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Dhanuka Agritech Ltd

| Q2 & H1 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤31st Oct 25

Summary : Dhanuka Agritech faced Q2 headwinds from adverse weather and biostimulant regulations, impacting sales and margins, but remains optimistic about H2 recovery, new product launches, and strategic growth initiatives.

Management Perspective neutral : Management acknowledged significant Q2 challenges from weather and regulations, but expressed optimism for H2 recovery, new product launches, and long-term growth plans. They revised down some guidance but maintained commitment to investments.

Concall Report Analysis & Insights

Business Overview

  1. Dhanuka Agritech is a leading Indian agrochemical company with pan-India presence.
  2. Q2 FY26 revenue from operations was INR 598.25 crores, down from INR 654.28 crores year-on-year.
  3. EBITDA stood at INR 136.73 crores, and PAT at INR 93.97 crores for Q2 FY26.
  4. Herbicides category was most impacted this quarter, contributing only 9% to turnover.
  5. Received registration for Ipflufenoquin and launched Wardu biostimulant; awaiting clearances for others.

Future Growth Prospects

  1. New product Ipflufenoquin and biostimulant Wardu will enhance the product portfolio.
  2. Second Dahej plant product, Difenoconazole, has 200 metric tons potential for India.
  3. Bayer product acquisition (Melody Duo, Triadimenol) expected to contribute INR 40 crores in FY26.
  4. Planning to manufacture Iprovalicarb in India by FY27, improving operating leverage.
  5. Leveraging strong distribution network for new ag inputs and digital farmer engagement.

Management Insights

  1. Q2 FY26 financial performance was significantly impacted by adverse weather conditions.
  2. The herbicides segment was particularly affected due to lack of application windows.
  3. Biostimulant sales faced headwinds from new regulatory frameworks.
  4. Management expects H2 FY26 domestic business to grow 2-3%, leading to flattish annual revenue.
  5. Committed to farmer welfare, food security, and introducing latest technology.

Signs of Skepticism

  1. Initial FY26 Bayer product revenue guidance of INR 100 crores was revised down to INR 40 crores.
  2. Dahej plant's breakeven target for FY26 has been pushed to FY27.
  3. EBITDA margin decline guidance was reiterated at approximately 100 basis points, suggesting ongoing pressure.
  4. Management resisted commenting on specific acquisition opportunities like FMC's India business.

Risk Factors

  1. Abnormal and uneven rainfall led to significant crop losses and reduced agrochemical demand.
  2. Delayed harvesting and application of crop protection products impacted Q2 sales.
  3. Biostimulant sales were stopped due to new government regulations, impacting revenue by over INR 20 crores.
  4. Dahej plant incurred a nominal EBITDA loss of INR 46 lakhs in Q2 FY26.
  5. Rabi season started soft and slow due to delayed kharif harvesting and October rains.

Good To Know

  1. Company has 4 manufacturing units, 41 warehouses, serving 6,500 distributors and 80,000 retailers.
  2. Maintains international collaborations with 10 global agrochemical companies.
  3. India's agri input industry offers a 7-8% growth opportunity.
  4. Government of India has approved over 146 biostimulants with new quality control testing.
  5. Investing in digital communication, farmer training programs, and collaborations with ag-tech startups.

Key Drivers

  1. New product launches will drive growth.
  2. Bayer product integration to boost revenue.
  3. Strong rabi season expected to recover sales.
  4. Digital initiatives enhance farmer reach.

Key Analyst Discussions

Competitive Environment

  1. Management is open to contract manufacturing opportunities at Dahej but focuses on own products.
  2. Declined to comment on specific acquisition targets like FMC's India business.

Market Trends & Consumer Behavior

  1. Herbicide sales were impacted by rainfall-related issues preventing application, not a shift to generics.
  2. Extended monsoon delayed kharif harvesting and rabi sowing, impacting October business.
  3. Rabi season started soft in North India due to excessive rains, but post-sowing rains are beneficial.
  4. Crop damages from recent cyclone on Eastern Coast are being assessed, with no significant seed damage reported yet.

Financial Highlights

  1. Dahej plant recorded INR 22 crores in sales and an EBITDA loss of INR 46 lakhs in Q2.
  2. Bayer product royalty income for H1 FY26 was INR 13.5 crores.
  3. Sales returns increased significantly in Q2 due to continuous rains, reaching 13.5% of H1 sales.
  4. EBITDA margins are expected to decline by approximately 100 basis points for FY26.
  5. H2 FY26 domestic business is projected to grow 2-3%, aiming for flattish annual revenue.

Product Composition

  1. The second Dahej product is Difenoconazole, with an estimated 200 MT potential for India.
  2. Margins for new products like Bifenthrin and Difenoconazole are expected to be similar to current average margins.
  3. Biostimulant sales were impacted by sudden regulatory framework implementation without industry consultation.
  4. Biostimulants and plant growth regulators contribute 8-10% to total annual sales.

Strategic Considerations

  1. Manufacturing of Iprovalicarb from Bayer acquisition is planned to start in India by FY27.
  2. Company continues to explore backward integration and acquisition opportunities, supported by a strong balance sheet.
  3. Leveraging its strong distribution platform to expand into other ag inputs like fertilizers.
  4. Actively investing in digital platforms for farmer education and engagement, including drone services.