Godrej Agrovet, a diversified agri-business company, is gaining attention due to its impressive earnings and strong growth potential. This optimism has led to a nearly 40% rise in the stock over the past month.
On July 11, company promoters Navroze Jamshyd Godrej and Jamshyd Naoroji Godrej increased their stake in Godrej Agrovet by 0.57% each, investing a total of Rs 82.97 crore. This move has boosted investor confidence in the company’s growth prospects.
Godrej Agrovet, India’s largest palm oil manufacturer, is well-positioned to benefit from the significant rise in palm oil prices this year. The company is also focusing on value-added and specialty segments and implementing cost-cutting measures, which have improved its growth outlook, according to Kotak Institutional Equities.
Kotak also believes the market is undervaluing Godrej Agrovet’s expected transformation, making the stock an attractive investment.
Solid Earnings Turnaround
In Q4 of FY24, Godrej Agrovet reported a threefold increase in net profit to Rs 65.5 crore, up from Rs 23.5 crore in the same quarter of the previous year. Revenue from operations grew by 1.9% to Rs 2,134.3 crore, compared to Rs 2,095 crore in Q4 FY23. This growth was driven by higher sales and cost-cutting efforts.
The company’s operations improved as the EBITDA margin increased to 6.9%, up from 3.6% in the previous year’s quarter.
Looking ahead, the management is optimistic about delivering better results. Nadir Godrej, Chairman of Godrej Agrovet, stated that the outlook for the company’s cattle feed and aquafeed segments is positive. He also expects margins to rebound after a muted performance in recent quarters. Additionally, a good monsoon is expected to drive the company’s growth.
Motilal Oswal Financial Services highlighted the turnaround in the company’s dairy and poultry/processed food businesses, predicting continued strong performance in FY25. This growth is driven by a focus on value-added and branded products.
Robust Growth Prospects
Godrej Agrovet has already turned around its standalone crop protection business, which saw 37% year-on-year (YoY) revenue growth in FY24, along with a 31% EBIT margin thanks to 80% revenue contribution from specialty products.
Kotak also believes that the turnaround in the dairy segment is sustainable, with an 8% EBITDA margin in Q4 FY24 due to cost-cutting measures and a rising share of value-added products.
Overall, Kotak expects all segments of the company to achieve market-leading scale in the coming years.
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