Complete Agri Play through Godrej Industries


#1

Disclosure: Invested around 310 in anticipation of government’s agri focus/ 5% of PF

Brief of company

  • Holds 24% of Godrej consumer which is equal to current market cap of Godrej industries. This is not consolidated in Godrej industries numbers. So you have remaining business free

Own businesses

  • Oleo chemicals business
  • Estate business
  • Nature basket retail
    Subsidiaries
  • Godrej properties - 53%
  • Godrej Agrovet - 60%

They should do a profit of about 480 cr this year. So that gives a PE of 21.

Godrej Agrovet had take a hit in the past due to poor monsoons. This company is trying to become a complete Agri play. They are dominant fodder, agri input, poultry player, palm plantation, seeds. They have also acquired majority stake in dairy business Creamline. They have also acquired Astec.

So, Godrej Agrovet represents complete agri chain from seeds to milk.

Any inputs…


(ranvir dehal) #2

True…

I am an interested party.( Almost 10% of my portfolio )

Godrej properties and Consumer products are already doing well.

I believe that the market is waiting for Agrovet to fire…which in all probability should happen this year. Reasons??? To my mind these can be the triggers…

Weakening El-Nino…so…better monsoon expectations.
Improvement in broiler and milk prices.
Creamline and astec life acquisition.
Govt’s agro push in the Budget.
Godrej-Tyson and GAVLs Bangladesh subsidiaries are already doing well.

My only concern is Natures Basket. The concept is good. I just hope that the company doesn’t chase growth at any cost kind of strategy.( As many retail companies have done in the past and have faltered)


#3

Nature basket should not be a drain due to rapid expansion. As it is focused on premium and niche grocery and food areas and only present in select localities. They have started online services in Bengaluru recently.


#4

Found an interesting report from Axis which is slightly dated. But it expects it to be a 10 bagger from current prices…


#5

Link


(ranvir dehal) #6

Humm…

Anyways, I am very bullish on GI…for next 5 yrs.

Lets see how it goes. Hoping for the best.( INSHA ALLAH !!! )


(varun jain) #7

ROE is hovering around 7-8% for last 10 yrs and this is the main drag I guess. How it will improve going forward I don’t know. Otherwise growth parameters are ok.


#8

I think RoE of consolidated entity is low because substantial investment in GCPL. It does not consolidate GCPL results. Similarly its estate business, chemical business, Godrej Properties and Godrej Agrovet are not very high RoE businesses. Added to that new businesses like Nature’s Basket is loss making.


(varun jain) #9

So what does it entail finally?


#10

Latest Axis Bank report


(aashish2137) #11

Good set of numbers from Godrej
http://www.moneycontrol.com/stocks/stock_market/corp_notices.php?autono=3567561

Despite agri business slowdown due to poor monsoon and demand, the company clocked some growth. Real estate contributed the most to sales and margin growth but other business growth seems satisfactory. Considering better monsoon prospects this year and continued performance from real estate division (2 new projects and delivery of phase 2 with better realizations), looks like a good year ahead for the company.


(Vishnu Ch) #12

CONFERENCE CALL - from Capital Markets

Godrej Consumer Products

Expects rural demand to pickup in H2 FY17

Godrej Consumer Products (GCPL) held conference call to discuss the quarter and year ended March 2016 result. Mr. Adi Godrej, Chairman and other top management of the company addressed the meet.

Highlights of the meet

  • The consolidated net sales for the quarter ended March 2016 have increased by 8% at Rs 2269.07 crore. The organic net sales at constant currency have grown by 12%. India business net sales increased by 7% to Rs 1208 crore, India business branded net sales increased by 9% in volume including offers and 6% in volume excluding offers . International business sales grew by 11% to Rs 1075 crore. The business has grown by 18% on an organic constant currency basis driven by robust performance across geographies. Reported growth impacted by currency translation impact of 7%. Organic EBITDA margin of 15% expands 40 bps… Overall OPM increased by 91 bps to 19.5%. The profit before tax and EO was up by 14% to Rs 410.03 crore. The net profit has increased by 17% to Rs 310.07 crore

  • Household Insecticides continues to deliver double digit growth, with a sales growth of 10%. This was driven by high single digit volume growth. The company has continued to gain market share across formats and ended the year with highest ever market share on a full year basis. HIT brand delivered strong growth, led by compelling awareness campaigns and effective activations. Good knight continued to lead category penetration. Gross margins continued to benefit from lower crude oil prices.

  • Swach Bharat Abhiyan programme will give growth to household Insecticides business.

