Hello Sir,

Hope you are doing well.

Last 2-3 quarters have been extremely bad for almost all the agrochemical companies. First there was excess inventory in the channel and therefore the demand plummeted. Second, the prices have come down sharply resulting in sales returns and inventory losses.

Source: Dhanuka Agritech website

However, Dhanuka Agritech has performed much better and has come out rather unscathed.

We believe, as a contrarian investor with 3-4 years investment horizon, it’s always good to look at spaces which are going through rough patch or facing temporary troubles because that’s where one gets good investment opportunities.

Below, we have shared interesting insights from the Q1 FY 24 con-call of Dhanuka Agritech to understand the current situation and the outlook for the industry. Hope you find the details useful for your own investments or to add the stock to your watch list.


A few days back, we released our new stock recommendation for our Alpha and Alpha + Members.

As per the management, for FY 24 they are targeting 30% + growth in sales at Rs 1,200 crore with EBITDA margins of 18-20%.

If management achieves it, the operating profit will jump ~75% in FY 24 over FY 23 (on standalone basis)

You can get this new recommendation along with other recommendations, by subscribing HERE


Dhanuka Agritech – Insights from Q1 FY 24 con-call of the company

– General Details

  • Dhanuka Agritech is a leading agrochemical company in India, focusing on branded sales in the market. The company’s strength lies in manufacturing and marketing of formulated products
  • The product portfolio is spread across insecticides, herbicides, fungicides, and plant growth promoters
  • With three manufacturing units and 41 warehouses across India, we cater to around 6,500 distributors and dealers and around 80,000 retailers
  • Dhanuka has international collaboration with 10 leading global agrochemical companies from the US, Japan, and Europe, which help us to introduce the latest technology in India
  • Delay in the arrival of the monsoon led to rain deficit up to mid-June and affected the performance of all agrochemical companies, including Dhanuka
  • The good news is that good rain since the last week of June have supported in catching up the demand of agrochemical over last five weeks, especially in case of herbicides

– Q1 FY 24

  • Volume de-growth 3.5% YOY and price realization de-growth 2.5%

– Sales return

  • Sales return increased substantially from Rs 14 crore to Rs 24 crore during the quarter
  • When there’s price reduction and distributors are having higher rates inventory, they have the tendency to return the products which they have purchased at high rates
  • We buy back the product at the current market rates, which are lower
  • In this quarter the goods return increased because of the trend of reducing prices
  • We hope that the same should be normalized in the second quarter because now the trend is either increase in the prices or the prices are stagnant
  • Mostly, we are seeing price stabilization and some products are even demonstrating some price increase

– Channel Inventory

  • So, inventory in the channel in the year beginning was high, and the channel was vary of taking any more inventory in Q1
  • However, by end of July, the inventory levels have come down significantly

– Outlook

  • Outlook till June was actually not very positive, at least in mid-June was not positive
  • However, July gave us a turnaround and July has been really good in terms of both volume and value.
  • So volume has certainly shown a turnaround in July. Value is also stabilizing
  • The outlook for August is looking really bright. The groundwater is recharged, commodity prices are good. Channel inventory has eased out in the month of July. Prices have either stabilized or showing an upward trend



Disclaimer: This is not a recommendation to buy/sell Dhanuka Agritech. The securities quoted are for illustration only and are not recommendatory.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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