In my view, Results are actually good…
Their operating margins were shrinking since last few quaters… Finally there is a big uptick there.
Ebidta margins at 8.2% vs 6.7% YOY, it was about 4% last quater…
Going forwards one need to see, if they can sustain this margins and at the same time increase their topline…
They have guided for 11-12k topline this year, so I am expecting better sales numbers going forward.
The company is experiencing good traction on their crop yield enhancer product (Double) due to a change in packaging structure.
Rajavelu NK, CEO – Crop Protection Business, Godrej Agrovet, says “It is encouraging to get amazing feedback from our channel partners in Maharashtra, Madhya Pradesh and Gujarat. The overwhelming acceptance of our innovative packaging, coupled with the unwavering momentum we enjoy in the market, fills us with great optimism as we eagerly anticipate the upcoming Plant Growth Regulator (PGR) season.”
Previous guidance: FY24’s topline should be between 10 to 11k.
Guidances from concall Q1FY24:
Astec: Some products still have headwinds… Aiming to double revenue from CDMO biz ever year for the new couple of years… However, FY25 onwards target is 20-25% growth.
Dairy Biz (15% FY23 Revenue): “Hoping to be PBT positive in this quarter”
Palm Oil (13% of FY13 Revenue): “No way our OER will be below last year on an annual basis… Possible for us to plant is close to about 100,000 hectares over and above the area we have in the next 5 to 6 years. The kind of infrastructure of nursery and other people we have created, we will ramp up our planting every year from 3,000, 4,000 per hectare in last year to about 10,000 to 12,000 going up to 15,000, 16,000 in 5 years’ time. The first results of this addition we will start seeing from
FY 28, FY 29 and full impact, you will see in FY 30 and FY 31.”
Animal Feed (50% of FY23 revenue):
a) EBITDA margin should be back to FY22 levels - Q1FY23 is @4.2% (If I am not wrong them margin was 5ish% in FY22)…
b) Volume growth 8% to 10%
Demergers? “We are working on I thi… So I think we are moving in that direction there”
Link to transcript: https://www.bseindia.com/xml-data/corpfiling/AttachLive/9b353407-ab98-4ec9-b64f-633d7969c3c6.pdf
Godrej Agrovet
On Palm oil business - some interesting stats - from their concall.
Their existing Palm oil plantation of about 25k to 30k Hector
(45k Hector in total, but 60% mature )
This year Palm oil revenue: 1300 Cr, PAT of 249 Cr.
From new allocation ( in Odisha & Telangana )=Theoratically possible Plantation is close to 100k Hector
That’s about 4X from current levels ( 25-30 k Hector ) in next 5-6 year…
Moreover, Goverment is encouraging more palmoil production at home and thus, in my view, this allocation of land MAY increase going forward as well…
All in all, I am expecting significant jump in revenues from palm oil business going forward. Obviously not in short term but in long term.
Disc: Invested, biased views
The company entered into an agreement
Source: Link
Disclaimer: Invested (Portfolio). Not a buy/sell recommendation
Precision Fermentation and the Disruption of the Palm Oil Industry - Rethink Disruption
Will Precision Fermentation be a threat to the company in 10-15 years?
Good result by Godrej agrovet…
Revenues up by 5%
Ebidta up 35% YoY
PBT up 53% YoY
Dairy Segment has turned Positive this quater as well…
Disc: Invested. Added more recently as well.
What worked
What didn’t work
References: Presentation and Press release
Disclaimer: I may or may not be invested in Godrej Agrovet or its subsidiaries. I am not SEBI registered and this is not a buy or sell recommendation.