  • Sales in Soaps business declined by 6%, due to deflationary pressures. Volume growth, including offers, was in the low double-digits. The Godrej No.1 Nature Soft – Glycerin & Honey variant launched in the winter soap space has received an encouraging response. Cinthol, premium soap brand, continues to lead volume and value growth. The company continues to remain competitive in sales promotion investments.

  • The mgmt said that when palm oil is low for such extended period, we see competition in soap industry. The company has not seen any impact of Patanjali on soap business.

  • Hair Colours sales bounced back during the quarter with a sales growth of 7%. This was led by a recovery in the sales of powder hair colour as well as a double-digit volume led sales growth in Godrej Expert Rich Crème. Godrej Expert Rich Crème continues to gain market share and lead distribution reach and household penetration in the crème category.

  • The company said that it will focus on crème hair colour going forward and little focus will be on powder format. Since hair powder is more of rural area products, growth was low. It will pickup if monsoon is good, which will help rural growth.

  • Hair colour - on crème don’t see impact on business due to competitions.

  • The recently launched aer pocket has received a very encouraging response from consumers. The company has gained share in home air fresheners. aer maintains its leadership position in the home sprays air care market on an exit market share basis.

  • Health and Wellness portfolio of hand washes and hand sanitizer, under Godrej Protekt, has been successfully introduced in general trade.

  • Hand sanitizer market size is Rs 70-80 crore and hand wash market size is Rs 500-600 crore.

  • During the quarter, company launched Cinthol deo stick for men and women in a disruptive cream format priced at Rs 69.

  • BBLUNT, range of premium hair care products, has been launched in modern trade and premium general trade outlets.

  • The growth rates in Indonesia business improved, with a constant currency sales growth of 13%. This performance was well ahead of the FMCG industry growth, which remains impacted by the overall macro-economic slowdown in Indonesia. The sales improved by 16% to Rs 394 crore. Operating margin (EBITDA) increased by 170 bps to 21%, driven by calibrated price hikes, lower commodity costs and the optimisation of marketing investments. HIT and Stella continue to deliver competitive performance and maintain their leadership positions.

  • The company is launching Project Pie in Indonesia.

  • Indonesia - market environment still tough. Home and personal care demand is still subdued, but sentiment is up for last 2 quarters. The mgmt is hopeful of maintaining the current performance gng fwd.

  • The company has increased its distribution in Indonesia, added lower unit pack and huge focus on innovation. All these things give confidence of similar growth rate. Margin maintenance is challenging at this level.

  • In Indonesia, the company will see rise in direct coverage by 20% in FY17, from present level of 110000 outlets.

  • Africa business delivered a strong constant currency growth of 26%, led by a robust performance in the Darling business. The sales improved by 20% to Rs 338 crore. Operating margin (EBITDA) improved by 180 bps to 15%, driven by calibrated price increases in hair extensions and effective cost control. The company has completed the acquisition of 100% equity stake in Strength of Nature, LLC in April 2016. This acquisition enables to turbo charge building hair care platform in Africa.

  • African business growth will moderate, but still look at double digit growth.

  • Latin America business delivered a constant currency sales growth of 31%, led by a strong performance in Argentina. The sales declined by 6% to Rs 164 crore. Operating margin (EBITDA) declined by 190 bps to 19%, due to higher sales and marketing investments in Argentina and Chile. Hair colour brands, Issue and Illicit, continue to gain market share amidst high competitive intensity.

  • European business delivered a strong constant currency sales growth of 15%, led by strong growth in own and distributed brands portfolios. The sales improved by 18% to Rs 133 crore. Operating margin (EBITDA) remained largely unchanged at 8%. During the quarter, launched a new range of Soft & Gentle 0% aluminium deodorants and feminine hygiene products in UK.

  • In Bangladesh, there is more trouble due to competition intensity and product portfolio it is present.

  • There was rise in receivables because increase in Africa business which has net working capital high than other business. Indian also seen slightly rise in receivable. Rise in inventories is due to strategic sourcing of some key raw material.

  • Rural growth was high in Q3, but in Q4, both rural and urban growth was same in line. Challenges are seen in rural side. Growth is challenging in West Maharashtra and in certain areas in UP and AP.

  • 1.5% of Gross Margin in standalone P&L has gone in promotion.

  • The mgmt is hopeful that in H2 FY17, rural demand will pick up on back of good monsoon…

  • The mgmt highlights that next quarter will also see margin expansion.

  • The company has palm oil inventory for next 3- 4 months.

  • Debt will come down from March level.


