MOSL: GODREJ AGROVET (Buy)-Higher commodity prices underplay robust revenue growth
GODREJ AGROVET: Higher commodity prices underplay robust revenue growth; In line PAT, EBITDA below our estimate
(GOAGRO IN, Mkt Cap USD1.7b, CMP INR648, TP INR760, 17% Upside, Buy)
- GOAGRO registered robust revenue growth due to a recovery in demand across segments. The Animal Feed and Palm Oil business drove performance on the back of a demand uptick and price hike. EBITDA margin contracted by 220bp YoY due to a surge in commodity prices, thereby affecting gross margin.
- We largely maintain over earnings estimate for FY22E/FY23E, as its 1Q performance was broadly in line with our estimates and the continued demand recovery across segments. We value the stock on a SoTP basis to arrive at our TP of INR760. We maintain our Buy rating.
Palm Oil and Animal Feed business drive revenue growth
- Consolidated revenue grew 28% YoY to INR19.9b (est. INR18.6b). EBITDA margin contracted by 220bp YoY to 8.5% (est. 10.1%) due to gross margin contraction of 300bp. EBITDA rose ~2% YoY to INR1,695m (est. INR1,883m). Adjusted PAT increased 20% YoY to INR1,060m (est. INR1,033m).
- Animal Feed business: Revenue grew 34% YoY in 1QFY22 (to INR10b) owing to demand uptick in the Food category, coupled with price hike taken by the company to offset an increase in commodity prices. EBIT margin contracted marginally (10bp) to 6.4% as the Aqua Feed business was affected due to higher RM prices and was unable to pass on the same to customers. EBIT grew 32% to INR637m. EBIT/kg grew 12% YoY (+5% QoQ) to INR2/kg.
Godrej Agrovet Ltd is an India-based agribusiness company. The Company engages in animal feed, oil palm plantations, agrochemicals, poultry. It focuses to improving the productivity of Indian farmers by products and services that increase crop and livestock yields. The Company offers Dripzyme, a technique of drip irrigation. Dripzyme helps in growth of additional branches, flower and fruit buds. The Company helps in creating a root system giving plants greater access to nutrients and water in the soil thereby enhancing the nutritional value of the yield. The Company operates crop protection, godrej tyson foods, aci godrej agrovet, creamline dairy products and astec lifesciences.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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