Godrej Agrovet’s Q4 is decent, but continuing momentum remains key

Overall, Godrej Agrovet’s consolidated revenues declined by 2.4% y-o-y to Rs1,455 crore. A sharp fall in other operating revenues meant total operating revenues declined by 10%.Premium
Overall, Godrej Agrovet’s consolidated revenues declined by 2.4% y-o-y to Rs1,455 crore. A sharp fall in other operating revenues meant total operating revenues declined by 10%.
 2 min read . Updated: 11 May 2021, 11:37 AM IST Pallavi Pengonda

Agri-business company Godrej Agrovet Ltd’s financial year 2021 (FY21) was a tough one. Lower demand from the HoReCa segment and lower out-of-home consumption weighed on volumes in the animal feed and dairy segments. HoReCa is short for hotels, restaurants and cafes.

As such, consumption of milk, chicken and egg was subdued due to lower demand in the March quarter as well. Revenues from the animal feed segment, which contributed around half of total revenues, declined by 9.3% year-on-year (y-o-y), primarily owing to a drop in price realizations. Note that volumes had declined by 12.6% y-o-y for FY21, but they were flat during the March quarter. Even so, the company benefited from a low base, considering volumes in the March 2020 quarter had declined by 11% owing to drop in poultry feed in February-March 2020.

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In the March 2021 quarter, performance of the dairy segment, too, was lacklustre, with revenues declining by 0.3% y-o-y. The company maintains that while out-of-home consumption and institutional demand picked up sequentially, it was still lower than the pre-covid levels. Vegetable oil and crop protection segment revenues grew 7.9% and 6.2%, respectively.

Overall, Godrej Agrovet’s consolidated revenues declined by 2.4% y-o-y to Rs1,455 crore. Though, a sharp fall in other operating revenues meant total operating revenues declined by 10%. Gross profit margin expanded by 46 basis points to 26.02%, whereas Ebitda margins contracted by 10 basis points. Ebitda is earnings before interest, tax, depreciation, and amortization. One basis point is one-hundredth of a percentage point.

Going ahead, FY22 has certain factors that may prove favourable for the company. As analysts from ICICI Securities Ltd said, “Apart from favourable base of FY21, we believe Godrej Agrovet can benefit due to (1) forecast of normal monsoon in FY22, (2) essentials goods such as animal feed, milk, palm oil continue to do well, (3) possibility of recovery in HoReCa sector in FY22, and (4) benefits of cost savings initiatives."

Even so, the second covid-19 wave plays spoilsport from a near-term perspective, affecting demand adversely and in turn revenues of the company. Meanwhile, the stock is around 11% away from its pre-covid highs seen in January 2020 on the National Stock Exchange.

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