The December quarter results reveal a company grappling with severe margin compression and operational challenges. Whilst nine-month revenue for FY26 stood at ₹904.18 crores, representing healthy 22.00% growth, the quarterly performance paints a starkly different picture. Revenue in Q3 FY26 plummeted 45.42% sequentially to ₹189.54 crores, falling significantly below the previous four-quarter average. More alarmingly, operating profit before depreciation, interest, and tax (excluding other income) collapsed to just ₹7.33 crores from ₹31.80 crores in the preceding quarter, pushing operating margins down to a worrying 3.87% from 9.16%.
The profit before tax stood at a mere ₹0.97 crores in Q3 FY26, down from ₹22.54 crores in Q2 FY26. This dramatic deterioration was driven by multiple headwinds: sharply lower operating profitability, elevated interest costs of ₹4.64 crores, and depreciation charges of ₹4.88 crores. The company's reliance on other income became starkly evident, with non-operating income of ₹3.17 crores representing a staggering 326.80% of profit before tax, raising serious questions about earnings quality.
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin |
|---|---|---|---|---|---|
| Dec'25 | 189.54 | -45.42% | 0.76 | -95.61% | 3.87% |
| Sep'25 | 347.26 | -5.48% | 17.33 | -46.82% | 9.16% |
| Jun'25 | 367.38 | +75.00% | 32.59 | -1430.20% | 13.81% |
| Mar'25 | 209.93 | +20.30% | -2.45 | -307.63% | 1.83% |
| Dec'24 | 174.51 | -43.95% | 1.18 | -94.39% | 5.44% |
| Sep'24 | 311.33 | +21.96% | 21.03 | +39.55% | 11.08% |
| Jun'24 | 255.28 | — | 15.07 | — | 10.56% |
Financial Performance: Margin Erosion and Profitability Collapse
The quarter-on-quarter comparison reveals the severity of Dharmaj Crop Guard's operational challenges. Revenue declined 45.42% sequentially from ₹347.26 crores in Q2 FY26 to ₹189.54 crores in Q3 FY26, suggesting significant seasonal headwinds or loss of market share. Year-on-year revenue growth of 8.61% appears modest, especially when compared to the company's five-year sales compound annual growth rate of 24.67%.
Operating margins have deteriorated sharply across all profitability metrics. The operating margin (excluding other income) compressed from 9.16% in Q2 FY26 to just 3.87% in Q3 FY26, whilst the gross profit margin fell from 7.87% to 3.09%. The profit after tax margin collapsed to a negligible 0.40% from 4.99% in the previous quarter. This margin compression suggests rising input costs, pricing pressures, or operational inefficiencies that management has been unable to mitigate.
Employee costs remained relatively stable at ₹14.48 crores in Q3 FY26 compared to ₹14.71 crores in Q2 FY26, but as a percentage of revenue, this represented a significant increase due to the sharp revenue decline. Interest expenses rose to ₹4.64 crores from ₹4.50 crores, with the latest six-month interest costs growing 28.91%, indicating increased borrowing costs or higher debt levels. Depreciation remained steady at ₹4.88 crores.
Critical Earnings Quality Concern
Other income dependency: Non-operating income of ₹3.17 crores represented 326.80% of profit before tax in Q3 FY26. Without this other income, the company would have reported a loss at the PBT level of ₹2.20 crores. This heavy reliance on non-operating income raises serious questions about the sustainability and quality of reported earnings.
Operational Challenges: Weak Return Ratios and Balance Sheet Pressures
Dharmaj Crop Guard's return on equity (ROE) stands at 11.64% on average, which whilst positive, remains below the threshold typically associated with high-quality businesses. The company's average return on capital employed (ROCE) of 12.72% similarly reflects moderate capital efficiency. These metrics, though not alarmingly low, indicate that the company generates acceptable but not exceptional returns on shareholder capital and deployed assets.
