Plant Health Care PLC (LON: PHC)

Plant Health Care PLC. is an FTSE AIM All-Share index listed leading provider of proprietary biological products to global agricultural markets. The Company offer products to enhance the health, vigour, and yield of major field crops such as corn, soybeans, cotton, and rice.

The Company expects to announce FY21 preliminary results in April 2022.

Growth Prospects

• Commercialization of Saori^®: PHC had entered into a supply agreement with a leading European-based fermentation company to secure the production capacity of PHC279. Moreover, the Company intends to commercialize Saori and other PREtec peptides in markets worth more than USD 5 billion.
• Increased Distribution of Harpin αβ: The Company had entered into a new distribution agreement with a leading distributor in the UK named Agrii to increase the accessibility of Harpin αβ for all crops in the UK.

Key Risks 

• Record UK Inflation: British inflation hit a 30-year high of around 6.2% during February 2022, which may cause a further interest rate hike.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• Failure to Develop Products: The Company might fail to develop and get the approval of marketable products. It could not only impact future revenue projections and market share.

Key Fundamental and Shareholders Statistics of Plant Health Care PLC.

Ospraie Ag Science LLC is the most significant shareholder as it holds nearly 64.15 million shares as of 31 December 2021.             

Trading Statement (for the year ended 31 December 2021, as of 01 February 2022)

• Top-Line Business: The top-line revenue increased by around 28%, from USD 6.6 million during FY20 to USD 8.4 million during FY21.
• Profitability: On the profitability front, the gross margin had shown an increase of 300 basis points to 59% during FY21.
• Cash Balance: The Cash & cash equivalents stood at USD 9.20 million as of 31 December 2021.
  

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 31 March 2022 at 11:45 AM GMT+1, PHC’s shares were trading at GBX 10.27, down by around 2.19% against the previous day’s closing price. Stock’s 52-week High and Low were GBX 17.60 and GBX 8.64, respectively.

On a daily chart, the stock price is sustained above the 50-days simple moving average of GBX 10.20 and 100-days simple moving average of GBX 10.18. Hence, there could be an uptick in the stock price in the near term. Also, the MACD line has given a bullish crossover against the signal line.

Valuation Methodology: EV/Sales Approach (FY22E) (Illustrative)

Business Outlook

PHC had shown resilient financial performance during FY21, supported by strong Harpin αβ revenue growth and several product launches from the PREtec platform. PHC has managed to establish manufacturing arrangements to support the wider adoption of PHC279 in 2022 and beyond. Meanwhile, the Company expects to obtain regulatory licences in the USA regarding the launch of PHC279 by the second half of 2022. In a nutshell, PHC remained on track to deliver cash breakeven within existing financial resources and deliver profitable growth over the coming years.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the decent fundamentals, commercialization opportunities, strong financial ratios, decent guidance, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Plant Health Care PLC at the current price of GBX 10.27 (as of 31 March 2022 at 11:45 AM GMT+1), with lower-double digit upside potential based on 4.99x EV/NTM Sales (approx.) on FY22E sales (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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