Planning to launch hair care products in FY17

Godrej Consumer Products (GCPL) held conference call to discuss business performance of its Indonesia business

Highlights of the meet

  • The growth rates in Indonesia business improved, with a constant currency sales growth of 13%. This performance was well ahead of the FMCG industry growth, which remains impacted by the overall macro-economic slowdown in Indonesia. The sales improved by 16% to Rs 394 crore. Operating margin (EBITDA) increased by 170 bps to 21%, driven by calibrated price hikes, lower commodity costs and the optimisation of marketing investments. HIT and Stella continue to deliver competitive performance and maintain their leadership positions.

  • Indonesia - market environment still tough. Home and personal care demand is still subdued, but sentiment is up for last 2 quarters. The mgmt is hopeful of maintaining the current performance gng fwd.

  • The company has increased its distribution in Indonesia, added lower unit pack and huge focus on innovation. All these things give confidence of similar growth rate. Margin maintenance is challenging at this level.

  • Godrej Indonesia derives 40% revenues from household insecticides category, 30% from air fresheners and 20% from wipes and non-core categories like specialized fabric care (bleach) and scourers and car care form remaining ~10%

  • In Indonesia, the company will see rise in direct coverage by 20% in FY17, from present level of 110000 outlets. The company plans to double its reach over the next five years

  • General trade to Modern trade ratio for the company is 40:60.

  • Household insecticides to benefit from double-digit growth in electrical/aerosols segment plus upside from expansion in coils/repellants via new formats. The company is not present in coils/repellants segment which constitute ~50% of the market,

  • Air fresheners category growth rates remain strong in double digits

  • Wipes to be driven by market share gains. The company’s current share at 50%+.

  • The company is planning to launch hair care products in Indonesia in FY17 backed by innovative formats.

  • Hair color in Indonesia is US$ 75-100 mn in size and the company plans to derive 10-15% of Indonesia’s revenues from hair care over the next 2-3 years

  • The company is launching Project Pie in Indonesia.

  • As commodity tailwinds reverse especially led by spike in crude oil prices, the company is likely to face some pressure on margins. However, it is deploying Project Pie in Indonesia, which should help sustain margins at current levels despite raw material inflation and higher brand investments

  • Going forward innovation, distribution and new category will be growth driver.

  • The mgmt expects 5 years from now, 3 core categories i.e. insecticides, air freshener and wipes will contributes 75% of total revenue presently from 90%.


(aashish2137) #13

HDFC has issued a technical report on Godrej Ind based on the higher tops and higher bottoms it has been making. Including the fundamental monsoon trigger for agro business and possible merger with Astec, the tailwinds are strong here.

PS: Not a recommendation, just my 2 cents.


(ranvir dehal) #14

GI is a relatively big conglomerate of diverse businesses. Its property business and consumer business have always done exceedingly well.

Godrej Agrovet is where the concern has been ( although profitable ). But with good monsoon rains, consolidation of Astec lifesciences and Creamline dairies and decent performance by Godrej Tyson JV, the stock has found some market favour.

GAVL’s animal business was reeling under some stress due to poor monsoons in the last two years. But its animal feed business in Bangladesh was doing extremely well as the rains there were good. So that can be an indication of things to come in India as well.

I just hope that they don’t splurge money on Nature’s Basket and tread cautiously there.


(aashish2137) #15

Also there are rumours of de-mergering GAVL and listing it either independently or via merger with Astec. Nature’s Basket is a short term concern I feel because in the longer run gourmet retail chains will catch up in urban areas.


(Marathondreams) #16

Good interview of Mr. Balaram Yadav of Godrej Agrovet about their future plans including Astec Life Science

http://t.in.com/d3Kd


(ramanhp) #17

Marketmojo shows valuations as “Expensive” and outlook as “Very Negative” :
http://www.marketsmojo.com/Stocks?StockId=918007&Exchange=0#navFinancialsShareholding


(ranvir dehal) #18

Marketmojo score is a strictly quantitative tool. It misses the pulse of the businesses and the qualitative factors. I dont think we should be paying too much attention to it.

Well thats my personal view.
Disc: invested.


(ramanhp) #19

True that @ranvir. Looks like they are doing the right things although have fingers in too many pies. The possibility of listing group companies can create value for the investors.


(hrfacebuk) #20

Good results by Astec Life Sciences-
Looks like restructuring/write-offs etc. post acquisition is completed and we would have cleaner set of comparable nos. going ahead.
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/B3EBF331_187F_40F1_AAAF_9DB775CC55F9_183951.pdf

Discl: Invested