DHANUKA - Dhanuka Agritech Ltd. Share Price

Management Outlook and Major Points:

Dhanuka Agritech's management highlighted a positive outlook driven by strategic initiatives despite challenges like low pest incidence and uneven rainfall. Key highlights:

1. Financial Performance: Q3 FY25 revenue grew 10.42% YoY to Rs.445.27 crore, with EBITDA up 21.55% to Rs.75.56 crore. PAT rose 21.33% to Rs.55.04 crore. Herbicides led sales (34.71%), followed by insecticides (29.99%), fungicides (19.96%), and others (15.34%).

2. Growth Drivers: Successful launches of LaNevo (insecticide) and MYCORe Super (soil health product), along with herbicide Roxa for wheat, contributed to growth.

3. Global Expansion: Acquired rights to Bayer's iprovalicarb (fungicide) and triadimenol (fungicide/insecticide), targeting expansion into 20+ countries (Latin America, Europe, Asia). Plans to shift manufacturing to India to leverage cost efficiencies.

4. International Strategy: Focus on building a global product basket via registrations, distributor partnerships, and marketing. The acquisition is expected to generate Rs.175"“200 crore revenue by FY27.

5. Domestic Growth: Targeting 15% annual growth (ex-acquisition) through new launches (e.g., rice herbicide, horticulture fungicide) and farmer engagement.

6. Margins: Aim to sustain gross margins at 38"“39% despite pricing pressures.

7. Dahej Facility: Expected FY26 revenue of Rs.60"“70 crore (mainly bifenthrin production) with international registration efforts underway.

8. Challenges: Lower pest pressure in key crops (potato, grapes, chili) and global pricing volatility.

9. Government Initiatives: Positive on policies supporting pulses, cotton, and sugarcane, aligning with Dhanuka's portfolio strengths.

Outlook: Management remains confident in double-digit growth, supported by new products, global expansion, and stable margins. Focus on R&D, farmer education, and strategic acquisitions underpins long-term growth.

Question 1: Regarding the acquisition of iprovalicarb and triadimenol, why weren't the brand names acquired, and what is the strategy for international expansion?
Answer: Dhanuka could not acquire Bayer's brand names (due to naming conventions tied to Bayer). The focus is on expanding into 20+ countries via registrations owned by Dhanuka, appointing national distributors, and leveraging existing customer networks. Marketing efforts will revive product demand, as Bayer had reduced focus on these molecules.

Question 2: What drove the 10% YoY revenue growth in Q3"”volume or pricing?
Answer: Volume contributed ~11.67% growth, while pricing remained stable. Q4 is expected to see balanced volume and pricing growth.

Question 3: What are the financials and outlook for the Dahej manufacturing facility?
Answer: Q3 revenue from Dahej was Rs.4 crores (9-month: Rs.26 crores), with EBITDA losses of Rs.4.25 crores (Q3) and Rs.12 crores (9-month). FY26 revenue is projected at Rs.60"“70 crores, focusing on domestic and international bifenthrin sales.

Question 4: How are RM prices and US-China tariffs impacting the business?
Answer: RM prices are stable; some products (e.g., Cartap, Mancozeb) saw increases. US tariffs may benefit Indian exports long-term, though China's price cuts for non-US markets could offset gains.

Question 5: Why did the "Others" product category's share increase, and what are these products?
Answer: Margin improvement was driven by specialty products (e.g., soil health solutions) and stable generics. The "Others" category includes generics and niche agrochemicals.

Question 6: What factors supported strong volume growth despite industry challenges?
Answer: New product launches (e.g., LaNevo, MYCORe Super), farmer outreach via Dhanuka Doctors, and retail channel engagement drove volume growth, offsetting generic product declines.

Question 7: How was the Rabi season's offtake, and is FY25 guidance achievable?
Answer: Low pest pressure and weak January offtake impacted Rabi sales, but FY25 guidance of 14% revenue growth and margin improvement remains intact.

Question 8: When will manufacturing shift to India for the acquired molecules, and what's their revenue potential?
Answer: Iprovalicarb's production may shift to Dahej in 2"“3 years; triadimenol remains outsourced. Revenue from these molecules is projected at Rs.175"“200 crores by FY27, with 15% annual growth.

Question 9: What is the channel inventory status, and how will budget focus on crops affect Dhanuka?
Answer: Dhanuka's channel inventory is minimal. Government emphasis on pulses, cotton, and sugarcane aligns with Dhanuka's portfolio (e.g., herbicides for pulses, fungicides for sugarcane).

Question 10: Why did interest costs rise, and what is the royalty outlook for Bayer products?
Answer: Interest costs rose due to a Rs.50 crore loan for the acquisition (repayable by December 2025). Royalty details for FY26 remain pending clarity from Bayer.

Question 11: How is Dhanuka addressing red rot disease in sugarcane?
Answer: Solutions include biological products (e.g., Godiva Super) and farmer education, though challenges persist due to over-reliance on a high-yielding, disease-prone variety.