This report is an updated version of the report published on 26 May 2022 at 08:28 AM GMT+1

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.

On 22 June 2022, the Company has scheduled its Annual General Meeting.

Growth Prospects

• Impressive Collaborations: PHC has signed a five-year commercial agreement with Nutrien Ag Solutions to supply Saori for Nutrien's use on soybeans in Brazil. The revenue from sales of Saori is expected to exceed USD 750k in the first half of 2022 and USD 5 million by 2025.
• Change in CEO: The Company has appointed Jeff Tweedy as the Chief Executive Officer (CEO) with effect from the Annual General Meeting on 22 June 2022. Currently, he is the Chief Operating Officer and will bring new business perspectives to strengthen the Company’s top-line and bottom-line business.

Key Risks 

• Weak Profitability: The Company’s net loss witnessed a significant increase during FY21.
• Record UK Inflation: The rise in regulated household energy bills led to UK inflation leaping to 9% in April 2022, the highest level since 1982. It may adversely impact UK equities.
• Bank of England Warning: The Bank of England had trimmed its economic growth forecast for 2023 and is expected to show a contraction of 0.25% from a previously estimated growth of 1.25%. Moreover, it had also warned of UK inflation reaching around 10% very soon.

Key Fundamental and Shareholders Statistics of Plant Health Care PLC.

Ospraie Ag Science LLC is the most significant shareholder as it holds nearly 54.47 million shares.

FY21 Financial Highlights (for the year ended 31 December 2021, as of 12 May 2022)

(Source: Company Filings)

• Profitability: On the profitability front, the gross margin had improved from 56% in FY20 to 59% during FY21.
• Balance Sheet: The cash and cash equivalents increased from USD 4.14 million as of 31 December 2020 to USD 9.16 million as of 31 December 2021.
• Fundraising: PHC has successfully raised £6.6 million ($9.1 million) through the issuance of new ordinary shares in March 2021. 

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 25 May 2022, PHC’s shares were closed at GBX 11.90, up by around 6.25% from the previous day closing price. Stock 52-week High and Low were GBX 17.00 and GBX 8.64, respectively.

On a daily chart, the stock price is sustained between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term.

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 accelerated its progress regarding the launch of PHC279 with Wilbur-Ellis in the USA during Q4 FY22. Meanwhile, the Company has ambitious plans for organic growth, with revenue exceeding USD 30 million in 2025. In a nutshell, PHC remained on track to strengthen its position in Europe which is known as the world's largest market for sustainable agriculture.

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 closing market price of GBX 11.90 (as of 25 May 2022), with lower-double digit upside potential based on 4.90x 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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