HUL into Palm Oil
f9d22e79-6a35-401f-add1-ee46187337e6.pdf (302.6 KB)
Godrej Agrovet -
Q3 FY 24 concall and results highlights -
Revenues - 2345 vs 2324 cr, up 1 pc
EBITDA - 171 vs 160 cr, up 7 pc ( margins @ 7.3 vs 6.9 pc )
PAT - 85 vs 67 cr, up 27 pc
Segment wise revenues -
Animal Feed - 1291 vs 1272cr, up 1.5 pc
Vegetable Oils - 355 vs 362 cr, down 2 pc
Crop protection- standalone - 172 vs 100 cr, up 72 pc
Astec Lifeciences - 51 vs 117 cr, down 56 pc
Creamline Dairy - 366 vs 348 cr, up 5 pc ( sale of Value added products grew by 20 pc )
Godrej-Tyson foods - 223 vs 280 cr ( due sharp fall in live bird prices )
ACI-Godrej JV - 610 vs 600 cr, up 1.7 pc
Percentage of sale of value added products in the Dairy business increased to 36 pc vs 32 pc YoY
Investing aggressively behind Astec’s CDMO business. Should yield good results in medium term
Expecting better margins in Animal feed business in Q4 on the back of better realisations. Realisations for 9M FY 24 @ Rs 1435 / Ton vs Rs 1200 / Ton for 9M FY 23. Expecting these realisations to improve further
Witnessed healthy growth in cattle feed and aqua feed business. Was partially offset by de-growth in poultry feed business
Astec’s CDMO revenues got deferred from Q3 into Q4. Expect a better outcome in Q4
Seeing recovery in live bird prices in Q4. This should aid growth in Godrej Tyson business. Should also help in the recovery in layer feed and poultry feed business
Astec’s R&D engine should start firing as we go fwd. Should help in both CDMO and enterprise business. Expecting to grow CDMO business @ 30-40 CAGR for next few yrs
Astec’s enterprise business continues to be under pressure. The overstocking of agrochemicals in global mkts was to the tune of 12-18 months of consumption. Complete inventory correction may take some more time
CDMO business steady state margins are 5-7 pc higher than enterprise business
Disc : hold a small tracking position, biased, not SEBI registered
Godrej Agrovet -
Q4 and FY 24 concall and results highlights -
Q4 outcomes -
Revenues - 2134 vs 2095 cr, up 2 pc
EBITDA - 158 vs 87 cr, up 81 pc, margins @ 7.4 vs 4.2 pc
PAT - 66 vs 23 cr, up 180 pc
FY 24 outcomes -
Revenues - 9561 vs 9374 cr, up 2 pc
EBITDA - 743 vs 630 cr, up 18 pc, margins @ 7.8 vs 6.7 pc
PAT - 359 vs 295 cr, up 21 pc
Segment wise sales, EBITDA -
Animal feed - 5008 vs 4957 cr, EBITDA @ 231 vs 176 cr. Good growth seen in cattle feed and fish feed segments partly offset by poultry feed segment
Vegetable Oils - 1221 vs 1298 cr, EBITDA @ 173 vs 248 cr. This segment saw margin compression due lower output prices
Crop Protection - 815 vs 596 cr, EBITDA @ 254 vs 74 cr. Good performance driven by higher sales of In-House and In-Licensed products
Astec Life - 458 vs 628 cr, EBITDA @ NIL vs 89 cr
Business is showing signs of recovery in Q4 ( in CDMO segment ). First three Qtrs were very tough for the generic business
Creamline Dairy - 1573 vs 1501 cr , EBITDA @ 67 cr vs (-) 11 cr. Dairy segment witnessing a structural turnaround led by cost efficiencies and increase in share of value added products to 36 pc of total sales ( LY it was 32 pc )
Godrej Tyson Foods - 986 vs 1003 cr , EBITDA @ 71 vs 34 cr. Branded business grew by 15 pc in FY 24. Aim to take the branded business to 80 pc of the total before FY 28
Company seeing moderation in fish feed prices in Q1
Seeing some stabilisation in Palm oil prices. Don’t see them falling any further this season
Some new CDMO products are likely to be commercialised wef Jul/Aug at Astec Lifesciences. CDMO business should continue to do well in FY 25 as well. Yet to see a recovery in the generic business. CDMO business is likely to cross > 50 pc of total Astec’s business in FY 25
Creamline Dairy’s business hit an EBITDA margin of 8 pc in Q4. Aim to take the percentage sales of value added products from 36 to 40 pc in FY 25. Company’s focus continues to be on value added products
Expect good growth to continue in cattle and fish feed segment. Growth in poultry segment is a lot more challenging as the industry is much more organised. Animal feed business’s margins were highest in Q4. Company expects the same to continue in FY 25 as well. EBITDA / Ton for animal feed was 1525. FY 25’s EBITDA / Ton is expected to be much better
Yummeiz brand and Real good chicken operate at EBITDA margins of 35 and 15 pc respectively. The EBITDA margins of non-branded live bird business varies between (-) 25 to (+) 25 pc
Earlier the company was into plantation and extraction of crude palm and palm kernel oil. Now they also have solvent extraction and refining plants. They aim to keep adding value to this segment to de-commoditise the business
Consol Capex guidance for FY 25 @ 250 - 300 cr
Disc: hold a small tracking position, biased, not SEBI registered
with dairy business just turning around overall even a 15% topline growth and share of palm oil increasing the ROCE would show a good improvement in 6-8 quarters
Godrej Agrovet Q1 FY25 Analysis: Key takeaways!!
