Motilal Oswal
Godrej Agrovet (Buy)
CMP: ₹524.1
Target: ₹610
Godrej Agrovet is a diversified agri company with pan-India presence and operations spread across five business verticals.
The diverse nature of Godrej Agrovet’s various businesses de-risks its operations, enabling it to focus on growth, optimise capital efficiency and to maintain its competitive advantage. It undertakes dedicated R&D in existing products, focussing on improving yields and process efficiencies. Strength of the ‘Godrej’ brand and its association with trust, quality and reliability help the company across segments, particularly in those involving direct sales to retail consumers.
In crop protection, Godrej Agrovet is focussing on multiple product launches with category expansion; it has guided for about 10 launches over the next 3-5 years with a potential of ₹10b. Growth in Astec will be driven by capacity expansion; Godrej Agrovet plans to invest ₹35-40 crore every year over the next 3-4 years in triazole chemistry. At a fixed asset turnover of 2-2.5x, it should aid in revenue CAGR of 15 per cent over FY18-21.
We expect consolidated revenue/ EBITDA CAGR (FY18-21) of 12 per cent/ 16 per cent to ₹7,300 crore/₹700 crore. We initiate coverage on Godrej Agrovet with ‘Buy’ rating and SOTP-based target price of ₹610.