About: Dhanuka Agritech Ltd. is in manufacturing of extensive range of products related to agriculture like insecticides, herbicides, fungicides and plant growth regulators. The company has its presence in entire country through their marketing offices in all major states, with more than 7000 distributors/dealers, which are selling to over 75000 retailers across India and reaching to more than 10 million farmers of India. The company also has also tied up with 4 America, 5 Japanese and 2 European Companies. In the below fundamental analysis, we will figure out if Dhanuka Agritech Ltd. is possible multibagger or not.
Balance Sheet of Dhanuka Agritech Ltd.
We have picked selected line items which actually matters to evaluate the Balance sheet of Dhanuka Agritech Ltd. As we can see, in the Financial Year 2016, Equity share capital of the company was Rs. 10 Cr. and in the Financial Year 2017, they bought their few shares back. We can also see that they have bought their shares back in 2015 as well. As we all know, Warren Buffett loves those companies who buy their shares back and the reason is if a company buys its shares back, it means the profit can be shared in lesser shareholders. Moving on, we see that they have been constantly increasing their reserves. And the best part is they are also reducing their loan year by year. Being a stock analyst, I liked this company at a very first glance; however, we will not jump the gun and go through the complete fundamental analysis to the prospects of Dhanuka Agritech being a multibagger for future years.
Profit and Loss Statement
As shown in the Profit and Loss Statement of Dhanuka Agritech Ltd, they have been consistent in increasing their Net Sales and their Employees Cost has been increasing too, which means they have been increasing their staff every year. They have reduced their interest too as they have reduced their secured loan, which we saw above in the balance sheet. Overall, the profit and loss of the company gives a good sign to continue its profit in coming years too and we can expect this company to becoming a multibagger soon. Till now, we have seen Dhanuka Agritech is a good company, now will dig deeper and go into the Fundamental Analysis of the company.
The closing price of Dhanuka Agritech Ltd on 15th Feb was Rs. 396, from this we will go into the Price to Earnings ratio of the company. We can see the EPS has been reduced to 23.32 and yet the current PE ratio of the company is 16.98 times, wherein the Industry PE ratio is much higher at 39.56. This simply means the stock of the company is undervalued. We can also see from the above image that the stock is trading at very close to its 52 week low, it is another sign that the stock price can run upwards anytime soon.
Future PE Ratio
Now we will calculate 1 Year forward PE ratio with the help of CAGR. If we calculate the EPS of the company for 5 years, we see the CAGR is 6.67%, which gives the Estimated EPS as 27.42 and using the estimated EPS, we can get forwarded PE ratio which is 14.44 times. Any case where the forward PE ratio is lesser than the current PE ratio, we can say the stock is undervalued. Therefore, we say the stock is trading low from its original price.
Relation between PB Ratio and Return on Equity
As we can see the PB ratio of Dhanuka Agritech Ltd. is reducing from past three years while their Return on Equity is growing. This is a sign of multibagger stock. I can also tell you the best time to buy a stock is when PB ratio is between 3 to 6 and the current PB ratio of the company is 4.29, therefore, it is the best time to buy this stock.
Evaluation of stock price using PEG Ratio
From the above analysis, we can see the PEG ratio is 0.85. I would like to mention that if the PEG ratio of a company is lesser than 1, it is the best time to buy the stock as it’s undervalued, which is the case with Dhanuka Agritech Ltd at the moment.
Target Price using EBITDA
Here, we have calculated EBITDA of last 7 financial years and used that to calculate the Expected EBITDA for next Financial Year, which comes to be 714. If we divide the Share Outstanding by Forecasted EV, we can get the target price of Dhanuka Agritech Ltd, which could be 624, that is almost the double of the current share price. And if we keep the 2/3rd as the safety margin, we get 416 and still higher than the current share price, thus, it shows the possibility to be a multibagger and definitely a must buy stock.
From the all above analysis, we can Dhanuka Agritech Ltd. is currently trading undervalued and also has all the sign to be a multibagger for the upcoming years. This can be a great stock and it must be added in our portfolios. Being a stock analyst, I would strongly recommend buying this stock to be rich in near future.