Accumulate Godrej Agrovet; target of Rs 587: Prabhudas Lilladher

Prabhudas Lilladher's research report on Godrej Agrovet

GOAGRO’s results were largely in line with our estimates. Topline declined by 7% (PLe (5%)) YoY driven by pressure on volumes in feed, palm oil, standalone CP and dairy business. EBITDA growth of 45% (PLe 42%) was driven by benefit of low RM cost in feed, 37% YoY increase in palm oil price and operating leverage benefits in Astec Lifesciences. GOAGRO is getting its mojo back with (a) margin expansion across key segments (b) expected build up in volumes in dairy, poultry & feed business with reopening of HORECA (Hotels, Restaurants and Café) and (c) Astec (subsidiary) being consistent on structural growth trajectory. We have increased EBITDA/ APAT estimates by 5%/5% for FY21E, 9%/13% for FY22E and 10%/13% for FY23E respectively to mainly factor better than anticipated margins in Animal Feed, higher than expected Int’l palm oil price.

Outlook

Maintain ACCUMULATE with revised target price of Rs 587 (Previous TP 513) based on SoTP (Table in Exhibit 1; Implied P/E 29x).

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