Read on Twitter
Rural Theme
Kenneth holds Coromandel and @contrarianEPS had suggested Agro Chemicals
Q3 FY 2020 saw the Indian Agro Chemical companies post 25% Sales Growth YoY- Rallis & Dhanuka
Structural or one off?
Kenneth holds Coromandel and @contrarianEPS had suggested Agro Chemicals
Q3 FY 2020 saw the Indian Agro Chemical companies post 25% Sales Growth YoY- Rallis & Dhanuka
Structural or one off?
#RALLIS
Price made a very good base around 160 before going up in anticipation of good results. Had traded Rallis off the lows & sold it with decent profits post the Budget in February.
https://twitter.com/langvalcapital/status/1172234677068812289?s=20
I was more interested in Dhanuka as I had never studied the company
Price made a very good base around 160 before going up in anticipation of good results. Had traded Rallis off the lows & sold it with decent profits post the Budget in February.
https://twitter.com/langvalcapital/status/1172234677068812289?s=20
I was more interested in Dhanuka as I had never studied the company
#DHANUKA
The MD refers to the company as a technology company (interesting).
Dhanuka is into Plant Protection - fungicides, insecticides & herbicides.
Top line dependent on - Monsoon, reservoir levels, hectare coverage
Bottom line - Raw material prices (30% import from China)
The MD refers to the company as a technology company (interesting).
Dhanuka is into Plant Protection - fungicides, insecticides & herbicides.
Top line dependent on - Monsoon, reservoir levels, hectare coverage
Bottom line - Raw material prices (30% import from China)
#DHANUKA
Strengths:
1. Brand (80)
2. Distribution network (7000 distributors & 80000 retailers)
3. R&D and tie ups with global cos
4. Almost Rural FMCG
5. Net Profit = CFO (debt free, asset light)
6. Pan India sales
Strengths:
1. Brand (80)
2. Distribution network (7000 distributors & 80000 retailers)
3. R&D and tie ups with global cos
4. Almost Rural FMCG
5. Net Profit = CFO (debt free, asset light)
6. Pan India sales
#DHANUKA
Negatives:
1. Price Competition in Industry
2. High working capital intensity
3. Raw material imports
4. Regulatory issues
Negatives:
1. Price Competition in Industry
2. High working capital intensity
3. Raw material imports
4. Regulatory issues
#DHANUKA
Past cycle performance
20% EBITDA margins to 15%
35% RoCE to 20%
Commodity prices impact
Bad monsoon
Past cycle performance
20% EBITDA margins to 15%
35% RoCE to 20%
Commodity prices impact
Bad monsoon
#DHANUKA
So what Growth Levers can lead to the reversal?
1A. Monsoon
IMD forecast of 96% of long term average. Production of food grain expected to be much higher in the coming year also.
So what Growth Levers can lead to the reversal?
1A. Monsoon
IMD forecast of 96% of long term average. Production of food grain expected to be much higher in the coming year also.
#DHANUKA
1B. Reservoir & Ground water levels
"we are looking at Q4 to be really good in continuation to Q3 we are very hopeful of Q1 and Q2 next year also panning out really well with the reservoir water levels and ground water level being good"
1B. Reservoir & Ground water levels
"we are looking at Q4 to be really good in continuation to Q3 we are very hopeful of Q1 and Q2 next year also panning out really well with the reservoir water levels and ground water level being good"
#DHANUKA
2. New products
5 products launched in the last year which have a collective market size of 500 Cr! How much can Dhanuka grab from this pie?
3 new products in Q1 FY21 and 3 more in Q2!
2. New products
5 products launched in the last year which have a collective market size of 500 Cr! How much can Dhanuka grab from this pie?
3 new products in Q1 FY21 and 3 more in Q2!
3. Raw material prices - structural change!
"the old plants(which were closed in China due to environmental issues) having coming around & stabilized either in the new location or with better environmental compliances in their previous location, which stabilize the supply chain"
"the old plants(which were closed in China due to environmental issues) having coming around & stabilized either in the new location or with better environmental compliances in their previous location, which stabilize the supply chain"
4. Pesticide Management Bill
"make it difficult for the fly-by-night operators for fake and scurrilous products to play in the market"
"if the execution is true to the spirit, going to boost business of companies like Dhanuka -
which invest in brand building & farmer education"
"make it difficult for the fly-by-night operators for fake and scurrilous products to play in the market"
"if the execution is true to the spirit, going to boost business of companies like Dhanuka -
which invest in brand building & farmer education"
#DHANUKA
At CMP 450, Dividend Yield = 2.7%
80 odd Crores cash & only 10 - 12 Cr CapEx in FY21
Dividend Payout = 44% (Mgmt declined to comment on any further increase)
Without significant capex planned, I see this trend of 40 - 50% payout to continue atleast in next 2 years.