The balance sheet reveals growing pressures. Total long-term debt stood at ₹64.11 crores as of March 2025, down from ₹76.11 crores in the previous year, which is a positive development. However, current liabilities surged to ₹268.64 crores from ₹125.73 crores, driven primarily by a dramatic increase in trade payables from ₹67.44 crores to ₹195.62 crores. This near-tripling of trade payables suggests either stretched payment cycles to suppliers or aggressive working capital management, both of which warrant careful monitoring.
The company's debt-to-EBITDA ratio averaged 1.62 over recent periods, indicating manageable leverage levels. The average net debt to equity ratio of 0.28 suggests conservative financial leverage. However, the EBIT to interest coverage ratio of 13.75 times, whilst adequate, has likely deteriorated given the recent profit collapse and rising interest costs.
Working Capital Warning Signs
Trade payables surge: Trade payables increased from ₹67.44 crores in March 2024 to ₹195.62 crores in March 2025, a 190% increase that significantly outpaced revenue growth. This suggests potential liquidity pressures or delayed supplier payments that could impact future operational flexibility.
Cash flow deterioration: The company reported negative net cash inflow of ₹2.00 crores for FY25, with closing cash position at zero compared to ₹3.00 crores in the previous year, highlighting tight liquidity conditions.
Agrochemical Sector Context: Navigating Industry Headwinds
The pesticides and agrochemicals sector in India has faced multiple challenges in recent quarters, including volatile raw material prices, inventory corrections across the channel, and erratic monsoon patterns affecting farmer demand. Dharmaj Crop Guard's Q3 FY26 performance appears to reflect these broader sectoral headwinds, with the sharp sequential revenue decline suggesting significant seasonal weakness or destocking in the distribution channel.
The company's five-year sales growth rate of 24.67% demonstrates its ability to expand during more favourable industry conditions. However, the five-year EBIT growth of just 15.27% indicates that revenue expansion has not translated proportionately into profit growth, suggesting either margin pressures or increased operating expenses over the period.
Compared to the broader pesticides and agrochemicals sector, which delivered a one-year return of 7.06%, Dharmaj Crop Guard has outperformed with a 19.01% return over the same period. However, this outperformance has been accompanied by significantly higher volatility of 45.62%, classifying the stock as high risk. The stock's beta of 1.50 indicates it is considerably more volatile than the broader market, amplifying both gains and losses.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Dharmaj Crop Guard | 17.71 | 2.19 | 11.64% | 0.28 | NA |
| Meghmani Organics | 35.77 | 0.94 | 6.03% | 0.52 | NA |
| Punjab Chemicals | 22.19 | 3.57 | 22.46% | 0.24 | 0.26% |
| Astec Lifesciences | NA (Loss Making) | 3.40 | 7.84% | 0.86 | NA |
| Heranba Industries | NA (Loss Making) | 1.11 | 4.37% | 0.56 | 0.43% |
| Advance Agrolife | 33.60 | 4.69 | 0.00% | 0.00 | NA |
Peer Comparison: Valuation Attractive but Quality Concerns Persist
Relative to its peer group, Dharmaj Crop Guard presents a mixed picture. The company trades at a price-to-earnings ratio of 17.71 times trailing twelve-month earnings, significantly below the sector median and well below peers like Meghmani Organics (35.77x) and Advance Agrolife (33.60x). This valuation discount reflects market concerns about earnings sustainability and growth prospects.
The company's ROE of 11.64% positions it favourably against most peers, with only Punjab Chemicals demonstrating superior capital efficiency at 22.46%. Dharmaj Crop Guard's price-to-book ratio of 2.19 times sits in the middle of the peer range, suggesting the market assigns moderate premium to the company's book value relative to competitors.
From a leverage perspective, Dharmaj Crop Guard maintains one of the lowest debt-to-equity ratios at 0.28, comparable to Punjab Chemicals (0.24) and significantly better than Astec Lifesciences (0.86). This conservative capital structure provides financial flexibility but may also indicate underutilisation of leverage to drive growth.
