If one wants to invest for the long term (minimum 3 years) and participate in the growth of the business by not getting perturbed by short to medium term fluctuation in prices then yes, Dhanuka is a good bet but in that sense PI will again score higher than Dhanuka because of inherent strength of its business model…However, if one is an opportunistic long term investor then it is not bad to wait for slight correction in prices of both the stocks in case elnino turns out worst.
Ashwin…do remember that Dhanuka will always quote at a discount to all other 3 cos. you mentioned…but, with the commissioning of the plant and introduction of new 9(3) products, Dhanuka might outperform in a particular year or so —in the long term I believe Pi will be a great wealth creator and might outperform all peers.
Rgds.
Discl. - Have sold off entire holding in Dhanuka and pared down my holding in PI significantly over last few months.
Thanks Mahesh and HG. Really appreciate answering to my question though I was under-prepared.
I’ve not studied the sector in detail. Starting to read previous year ARs of PI Ind, Dhanuka and Monsanto. Superficially Dhanuka seemed undervalued but CSM + domestic play of PI makes it better and the markets have acknowledged them. Guess I’ve to prepared and enter on bad news and hope the market gives me that opportunity.
Its combination offour – market sentiments, opportunity elsewhere, valuationsand elnino…
Since market sentiments are exceptionally strong since last month, have preferred to remain more in cash but paring down my position in PI & Accelya is not because of that, as I have shifted fromthem to a better opportunity I felt elesewhere.
Yes prasanna…market has had a good run up and now investment can be made in only those stocks in which downside risk is lower with significant upside potential…however, it’s not easy to find such stocks and what suits me might not suit other…I have been accumulating DFM Foods and Tata Global – with Tata Global stopped accumulating post recent run up while Dfm still accumulating – over last two months and gradually selling on all my other holdings.
I’m surprised to hear about Tata Global. Can you please share your investment rationale? I feel that the market is taking cognizance of Star bucks franchise alone. They are yet to scale to Chennai, Hyderabad, Kolkata, Kochi etc. and thus gives it a huge upscale potential. In tea segment, HUL and Nestle have good brands and I think competition is fierce. Even bottled water and glucose water thing seems not to have the traction it is hoped. It is not cheap, ratios are so-so and trading at premium valuations (IMO).
What is your opinion on Accelya Kale? Good ratios, free cash flow (and thus good dividend yield), and not very stiff valuations. I might consider to own for good dividends but was put off on non clarity on business going forward (growth as well as take over plans by Accelya?).
TGBL is one of the great scalable opportunity with exceptional management available at relatively cheaper valuations. Infact, if you go into detail then you willl find that it is one of the cheapest FMCG stocks available. It is a good long term investment but only at right price. Downsides seemed limited at the time I bought and I was comfortable at owning it for long term wealth creation. It should ultimately turn out to be a value-unlocking story.
On AccelyaKale, again its a good stock to own because of its clean management, strong balance sheet and niche operation. It ultimately is going to be the target of a larger niche player or big diverse MNC wanting to strentghen its positioning in a particular vertical ; however, wait can be longer as promoters might not sell out cheap. Its valuations will improve after it can deliver past growth again in FY15 ; its better to buy it at right price despite good dividend yield…at 800 its not a buy and a hold to me…as i said before, my only reason of paring down my position in it is shifting to a better opportunity.
The net sales has increased by 4% to Rs 172.91 crore while net profit is up by 18% to Rs 20.5 crore. OPM inclined by 108 bps to 16.2%.Volume grew by 2% while remaining 2% is price hike.Delayed monsoons have impacted the volume growth. Lower volume growth is also attributed to cautious inventory placement in the channel on the back of expectations of deficit monsoon.
Insecticides, Herbicides, Fungicides and Others (incl PGR) contributed 28%, 57%, 9% and 6% respectively to sales during the quarter.Thecompany’s 50% sales come from products which are from tie-ups. As such, there is not much impact on raw material price.
