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ICICI Securities Report
Godrej Agrovet Ltd. had reported average Ebitda margin of 8.1% over FY13-22 but its Ebitda margin dropped to 5.6% in FY23 due to steep inflationary pressures.
With correction in commodity prices, its Ebitda margin recovered 130 basis points but it was lower than our expectations.
We model Godrej Agrovet's Ebitda margin to recover to 6.8% in FY25. With lower margins, we also model company's return on capital employed (and value creation) to be muted.
We believe -
weak volumes of shrimp feed (high margin segment) and
losses of dairy segment continue to drag the overall performance.
We model these segments to report muted numbers over next two-three quarters. We downgrade the stock to 'Hold' from 'Add' with discounted cash flow based revised target price of Rs 480 (implied price/earning of 22 times FY25E; earlier target price: Rs 450).
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