Prime Transaction estimates an intrinsic value of 1.6922 lei for DN Agrar shares

The analysis team of the brokerage house Prime Transaction estimates an intrinsic value of 1.6922 lei for the DN Agrar (DN) share, both above the market price of the milk producer's shares from the middle of this week and above the previous estimate, as it appears from the attached report. In the previous report, from November, Prime estimated an intrinsic value of 1.5954 lei for DN securities.

Now, analysts have raised the estimate by 6%, the new value being 29% and above the share price in the market on Wednesday, of 1.31 lei.

"The stock market evolution of DN Agrar was very good in the period that passed from the coverage initiation report, even if the time interval was short," the document states.

According to Prime, in less than a month, the share price increased by 15.4%, from 1.2 lei per share to an intraday high of 1.385 lei, after which it stabilized somewhat lower, about 10% above the level at which it was at the time of the creation of the previous material.

"The DN share price went in the same direction as the market as a whole, but the growth rate was higher both in comparison with the main index of the Bucharest Stock Exchange, BET, and with the BETAeRO index, of the market on which the issuer's shares are traded", shows in the report.

According to the document, DN's quote not only correlated with the rest of the market, but also with its financial results, which continued to improve in the third quarter of the year. Even if the profit did not grow at the same rate as in the first two quarters of the year, and the turnover even decreased in the third quarter, we can still talk about good results that justify, at least partially, the stock market evolution.

For the third quarter, the company reported a net turnover of 35.6 million lei, down 12.7% compared to the third quarter of last year, and a net profit of 7.2 million lei, up 27%, for the same reporting period. In the first nine months, the net turnover of DN Agrar amounted to 115.9 million lei, with 12.4% compared to the same period last year, while the net profit was 22.6 million lei, 109% higher compared to the first three quarters of 2022.

"Along with the financial results for the third quarter came some important information related to the company's future plans. First, the Straja farm project appears to be on schedule, keeping the late 2024 deadline for production to begin (even slightly better than the previous version, which placed this time in December 2024). In addition, compared to the previous projects, biogas production with a partner and vertical diversification appeared, currently in the stage of working options, without specifying in which direction the business would be expanded", the report states.

According to the document, another important piece of information published along with the financial results refers to discussions with a potential new client in the milk processing sector, to which a quantity of milk equivalent to almost a quarter of the year's supply would be supplied monthly. 2022 by company.

"Apart from the publication of the financial results, the most important event of the period was the holding of the General Meeting of Shareholders on November 24, where the transaction was approved through which the majority shareholder, A.M. Advies B.V., sold to DN Agrar Group the remaining 5% it still owned in DN Agrar Cut SRL, for the sum of 376 thousand euros. Later, at the beginning of December, the registration of the transaction was reported to the Trade Registry", the report also states.

To evaluate the DN Agrar share, the Prime Transaction team uses a combination of the market multiples method and the future cash flow method. Using the market multiples method, analysts estimated an intrinsic value of 1.6035 lei, while using the cash flow method, the estimated intrinsic value of the DN share is 1.7809 lei.

Taking both methods into account, the resulting average value is 1.6922 lei/share, 6.07% higher than the one in the coverage initiation material and 29% above the company's share price as of the middle of this week.

The Prime Transaction Report is not an investment recommendation. The estimated value is not a target price that analysts expect the issuer's stock to reach, but only an intrinsic value, dependent on the confirmation of the assumptions detailed in the report. The report represents general information and is not a substitute for investment consulting services, the document states.