Valuation Paradox
Dharmaj Crop Guard trades at attractive valuation multiples (P/E of 17.71x versus industry average of 32x), yet this discount appears justified given the deteriorating financial trends, weak quarterly performance, and heavy reliance on other income. The market is clearly pricing in execution risks and margin sustainability concerns that the recent quarterly results have only reinforced.
Valuation Analysis: Cheap for a Reason
At the current market price of ₹241.65, Dharmaj Crop Guard trades at a P/E ratio of 17.71 times and a price-to-book value of 2.19 times. The company's EV/EBITDA multiple of 10.16 times appears reasonable for the agrochemicals sector, though the recent EBITDA collapse raises questions about the sustainability of this metric. The EV/Sales ratio of 0.89 times suggests the market values the company at less than one times revenue, reflecting scepticism about profitability potential.
The stock's valuation grade has fluctuated between "Attractive" and "Fair" over recent months, currently sitting at "Attractive" as of October 2025. However, this attractive valuation must be viewed in the context of deteriorating fundamentals. The company's PEG ratio of 0.87 suggests the stock trades below its growth rate, which could indicate value, but the recent earnings collapse casts doubt on the sustainability of historical growth trajectories.
The stock has declined 38.24% from its 52-week high of ₹391.25, reached in better times, and now trades 43.80% above its 52-week low of ₹168.05. This positioning suggests the market has already priced in significant concerns, though further downside remains possible if operational trends do not improve.
Shareholding Pattern: Stable Promoter Base, Minimal Institutional Interest
Promoter holding in Dharmaj Crop Guard has remained rock steady at 70.40% over the past five quarters, with no pledging of shares. This stability provides some comfort regarding management commitment and alignment with minority shareholders. The top promoters include Talavia Rameshbhai Ravajibhai (26.67%), Jamankumar Hansarajbhai Talavia (24.45%), and Manjulaben R Talaviya (6.62%).
Foreign institutional investor (FII) holdings have shown minor fluctuations, standing at 3.49% as of December 2025, up from 3.09% in the previous quarter. Whilst this represents a modest 0.40% sequential increase, the absolute level of FII participation remains negligible, suggesting limited institutional conviction in the stock. Mutual fund and insurance company holdings are conspicuously absent at 0.00%, a significant red flag indicating that domestic institutional investors see limited merit in the investment case.
Other domestic institutional investor (DII) holdings have remained stable at 0.47% for the past three quarters, down from 0.91% in December 2024. The non-institutional category, representing retail and other investors, accounts for 25.64% of shareholding. The overall institutional holding of just 3.96% is extremely low and reflects the stock's micro-cap status and limited liquidity.
| Quarter | Promoter | FII | MF | Insurance | Other DII | Others |
|---|---|---|---|---|---|---|
| Dec'25 | 70.40% | 3.49% | 0.00% | 0.00% | 0.47% | 25.64% |
| Sep'25 | 70.40% | 3.09% | 0.00% | 0.00% | 0.47% | 26.03% |
| Jun'25 | 70.40% | 3.58% | 0.00% | 0.00% | 0.47% | 25.54% |
| Mar'25 | 70.40% | 4.14% | 0.00% | 0.00% | 0.47% | 24.98% |
| Dec'24 | 70.40% | 3.77% | 0.00% | 0.00% | 0.91% | 24.92% |
Stock Performance: Volatile Journey with Recent Underperformance
Dharmaj Crop Guard's stock has delivered a one-year return of 19.01%, outperforming the Sensex's 10.44% gain by 8.57 percentage points. This outperformance extends to the three-year timeframe, with the stock returning 42.06% compared to the Sensex's 38.85%, generating positive alpha of 3.21%. However, these longer-term gains mask significant recent underperformance and volatility.
