Godrej Agrovet Ltd. share price target

12 May 2020 Ex-Tyson Foods (absent in the base quarter) and sale of land, GOAGROs revenue declined 1%. On the other hand, EBITDA increased 9%, aided by performance in Crop Protection (CP) and Palm Oil, which was offset by Animal Feed (AF) and Dairy. Although quarterly performance was above our estimates, we maintain our estimates for FY21/FY22 due to the current uncertain scenario. Revenue improved 7% YoY to INR14.9b (v/s est. INR13.4b), largely attributable to growth in CP, Dairy, and Godrej Tyson Foods (absent in the base quarter). EBITDA margins contracted 220bp YoY to 3.2% (v/s est. They were weighed by margin contraction in AF, Dairy, and Godrej Tyson Foods, whereas they were offset by margin expansion in CP. However, higher other income restricted PAT decline to 10%. FY20 revenue/PAT grew 15%/6%, while EBITDA declined 10%. revenue remained flat YoY (at INR8.

6 February 2020 GOAGROs 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 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. 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.

3 December 2019 Indonesia and Malaysia are the worlds largest palm oil producers and together account for ~86% share of palm oil production globally. According to both the South-East Asian countries are likely to increase the usage of palm oil for the production of biodiesel, which shall be used for their own consumption. The Indonesian government intends to implement B30 biodiesel (from B20 currently) in 2020, which would increase domestic consumption of crude palm oil by 3MMT. Therefore, post implementation of B30, incrementally 9% of Indonesias supply would be directed toward biodiesel Additionally, Malaysia which accounts for ~32% of the global production is also in the process of implementing B20. If B20 is implemented, domestic consumption of crude palm oil in Malaysia will incrementally increase by 1MMT; the country currently produces ~19MMT crude palm oil. GOAGRO is a participant in the governments Oil Palm Development Program (OPDP), which gives the company access to produce of Fresh Fruit Bunches (FFBs) from farmers in designated areas.

YoY to INR9.4b). EBITDA margin contracted 240bp YoY to 6.5% (v/s est. 8.3%), mainly due to lower margin in crop protection and palm oil. EBITDA declined 15% YoY to INR1,197m (v/s est. INR1,561m). Adj. PAT was up 10% YoY to INR1,040m due to deferred tax benefit (v/s est. INR958m). Animal feed drives performance: Realization improvement in animal feed biz (+21% YoY) drove segment revenue growth of 32%; EBIT/kg stood at INR1.3 (up 1.7x YoY; flat QoQ). Astec posted strong revenue growth of 24% while EBITDA declined 32% YoY on account of INR120 inventory loss (related...

Revenue in-line; EBITDA/adj. PAT below estimates: Consol. revenue grew 15% YoY to INR17b (our estimate: INR16.6b), mainly led by the animal feed segment (+20% YoY to INR8.9b). EBITDA margin contracted by 105bp YoY to 8.3% (our estimate: 9.5%), mainly on account of higher other expenses. EBITDA grew 2% YoY to INR1,419m (our estimate: INR1,584m). Adj. PAT was down 5% YoY to INR760m (our estimate: INR916m). Margin pressures evident: Animal feed revenue increased 20% YoY, led by price hikes of 13% YoY (+9% QoQ). However, segmental EBIT margin shrank...

India has a huge opportunity in the palm oil business as it imports more than 90% of its demand due to supply constraint of fresh fruit brunches (FFBs). Oil palm plantation in India is regulated and GOAGRO has participated in the governments Oil Palm Development Program (OPDP) for accessing FFB produce from farmers in designated areas, thus being an asset-light model. GOAGRO being the largest palm oil manufacturer in India (35% market share) is well placed to capitalize on this opportunity as the government increases the area under cultivation. We expect the segment to deliver revenue CAGR of 11% over FY18-21 to INR8,046m by FY21 on account of increasing availability of FFBs (on higher mix of mature plants), increase in oil plantation area (currently has access to ~66k hectares of land and plans to add 2-2.5k hectares per year), and improvement in the Oil Extraction Ratio (OER).

Godrej Agrovet Ltd (GAVL)'s Q2FY19 revenue was in-line with estimates, while higher expenses impacted operating profit. Its revenue grew by 11.4% yoy to Rs1,588cr, while EBITDA declined by 3.7% yoy to Rs141cr during the quarter due to lower operating leverage in animal feed (in Aqua) and palm oil segments. Net profit was up by 16.7% yoy to Rs94.2cr led by increase in other income.

Godrej Agrovet Ltd. (GAVL), part of the conglomerate Godrej group, is an agri-business company operating in five business verticals- animal feed, crop protection, palm oil, dairy and processed foods.

GoI has increased its investment towards agricultural and poultry industry which will benefit GAVL with its diversified business verticals coupled with pan India presence and established Godrej brand. Its significant investments towards R&D; and diversified business model would help to drive growth, optimize capital...