Company Overview: DGL Group Limited (ASX: DGL) provides chemical supply chain management solutions such as warehousing and distribution, and waste management. Through Environmental Solutions, DGL provides battery disposal services in Australia and New Zealand.

DGL Group Limited

­­­­­­DGL Details

Material Business Updates

First Half FY22 Performance:

Top 10 Shareholders:

The top 10 shareholders together form ~63.65% of the total shareholding. Henry (Simon) and Milford Asset Management Ltd. hold a maximum stake in the company at ~­­­54.06% and ~4.45%, respectively.

Key Metrics:

DGL delivered a substantial surge in scale and diversified earnings in H1FY22 via acquisitions and organic growth. The company has exceeded its expectations with robust revenue, gross profit, EBITDA and NPAT growth.

Outlook:

Key Risks:

The company is facing headwinds from increased raw material and employee cost pressures. The potential risk of resurgence of containment measures sustain.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Stock Recommendation:

The stock of DGL gave a negative return of ~22.31% in the past month. The stock is currently trading slightly higher than the 52-weeks average price level band of $1.140 - $4.490, manifesting an accumulation opportunity. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the pricing benefits, integrated acquisitions, and organic growth, the company might trade at a slight premium to its peers’ EV/Sales multiple average. For valuation, a few peers like Secos Group Ltd (ASX: SES), Clover Corporation Ltd (ASX: CLV), Incitec Pivot Ltd (ASX: IPL) and others have been considered. Given the decent trail of financial performance, scalability benefits, favourable trading environment, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $2.890, up by ~0.696% as of 1 June 2022.

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.

DGL Daily Technical Chart (Source: REFINITIV)

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 previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

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

Resistance: A level where-in stock prices tend to find resistance when they are rising, and an 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.