Over the past six months, the stock has declined 24.37% whilst the Sensex gained 4.53%, resulting in negative alpha of 28.90 percentage points. This sharp underperformance coincides with deteriorating quarterly results and margin pressures. The three-month return of -2.30% compares unfavourably to the Sensex's 0.46% gain, though the one-month return of 3.07% shows some recent recovery attempt.
The stock's two-year return of just 3.42% significantly trails the Sensex's 17.68% gain, highlighting the challenges the company has faced in recent times. Year-to-date, the stock has gained 0.42% compared to the Sensex's 1.13% decline, providing marginal outperformance. However, with a volatility of 45.62% and a beta of 1.50, investors must brace for continued price swings that could amplify both gains and losses.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 0.69% | 0.52% | +0.17% |
| 1 Month | 3.07% | 0.81% | +2.26% |
| 3 Months | -2.30% | 0.46% | -2.76% |
| 6 Months | -24.37% | 4.53% | -28.90% |
| YTD | 0.42% | -1.13% | +1.55% |
| 1 Year | 19.01% | 10.44% | +8.57% |
| 2 Years | 3.42% | 17.68% | -14.26% |
| 3 Years | 42.06% | 38.85% | +3.21% |
Technical Analysis: Mildly Bearish Trend with Multiple Resistance Levels
From a technical perspective, Dharmaj Crop Guard currently exhibits a "mildly bearish" trend as of February 2, 2026, when the trend changed from bearish at ₹238.90. The stock trades below all major moving averages, including the 5-day (₹246.84), 20-day (₹237.54), 50-day (₹238.33), 100-day (₹261.13), and 200-day (₹281.00) moving averages, indicating persistent selling pressure and lack of sustained buying interest.
Technical indicators present mixed signals. The MACD shows mildly bullish signals on the weekly timeframe but mildly bearish on monthly charts. The RSI provides no clear directional signal on either timeframe. Bollinger Bands suggest sideways movement on weekly charts but mildly bearish on monthly timeframes. The On-Balance Volume (OBV) indicator shows mildly bullish signals on both weekly and monthly charts, suggesting some accumulation despite price weakness.
Immediate support lies at the 52-week low of ₹168.05, approximately 30% below current levels. Immediate resistance sits at the 20-day moving average area of ₹237.54, which the stock is currently testing. Major resistance levels include the 100-day moving average at ₹261.13 and the 200-day moving average at ₹281.00. The 52-week high of ₹391.25 represents a distant resistance level, 61.93% above current prices.
Investment Thesis: Quality Concerns Overshadow Valuation Appeal
Dharmaj Crop Guard's investment case rests on four key pillars: valuation, quality, financial trend, and technical trend. The company currently scores 34 out of 100 on the proprietary Mojo Score, firmly in "SELL" territory. This rating reflects the confluence of negative factors overwhelming the stock's lone positive attribute of attractive valuation.
The valuation grade stands at "Attractive," with the stock trading at significant discounts to both historical levels and peer multiples. However, this cheapness appears to be a value trap rather than a genuine opportunity, as deteriorating fundamentals justify the markdown. The quality grade of "Average" reflects moderate return ratios and acceptable but unexceptional long-term financial performance.