Godrej Agrovet reported strong profitability growth in Q1 FY25 despite a marginal decline in revenues. The company’s profit before tax, excluding non-recurring items, improved by 36% to ₹169 crores compared to ₹124 crores in Q1 FY24. This growth was primarily driven by robust volumes and improved realization in the domestic Crop Protection business and margin expansion in the Animal Feed and Dairy businesses.
Strategic Initiatives:
Trends and Themes:
Industry Tailwinds:
Industry Headwinds:
Analyst Concerns and Management Response:
Concern: Weak performance of Astec LifeSciences.
Response: Management has taken inventory write-downs and is exploring new product opportunities to utilize existing capacities.
Concern: Decline in Animal Feed volumes.
Response: Management expects improvement as milk prices stabilize and the season progresses.
Concern: Sustainability of high margins in Animal Feed and Crop Protection segments.
Response: Management expects to maintain margins around current levels due to favorable commodity positions and product mix.
Competitive Landscape:
The company maintains strong positions in its key segments. In Bangladesh, the joint venture ACI Godrej has grown from the 15th to the 2nd largest Animal Feed company.
Guidance and Outlook:
Management expects EBITDA margins to stabilize between 9-10% in the coming quarters. They anticipate growth in the CDMO business of Astec LifeSciences by 60-70% year-on-year.
Capital Allocation Strategy:
The company has announced a ₹110 crore capex project for Animal Feed in Maharashtra and plans a new refinery in the Oil Palm business with an investment of ₹70-80 crores. Most capex will be managed through internal accruals.
Opportunities & Risks:
Opportunities:
Risks:
Regulatory Environment:
The implementation of the Agri stack initiative by the government is expected to bring significant changes to the agricultural sector, potentially benefiting companies like Godrej Agrovet in the long run.
Customer Sentiment:
Farmers have been reducing feed quantities due to subdued milk prices, impacting the Animal Feed business. However, this trend is expected to reverse as milk prices improve.
Top 3 Takeaways:
Godrej Agrovet (GAVL) is expanding its oil palm operations with a significant investment in Tripura.
The company will establish an oil palm processing mill, expand its nursery capacity, and set up a research and development center in the state.
GAVL will launch a farmer support center to bolster its presence in the region.
Godrej Agrovet -
Q1 FY 25 concall and results updates -
Revenues - 2351 vs 2510 cr, down 6 pc
EBITDA - 235 vs 204 cr, up 15 pc ( includes an exceptional loss of 18 cr due write down of inventory of Astec Lifesciences. Adjusted for that, EBITDA would have been 253 cr )
PAT - 132 vs 107 cr
Segment wise revenue and EBITDA breakdown -
Animal feed - 1155 cr, 78 cr
Vegetable Oils - 215 cr, 23 cr
Crop protection + Astec Life - 383 cr, 115 cr
Dairy - 429 cr, 28 cr
Poultry and Processed food - 234 cr, 24 cr
Boost in profitability in Q1 led buy robust volume and value growth in Crop protection business ( minus Astec ) and margin expansion in Animal feed + Dairy business
EBITDA / Ton in animal feed business improved sharply to Rs 2258/MT vs Rs 1443/MT, however the volumes were adversely affected due to subdued milk prices
Margins in Veg Oils business reduced due lower Oil extraction ratio
Astec’s generic business continued to see sharp price erosions. Also, deferral of CDMO orders further led to margin compression
Margins in Dairy business improved by 490 bps - led by operational efficiencies and better milk spreads. Contribution of Value added products improved to 42 pc from 36 pc of sales ( big jump )
In the poultry segment, company continues to focus on the branded business and de-focus the live bird business
