agro-Chemicals, Fertilizers, and Seeds. The company has a farmer network of more that 1 crore whr in its products are used by them. The Agri-Division has a pan-India presence through its marketing offices in all major states in India. It has a vast dealer network of distributor and DHANUKA is one of the preferred choice of the farmers. Dhanuka Laboratories Ltd, another Group Company dealing in pharmaceuticals was started in 1998, with an objective of leveraging the groups’ expertise in providing solutions to Healthcare Industries.

Companies four pesticides manufacturing units located at Gurgaon, Sohna (Haryana), Sanand (Gujarat) and Udhampur (J&K). The company has Agro-Chemicals, Fertilizers, and Seeds as their main segments. Pesticides include herbicides/weedicides, insecticides, fungicides. The company is also in the business of seeds which accounts for a meager 2-3% of the business.

In Pharma, Dhanuka Laboratories Ltd., is also actively doing the research and is manufacturing Active Pharmaceutical Ingredients (API) and Advanced Intermediates in the field of Cephalosporin Antibiotics.

Dhanuka 9 month ended results was good and declared a EPS of 7.86 against last financial of 9.42 for 12 months. We expect EPS of FY11 around 10.5-11 which makes its PE of 8-8.5 against industry PE of 12-13. Hence target of 130-140 possible.

Promoter have good holding in the company shows the confidence in the business. Holding high stake of 74.99 per cent. Institutional holding is 8.25 per cent. The company has around 80 brands in their portfolio. Recently they came out with Luster, a fungicide for Paddy. Company has an edge over its competitors on account of its diverse product range and market reach -60000 retailers and 10 million farmers.

Only problem is its raw material dependence which is imported from Nissan Chemical Company, Hokko Chemical Industry Co, Mitsui & Co etc and hence risk of foreign exchange. Company’s products are dependent on the Rain Gods which cannot be predicted with certainty. Raw material prices depend on crude prices- higher the crude prices, higher the input costs for Dhanuka.

But technical chart is looking fine and accumulation phase is on.