Prime Transaction estimates an intrinsic value of 1.7683 lei for DN Agrar shares, above the market price

The analysis team of the brokerage house Prime Transaction estimates an intrinsic value of 1.7683 lei for the shares of milk producer DN Agrar (DN), 16% above yesterday's mid-session market price of 1.52 lei, as shown in the attached report.

From August until now, the DN Agrar quote has oscillated in a lateral channel, between 1.55 lei and 1.45 lei. "The financial results of the company were very stable both in the second quarter of the year and in the first six months taken together, at least in terms of profit," say those from Prime.

The company's quarterly operating income rose by 12%, to 71.6 million lei in the second quarter of 2024, the biggest contributions to this increase coming from net turnover, with an increase of 6.9 million lei (+19 .11%) and from the income from the production of fixed assets, with 2.5 million lei (+93.95%). "In the first case, the increase came mainly from the higher production capitalized by the group, while in the case of income from the production of fixed assets it is about the registration as fixed assets of the youth of milk cows that entered the process of milk production in the analyzed period", according to the brokerage house.

Operating expenses kept pace with revenues, increasing by a total of 12.2%, from 53.9 million lei to 69.6 million lei, on a quarterly basis, so that the operating result increased by almost 11%, up to 11 million lei in the second quarter of 2024, after falling by 13.4% in the first quarter of the year. The consolidated net profit rose at a slower rate than the operational one, i.e. by 6.2%, up to 7.2 million lei, in the second quarter of the year, while, on a half-yearly basis, the result of recorded a slight decrease.

"As we estimate, the base effect compared to last year, which was marked by high milk price volatility, started to fade, and operational efficiency and investments became the main influencing factors for DN Agrar's results. It is expected that this will also happen in the second half of the year, when the impact of weather conditions on the group's agricultural production will also have to be monitored," according to those from Prime.

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 1.75 lei, while using the cash flow method, the estimated intrinsic value of the DN share is 1.7866 lei. Taking both methods into account, the resulting average value is 1.7683 lei/share, according to the report.

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.