Astec business is showing improvement in the domestic mkt but continues to face challenges from Chinese dumping in the international markets. However, they hope to grow the CDMO business by 60-70 pc CAGR for next 2-3 yrs. LY, Astec’s CDMO business did a revenue of around 260 cr
Post the heat wave in Q1, rains have been good in July. This should ideally improve the oil extraction ratio and hence the performance of Veg Oil business
Company has acquired 100 pc stake in their Godrej-Tyson JV
ACI-Godrej - their JV in Bangladesh is now no2 player in Bangladesh in the animal feed industry. Since they have a local partner, their investment in JV should be safe
Company hopes to clock EBITDA margins of between 9-10 pc for the rest of FY 25 ( in Q1, margins were exceptionally high @ almost 11 pc )
Company intends to set up a new Greenfield capacity for their animal feed business. Should end up spending 110 cr or so for the same
Dsic : holding, biased, not SEBI registered, not a buy/sell recommendation
Godrej Agrovet -
Q2 FY 25 results and concall updates -
Revenues - 2449 vs 2571 cr, down 5 pc
EBITDA - 221 vs 215 cr, up 3 pc ( margins @ 9 vs 8.3 pc )
PAT - 104 vs 105 cr
Segment wise revenues , EBIT -
Animal feed - 1205 vs 1242 cr , EBITDA @ 71 vs 57 cr ( margins @ 6 vs 4.6 pc ). Cattle feed degrew YoY due weak milk prices. Broiler and Layer feed volumes grew by 5.5 and 10.5 pc YoY
Vegetable Oil - 434 vs 435 cr, EBITDA @ 73 vs 68 cr ( margins @ 17 vs 15.6 pc ). Despite a 13 pc decline in fresh fruit bunch arrivals, segment revenues did not decline due improved realisations for Crude Palm Oil and Palm Kernel Oil. Also, GOI has raised the import duties on crude sunflower, soybean and palm oils wef Sep 24
Crop protection - 198 vs 243 cr, EBITDA @ 85 vs 77 cr ( margins @ 43 vs 30 pc !!! ) Erratic rainfalls led to lower spraying opportunities of herbicides by farmers and higher sales returns - leading to a de-growth in topline
Astec Lifesciences - 99 vs 111 cr, EBITDA @ (-) 17 vs (-) 2.4 cr ( margins @ (-) 18 vs (-) 2 pc ). Weakness in generic business continues. CDMO volumes were affected by cautious approach adopted by key customers
Creamline Dairy - 403 vs 390 cr, EBITDA @ 18 vs 12 cr ( margins @ 4.4 vs 3 pc ). Sales of VAP stood @ 32 pc of sales
Godrej Tyson Foods - 197 vs 237 cr, EBITDA @ 5 vs 19 cr ( margins @ 2.7 vs 8.2 cr )
JV - ACI Godrej Agrovet - 410 vs 438 cr
Expecting a very strong H2 in Astec Life’s CDMO business. That should propel Astec’s CDMO revenue growth for full FY 25 to > 400 cr vs 270 cr in FY 24
Share of VAP in Creamline dairy business fell to 32 pc vs 40 pc in Q1 due prolonged rainy season which led to lower sales of curd, buttermilk, lassi etc. Company expects a strong rebound in VAP sales in Q3 and Q4
Vegetable oils should see a better H2 vs H2 LY both because of increased import duties and absence of over-supply in the mkt
Q2 is generally the weakest Qtr of the year for Godrej Tyson business - because of Savan, Shradh periods. This business should see good pick up wef Q3. Also, the chicken and mutton prices were unusually high ( due increased incidence of disease ) in Q2 leading to margin compressions
Expecting a reduction in receivables as they go into H2. Receivables generally build up in Q2 due to the crop protection business. This should also lead to significant debt reduction by end of current FY
In the CDMO business, company currently has 9 molecules in the manufacturing phase. They did not disclose the number of molecules in the development phase
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation
Deepak, it is a good read.
One query w.r.t. the Neuland and DFPCL examples used by you. These are applicable for the Astec Business is what I see (correct me on this, if needed).
These were in general related to cases where market has rerated cases of transition of cases from volatile to stable margins. Astec is also a part of that transformation
Regarding quantum of upside .Cant predict anything
