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.

Investment Rationale for Valuation – Speculative Buy at GBX 10.70

• Bright Prospects: PHC had shown resilient financial performance during FY21, supported by strong Harpin αβ revenue growth and several product launches from the PREtec 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.
• 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.
• Technical Standpoint: The stock price is close to the lower Bollinger Band, while 14-day RSI (~36.93) is in the oversold zone.

Key Risks

• Weak Profitability: The Company’s net loss witnessed a significant increase during FY21.
• Macroeconomic Uncertainties: The resurgence in Covid-19 cases and fresh restrictions in China, the US dollar hitting two-decade peaks, persistent inflation, and subdued economic forecasts can continue to impact corporate profits and put pressure on equity markets.

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.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY22E)

*Peers: Victrex PLC, Treatt PLC, and Itaconix PLC,

*All selected peers are LSE-listed Companies from the Basic Materials sector.

Conclusion

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 10.70 (as of 10 June 2022) with lower double-digit upside potential based on 3.96x EV/NTM Sales (approx.) on FY22E Sales (approx.).

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.

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

Note 2: Investment decision should be made depending on the investors’ appetite on 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 subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which 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 5: ‘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 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 unfavorable movement in the stock prices.

---

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.