Dharmaj ready to benefit from high demand for agrochemicals

Stock Opportunities
24

Dharmaj had a very good FY24, with sales growing 24% and EPS by 34%. This was a year when most agchem cos had a very bad year. They are confident of 25%+ sales growth in FY25. Concall notes below

FY24Q4

  • Targeting 900 cr. sales in FY25

  • Technical division

    • Started with 7-8 products in phase 1, 5 synthetic pyrethroids (Cypermethrin, Alphamethrin, Lambda Cyhalothrin, Bifenthrin.) + 3 non-synthetic pyrethroids (Thiamethoxam, Chlorantraniliprole, Pymetrozine, Dimethomorph). Have achieved desired purity levels in May

    • In phase 2, will commercialize 3 new molecules in 2024

    • Average monthly production of 200 metric tons per month (30% utilization in FY25) - 275 cr. capex

    • Witnessing price increase in pyrethroids . Gharda is the largest manufacturer for synthetic pyrethroid and have shut plant for last 6-8 months as they are shifting plant from Dombivli to Sayakha which will become operational in 2 years

    • Started exports in April, achieved 27 cr. sales in April + May (sold 300 tons of synthetic pyrethroid)

    • Quarterly expenses: depreciation 3.7 cr, finance cost 1.1 cr. (this includes government subsidy), fixed overheads 9 cr.

    • Targeting 70 cr. annual overheads (33 cr. fixed + 37 cr. variable), 150 cr. sales and 15-20 cr. EBITDA loss

    • Will breakeven at 200-220 cr. (40% utilization to be achieved in FY26)

    • Will see 3-4% EBITDA margin improvement by FY27 (and 400-450 cr. external sales)

  • B2C

    • Tapped 4 new states in South India (Odisha, Andhra Pradesh, Karnataka, Telangana) expanding to 24 states. Wont add new states in FY25

    • Rajasthan grew to 23 cr. (vs 13.5 cr. in FY23)

    • Gujarat sales was 80 cr.

    • 25% growth target in FY25

  • B2B

    • 25% growth target in FY25

  • Volume growth was 45-50% in FY24

  • Targeting 800 cr. formulation sales in FY25

  • Reduced payables to avail cash discount

  • Formulation has 90 days credit period, technical division will have 120 days credit period

  • Accounting changes

    • Cash and quantity discounts were earlier reported as other expenses and will now be netted directly from sales. (FY23 revenue has been restated by ~9 cr.)

    • Out of 275 cr. capex, 260 cr. was on physical assets with remaining being capitalization of interest, consulting fee, intangible items.

    • 6.25 cr. expenses in FY23, one-time professional and consulting fee for Sayakha project

Disclosure: Invested (position size here, no transactions in last-30 days)

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