The company has received two 9(3) registrations, “Mortar” an insecticide for paddy and vegetables and “Sakura” a weedicide for soyabean. “Sakura” is a product from the Nissan Chemical portfolio. The company has launched “Mortar” in Q1 FY15 and plans to launch “Sakura” in Q2 FY15. The company has also introduced “Pager” a cotton insecticide for sucking pests in Q1 FY15 and aims to launch “Jackal” an insecticide for paddy and cotton in Q2 FY15. The company also hopes to receive 9(3) registration for a sugarcane herbicide in Q2 FY15.
The mgmt said that since from mid July the rain has picked up. It is expected to pick up more in August. As such, it expects Q2 to be better.The mgmt said that Oil seed sowing is lagging in the country, which may impact its sales.Company’s maximum sales come from paddy, then horticulture and vegetables.Targa Super had more or less flat sale in the quarter.Luster to perform well next year, as it will be its 3rdyear.
The company’s top 10 products contribute 54% to sales.The company has 8000 distributors & dealers and sale to 75000 retailers. Products are used by over 10 million farmers across India.The mgmt expects EBIDTA margin to be around 15-16% for FY15.
Industry conditions weakened in Q2FY16; Dhanuka’s
performance was in line with the sector.
Dhanuka achieved volume growth in H1FY16 and has
indicated market share gains so far in the year.
Dhanuka’s product portfolio is focused on herbicides and fungicides, the high-growth segments of India’s crop protection market. While insecticides account for the majority of the market, herbicides and fungicides are set for faster growth as farmers switch to agrochemicals amid an increasing labour shortage and higher costs. Non-insecticide products account for c60% of Dhanuka’s sales, the highest
in the sector.
Better profitability should be driven by the focus on highmargin
products licensed from global innovators. Speciality products contribute c65% to
sales.
@hitesh2710, @ayushmit, @Vivek_6954, @Donald, @manish962 - hello seniors, we havent discussed Dhanuka Agritech for quite some time now - 2015 monsoon has not been satisfactory and this has led to lower pickup of herbicides/fungicides from markets, dhanuka has seen rapid growth till 2014 followed by an yearlong sideways correction, what would be your take on this one for 2016?
According to the 2015-16 AR, they have started a new factory in Keshawara, Rajasthan with state of the art technology and equipments.
Lots of Ads with their brand ambassador - Mr Amitabh Bachchan are being aired in TV recently.
There are a lot of promises in this year’s government budget, with farmers being given insurance ( Bhima Yojana), additional budget, soil health card etc.
Telangana plans to spend Rs 81,000 crore (US$ 11.88 billion) over the next three years to complete ongoing irrigation projects and also undertake two new projects for lifting water from the Godavari and Krishna river. AP & Telengana account for nearly 23 % of their sales.
Cons :
They have a subsidiary in Bangladesh which non-operational. Not sure what they are doing with it.
Due to poor monsoon last year, the Net Profit increase was nearly flat even though sales & CFO grew approx by 25 %. From the AR, I understand that this was due to higher taxes paid this year.
At 30 PE, not sure if this stock is cheap anymore.
I couldn’t find much about the management. Can anyone throw some light on this?
Disc : Invested a small amount for tracking purposes.
@eyesice
thanks for your write-up, the sideways correction seems to be over and in my opinion, 2016 monsoon is far better than previous 3 years - this has led to stronger sowings in Maharashtra, Western Andhra, North Eastern Karnataka, Madhya Pradesh, Eastern Gujarat - I see a much better July-Sep revenues for Dhanuka - those who havent bought this one in last 1-2 years have certainly missed the bus. I regret not having picked up more
Disclaimer - Invested and interested in lapping up on every correction
Corp Governance issues.
The top 5 family members take home a total pay of 15 Cr odd vs PAT of 105 Cr +
This is based on a commission of profit based policy they have had for years.
And for some reason, this year they have decided to put money in illiquid or risky funds
20 cr odd in real estate funds and 3 Cr in PMS type of funds.
already asked in the recent concall.
They gave a very unsatisfactory answer - something like:
We can get higher dividends and other income like this.
And corporate policy is to invest up to 10% in these kind of assets (they are closer to 20% right now)
