Agria Update - April 2022
AGRIA: WHERE GROWTH MEETS VALUE• We reinitiate our coverage on Agria Group Holding with a “BUY” recommendation and target price of BGN 34.39. Our valuation approach combines FCFF model with 75% weight and multiples with 25% weight.
• Agria had a record 2021 year with revenue jumping 26.5% YoY and operating margin improving by 3.4 p.p. to 14.4%. Consequently, net profit more than doubled to over BGN 25m. Efficiency has also been improving as cash conversion cycle has been trending downwards. In 2021 the company announced its first dividend, since going public and implemented a share buyback program. A dividend increase in 2022 may boost investor confidence further.
• Revenue growth has been impressive with 5-year CAGR of 19.9%. The ambitious expansion plans, focused around the construction of own port facility – Agria port in Beloslav, will offer a competitive advantage in the grain trading segment and support the growth of the company in the future. The project is expected to be completed in 2023, but supply chain disruptions may cause a delay.
• The recent Russian invasion in Ukraine poses a threat of severe supply crunch in corn, wheat and especially sunflower, which will likely support record high prices of those commodities. Furthermore, with around 80k daa of own land in Northeast Bulgaria and 290k tonnes storage capacity, Agria seems to be a great pick for high inflationary environment.
• Skyrocketing fertilizer and energy prices pose a risk on company’s profitability. While grains price increase will likely offset that, supply chain issues may make the situation difficult. EU sanctions on Russian and Belarusian companies, combined with the dependency of Bulgarian fertilizer producers to natural gas from Russia could make it hard for farmers to get their hands on fertilizers, thus lowering crop yield.
First Financial Brokerage House (FFBH) is a leading non-banking financial institution on the Bulgarian capital market. Founded in 1991, FFBH offers the complete spectrum of investment banking services spanning corporate finance, privatisation advisory, mergers and acquisitions, financial consulting, brokerage services, research & analysis and asset management.
FFBH provides its services mainly to major international banks and corporations seeking investment in Bulgaria. FFBH is not only local contractor and partner to its clients but also an information source and provider for all major news and events in the economic and political life of the country.
We are the main contact point for the large majority of foreign and local institutional investors in the Bulgarian equity market. FFBH is providing access to the Bulgarian Stock Exchange by either its highly experienced sales trading desk or by order routing across the Bloomberg network.
Additionally, FFBH is offering a range of tools, specifically tailored for the retail investor. Both domestic and international markets are only a click away, via electronic trading solutions. As a major advantage, our customers are able to benefit from the broad range of Analysis & Research products with premium quality, provided by our team of dedicated analysts.
Clients of our research products are most of the largest foreign and local institutional investors looking for opportunities in Bulgaria. More than 100 investment banks, investment funds and other institutional investors use our Equity research and Economic review on a regular basis. FFBH’s Morning Bulletin and Weekly Bulletin reach more than 300 clients over different countries and continents.
Our major Research and Analysis Services include:
- Semi-Annual Outlook of the Bulgarian economy and the domestic capital markets;
- Equity analyses of the biggest and/or most liquid companies listed on Bulgarian Stock Exchange - Sofia;
- Quarterly Bulgarian Real Estate sector and REITs overview;
- Quarterly Bulgarian Banking System overview;
- Quarterly macroeconomic overeview, with details on the major economic sectors, commentaries, and statistical indicators;
- Daily and Weekly bulletins, including an overview of the capital markets and the most important macroeconomic & corporate events.
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