AUGA Group: Agtech direction clearly set (stays BUY)
We keep our BUY rating on AUGA, with a new 12M price target (PT) of EUR 0.49/share, implying 27% upside. AUGA has managed to navigate the inflationary environment but, as opposed to our previous estimates, it is now facing lower commodity prices, leading to our downward revenue adjustments and lower PT. In May 2023, it presented its new strategy on how to become a fully sustainable and green agri producer, while sharing its knowhow with other farmers. It also announced the divestiture of its ready-to-eat soup company, Grybai LT, at a favourable price, as it does not see it as a core business. In our view, both events clearly set the company’s direction and we see many triggers ahead that are likely to lead to a higher share price, should the company deliver them, including: 1) biomethane tractors and generation units; 2) specialised feed technology R&D; 3) testing the platform that should help other farmers to achieve more efficient, greener production; and 4) new financing planned; and all within the next few quarters. AUGA is trading currently at our IFRS-adjusted 2022-24E EV/EBITDAs of 6.8-9.7x, still well below its historical averages.Auga Group AB. Auga Group AB, formerly Agrowill Group AB, is a Lithuania-based company engaged in the agriculture sector. The Company's activities are structured mainly into three divisions, namely Mushroom-growing, Plant production and Livestock production. The Company offers white, brown, portabella, eryngii, pleurotus and shiitake mushrooms. It specializes in organic wheat and other crops, including organic vegetables and organic feed for livestock in its farms. The Company supplies potatoes, beetroots, onions, carrots, marinated champignons, marinated beetroots, among others. The Company operates own trademark AUGA. In addition, the Company is involved in own farms management. The Company has numerous subsidiaries, including UAB Arginta Engineering, UAB AVG Investment and UAB Agro GIS, among others. It operates domestically on the Lithuania territory.
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