Godrej Agrovet Shares Have A 42% Upside Potential; ICICI Securities Says Initiating 'Buy'

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ICICI Securities Report

The stronger performance over FY24–25 (16%/19% PAT growth seen in FY24/FY25) has not really reflected in Godrej Agrovet Ltd.’s stock price, with a ~11% dip in the stock price seen in the last 12 months.

At current levels, the stock trades at the lower end of the five-year PER and EV/Ebitda bands. Therefore, we see the robust 26% EPS growth over FY26–28E, coupled with the 600/700 bps boost in RoE/ROCE (FY28E vs FY26E) not fully reflecting in valuations – Applying the average 1 year forward PEG range over FY22-25 (1.3-1.6x) to FY27E/FY28E EPS delivers target price of Rs 843/1820 per share – implying 23-164% upside from current market price.

Our SoTP-based valuation, basis EV/Ebitda multiples of 12–16x based on FY28E for its different business segments and factoring in ~30% of HoldCo discount for Astec on current market price, delivers a target price of Rs 980, ~42% upside from CMP.

We initiate coverage on Gpdrej Agorvet with a Buy rating.

Key risks

Key upside risks:

Good monsoon; decline in competitive pressures; decrease in raw material prices; and higher number of new products.

Key downside risks:

Weaker-than-expected monsoon; steep increase in competitive pressures; increase in raw material prices; lower-than-expected offtake of new products; and an outbreak of disease could result in governmental restrictions on import/export/domestic sale of its fresh chicken or other products.

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