At CMP 450, Dividend Yield = 2.7%
80 odd Crores cash & only 10 - 12 Cr CapEx in FY21
Dividend Payout = 44% (Mgmt declined to comment on any further increase)
Without significant capex planned, I see this trend of 40 - 50% payout to continue atleast in next 2 years.
#DHANUKA
TTM EPS = 27
8% annual growth in Earnings for next 10 years
Margin of Safety = 20% (mainly for COVID impact)
Fair Value ~ 350
Expected Returns = 12% CAGR
+ Dividend Yield @ Fair Value = Minimum 3%
Total = 15% CAGR at 350?
TTM EPS = 27
8% annual growth in Earnings for next 10 years
Margin of Safety = 20% (mainly for COVID impact)
Fair Value ~ 350
Expected Returns = 12% CAGR
+ Dividend Yield @ Fair Value = Minimum 3%
Total = 15% CAGR at 350?
#DHANUKA
Price peaked along with RoCE and EBITDA margins in 2017. Fell 66% from 900 to 300. The reversal started in Dec 2019, maybe in anticipation of good results. It had 8 green weekly candles on huge volumes and only 1 red week!!!
Double bottom at 300 due to Covid crash
Price peaked along with RoCE and EBITDA margins in 2017. Fell 66% from 900 to 300. The reversal started in Dec 2019, maybe in anticipation of good results. It had 8 green weekly candles on huge volumes and only 1 red week!!!
Double bottom at 300 due to Covid crash
Management had concall on Apr 1st to discuss Covid impact:
"labor is not available for doing harvesting or vegetable
picking. Delay in harvesting could have some impact on Kharif sowing"
" government has incorporated food, fertilizers, seed & agrochem in essential commodities"
"labor is not available for doing harvesting or vegetable
picking. Delay in harvesting could have some impact on Kharif sowing"
" government has incorporated food, fertilizers, seed & agrochem in essential commodities"
- Cotton will be impacted
- wheat, pulses, sugar, fruits & vegetables would hold the agriculture in strong position, will also lead the economic recovery
- warehouses & shops in the market are opening up few hours, resulting in movement of agrochemicals
- wheat, pulses, sugar, fruits & vegetables would hold the agriculture in strong position, will also lead the economic recovery
- warehouses & shops in the market are opening up few hours, resulting in movement of agrochemicals
- supply chain would involve basic technical grade material,then intermediate, emulsifiers and solvents.
- supply chain will also include the manufacturers
of duplex boxes, paper labels, corrugated boxes, HDPE and PET bottles.
The entire supply chain is practically in shutdown!
- supply chain will also include the manufacturers
of duplex boxes, paper labels, corrugated boxes, HDPE and PET bottles.
The entire supply chain is practically in shutdown!
"So in four parts, I have sufficient inventories in my plant I have sufficient inventories in pipeline from me to my channel. I have sufficient inventories coming in
from China and from Japan, so I’m left only with the concerns on domestic manufacturer"
from China and from Japan, so I’m left only with the concerns on domestic manufacturer"
No increase in raw material prices
- heavy inventory pile up in China
- fall in crude price - basic raw material of chemicals
- heavy inventory pile up in China
- fall in crude price - basic raw material of chemicals
Demand side issues
- No hit on Rice
- cucurbits in this period- muskmelon, watermelon, cucumber, tomato, and others which are sown in March and harvested in this period will be hit
- Maize sowing has taken a hit in some pockets due to seed availability
- No hit on Rice
- cucurbits in this period- muskmelon, watermelon, cucumber, tomato, and others which are sown in March and harvested in this period will be hit
- Maize sowing has taken a hit in some pockets due to seed availability
- if need be, can run three shifts instead of 2 post lockdown if transportation opens up
- Industry to grow at 12 - 15%, Dhanuka growth will be higher than Industry average
- Industry to grow at 12 - 15%, Dhanuka growth will be higher than Industry average
All 3 manufacturing facilities at Sanand (Gujarat), Udhampur (J&K) and Keshwana (Rajasthan) have started operations as of April 24th
#DHANUKA
Price made a low of 275 in the recent crash & is up 60% since. Was it because of the underlying turnaround in the agri sector or was it money chasing consumption based stocks due to Covid?
@unseenvalue @contrarianEPS @ayushmitt
@abhymurarka
Price made a low of 275 in the recent crash & is up 60% since. Was it because of the underlying turnaround in the agri sector or was it money chasing consumption based stocks due to Covid?
@unseenvalue @contrarianEPS @ayushmitt
@abhymurarka
Agro Chemical
-Foreign market players UPL & Sharda still in tough economic conditions?
-Insecticides India trading at 50% discount with same Sales as Bharat Rasayan
-Bayer (MNC) & PI are in a different world!
-Astec & PI make ingredients & intermediates. What makes them special?
-Foreign market players UPL & Sharda still in tough economic conditions?
-Insecticides India trading at 50% discount with same Sales as Bharat Rasayan
-Bayer (MNC) & PI are in a different world!
-Astec & PI make ingredients & intermediates. What makes them special?
