Latest News
-
FREE, FREE, FREE! 3:1 Bonus: Pharma Stock Hits Back-To-Back Upper Circuits; 500 Shares To Earn Rs 1,69,500 -
1:10 Stock Split: Below Rs 10, Fertilizer Sector Turned Ex-Split; 8,282% Returns In 5 Years -
Rs 17/Share Dividend: Record Date On April 26; Buy The ICICI Group Stock To Be Eligible? -
Honasa Consumer to Strengthen Operations by Merging Fusion Cosmeceutics and Just4Kids -
Wipro Reports 7.8% Decline in Q4 Net Profit; CEO Highlights Economic Challenges -
IREDA Hits Record Annual PAT of Rs 1,252 Cr in FY24; Q4 Profits Up by 33% -
Massive Employee Exodus Hits India's Top IT Companies in FY23-24 -
Air India Enhances Operational Efficiency with New Crew Management System -
BlackRock Acquires Shares in Electrosteel Castings and PTC India for Rs 207 Crore -
IndiGo Enhances Domestic Routes with Direct Chennai-Durgapur Flights
Buy This Small Cap Godrej Group Stock, Shares Can Surge 19%, Buy For Rs 580 Target Price
Motilal Oswal has recommended 'buy' Godrej Agrovet Ltd (GOAGRO) for a target price of Rs 580 apiece. If the investors buy the stock of the company at the current market price, the investors can expect gains of up to 19% in 12 months considering the given target price by the brokerage firm. Godrej Agrovet is a small cap Agriculture sector company of the conglomerate Godrej Group. It has a market cap of Rs 9,512.90 crore.
The brokerage in the report has stated, "Operational performance in line with our expectation. GOAGRO reported a subdued operating performance on the back of volatile commodity prices, higher input cost, and limited pass-on of prices. EBIT in the Animal Feed (AF)/Palm Oil business declined by 15%/16% YoY, while the same in the Crop Protection (CP) business grew 13% YoY on the back of robust revenue growth (up 44% YoY)."
Stock Outlook & Returns
The stock of Godrej Agrovet is currently trading at Rs 488.40 per share, 1.34% down compared to its previous close of Rs 495.05 per share on NSE. Today, it opened at Rs 492.05 per share. It recorded its 52 week high level on 10 November 2021 at Rs 636.25 and 52 week low at Rs 441 on 31 March 2022.
The stock in the week fell 3.16%, 6.06% in 1 month, and 1.39% in 3 months, respectively. Whereas, the stock has given negative returns of 22.61% in 1 year, 1.08% in 3 years, and 10.52% in 5 years, respectively.
Crop Protection business drives revenue growth
Consolidated revenue grew 14% YoY to INR24.5b (est. INR23.1b) on the back of strong growth across businesses, except the Palm Oil business (up 1% YoY). EBITDA margin contracted by 270bp YoY to 6.1% (est. 6.8%). EBITDA/adjusted PAT declined by 21%/34% YoY to INR1.5b/INR718m (est. INR1.6b/INR822m).
1. Animal Feed business: Revenue grew 8% YoY to INR12.2b, led by the Cattle Feed category (up 15% YoY). Total sales volume grew 5.7% YoY to 357KMT. EBIT/kg stood at INR1.38 (down 19% YoY, but up ~2x QoQ).
2. Palm Oil business: Revenue remained flat at INR4b, while EBIT margin contracted by 330bp YoY to 16.2%. EBIT stood at INR656m (down 16% YoY). Strong volume growth was offset by lower crude oil prices (Crude Palm Oil/Palm Kernel Oil prices declined by 16%/3% YoY).
3. Crop Protection business: Consolidated revenue/EBIT grew 44%/13% YoY to INR3.7b/INR589m, led by higher growth in Astec (up 95%/2x YoY to INR2b/INR279m). Consolidated EBIT margin contracted by 440bp YoY to 15.9% due to higher raw material prices, limited transmission, and an unfavorable product mix.
Highlights from the management commentary
1. Palm Oil business: Oil Extraction Ratio (OER) stood at 18.62% in 1HFY23 v/s 17.75% in 1HFY22, and is expected to improve further in 2HFY23, resulting in better profitability.
2. Capex: GOAGRO is adding a 400MT of palm oil refinery capacity at a capex of INR700m. The same is expected to be commissioned by Apr'23, thereby improving margin by 50bp. It is building a solvent extraction plant of ~200MT, which is expected to be operational by Jun'23.
3. Dairy business: The management is expecting to break-even in FY24, with a turnover of INR20b and 45% share in VAP.
Valuation and view
The CP business is likely to do well going forward, led by product launches in the standalone business (over the next one-to-two years) and better performance in Astec Lifesciences, owing to its expertise in triazole chemistry and ramping up of the Herbicide plant. The AF business is expected to witness a revenue/EBIDTA CAGR of 10%/7% over FY22-24, with product launches capturing a higher market share.
"We expect consolidated revenue/EBITDA/PAT CAGR of 9%/11%/2% over FY22- 24. We largely maintain our FY23/FY24 earnings estimate and value the stock on a SoTP basis to arrive at our Target Price of INR580. We maintain our Buy rating," the brokerage has said.
Disclaimer
The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.