The financial trend is classified as "Negative," driven by the sharp quarterly profit decline, margin compression, and heavy reliance on other income. The technical trend of "Mildly Bearish" suggests continued near-term price pressure. Together, these factors create an unfavourable risk-reward profile for both fresh investors and existing shareholders.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Attractive valuation multiples: P/E of 17.71x trades at significant discount to industry average of 32x, suggesting potential upside if operations stabilise
- Strong promoter commitment: Stable 70.40% promoter holding with zero pledging demonstrates management confidence and alignment
- Conservative leverage: Debt-to-equity ratio of 0.28 and debt-to-EBITDA of 1.62 provide financial flexibility and low solvency risk
- Long-term growth track record: Five-year sales CAGR of 24.67% demonstrates ability to scale operations in favourable conditions
- Nine-month revenue momentum: FY26 nine-month revenue of ₹904.18 crores grew 22.00% year-on-year, showing underlying demand strength
- Superior sector returns: One-year stock return of 19.01% outperformed the pesticides sector's 7.06% by nearly 12 percentage points
⚠ KEY CONCERNS
- Severe profit collapse: Q3 FY26 net profit of ₹0.76 crores plunged 95.61% QoQ and 35.59% YoY, raising serious execution concerns
- Margin compression crisis: Operating margin contracted from 13.81% in Q1 FY26 to just 3.87% in Q3 FY26, indicating pricing power erosion
- Earnings quality deterioration: Other income of ₹3.17 crores represented 326.80% of PBT, masking operational weakness
- Working capital pressures: Trade payables surged 190% to ₹195.62 crores, suggesting potential liquidity stress or extended payment cycles
- Negligible institutional interest: Zero mutual fund and insurance holdings with total institutional ownership of just 3.96% signals lack of conviction
- High volatility profile: Stock volatility of 45.62% and beta of 1.50 create significant downside risk in adverse market conditions
- Weak return ratios: ROE of 11.64% and ROCE of 12.72% remain below levels associated with high-quality compounders
Outlook: What to Watch in Coming Quarters
POSITIVE CATALYSTS
- Margin recovery: Any improvement in operating margins above 8-10% would signal pricing power restoration and cost control success
- Sequential revenue growth: Q4 FY26 revenue returning to ₹300+ crore levels would indicate seasonal recovery and demand normalisation
- Reduced other income dependency: Core operating profit driving earnings rather than non-operating income would improve quality perception
- Institutional accumulation: Entry of mutual funds or meaningful increase in FII holdings would validate investment thesis
- Working capital normalisation: Trade payables stabilising and cash position improving would ease liquidity concerns
RED FLAGS TO MONITOR
- Continued margin pressure: Operating margins remaining below 5% in Q4 FY26 would confirm structural profitability challenges
- Further profit deterioration: Another quarter of sub-₹5 crore net profit would raise questions about business viability at current scale
- Increasing debt levels: Any uptick in borrowings without corresponding EBITDA growth would strain coverage ratios
- Promoter stake reduction: Any decline in 70.40% promoter holding would signal potential loss of confidence
- Sustained technical weakness: Break below ₹200 levels could trigger further selling and test 52-week lows near ₹168
The Verdict: Structural Concerns Warrant Exit
Score: 34/100
For Fresh Investors: Avoid initiation at current levels. The 95.61% quarterly profit collapse, margin compression to 3.87%, and heavy reliance on other income signal fundamental execution challenges that attractive valuation multiples cannot compensate for. Wait for at least two consecutive quarters of margin recovery and sustainable profitability before considering entry.
For Existing Holders: Consider exiting positions on any technical bounce towards ₹260-280 levels. The confluence of negative financial trends, deteriorating earnings quality, and mildly bearish technicals creates an unfavourable risk-reward profile. The lack of institutional interest and persistent margin pressures suggest limited near-term catalysts for re-rating.
Fair Value Estimate: ₹200-220 (17.17% downside from current levels) based on sustainable earnings normalisation and sector-average margins of 8-9%. Current price of ₹241.65 appears to discount optimistic recovery scenarios that recent quarterly performance does not support.
Rationale: Whilst Dharmaj Crop Guard trades at attractive valuation multiples and maintains a debt-free balance sheet with committed promoters, the sharp deterioration in quarterly profitability, margin compression, and earnings quality concerns override these positives. The company's average quality grade, negative financial trend, and mildly bearish technical setup create a cautious outlook that warrants a SELL rating until operational stability returns.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The author and publisher are not registered investment advisors and do not provide personalised investment advice.
