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MOSL: GODREJ AGROVET (Buy)-Animal feed/palm oil biz drive overall revenue growth

GODREJ AGROVET: Animal feed/palm oil biz drive overall revenue growth

(GOAGRO IN, Mkt Cap USD1.5b, CMP INR560, TP INR649, 16% Upside, Buy)

 

Miss on EBITDA and PAT

• GOAGRO’s 3QFY20 revenues were up 23% YoY (+12% ex-Godrej Tyson Foods as it was absent in the base quarter) while EBITDA stood flat due to margin contraction in crop protection (CP), dairy and Godrej Tyson Foods. However, PAT grew 26% YoY due to the lower tax rate.
• Revenue was in line; however, miss of 26%/9% at EBITDA/PAT level has led to a decrease in our FY20 estimates by 10%/3%. 

Crop protection, dairy and Godrej Tyson Foods drag EBITDA margins

• Revenue grew 23% YoY to INR17.8b (v/s est. INR17.7b) attributable to growth in animal feed (AF), palm oil and Godrej Tyson foods. EBITDA margins contracted 130bp YoY to 5.6% (v/s est. 7.7%) due to margin contraction in crop protection (CP), dairy and Godrej Tyson Foods. PAT was up 26% due to lower tax rate and higher other income. 9MFY20 revenue/PAT grew 18%/8% YoY, while EBITDA declined 5% YoY.
• AF business revenue grew 32% YoY (volume growth of 8%) with EBIT up 48% YoY (to INR350m). Although EBIT/kg grew 37% YoY to INR1/kg, it declined 23% QoQ due lower share of high-margin shrimp feed sales and sale of feed to Godrej Tyson Foods (subsidiary company) at no profit.
• Palm oil business grew 24% YoY with EBIT margin expansion of 180bp (to 19.4%). Higher volumes and sequential price recovery supported quarterly performance. EBIT grew 37% YoY to INR436m.