Initiating Coverage | 1 April 2019
Sector: Agriculture
Godrej Agrovet
Processed
Food & Dairy
Palm
Oil
Animal
Feed
Crop
Protection
Agri behemoth in the making
Sumant Kumar - Research Analyst
(Sumant.Kumar@motilaloswal.com); +91 22 6129 1569
Research Analyst : Darshit Shah
(Darshit.Shah@motilaloswal.com); +91 22 6129 1546;
Aksh Vashishth
(Aksh.Vashishth@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Godrej Agrovet
Contents: Godrej Agrovet | Agri behemoth in the making
Summary ............................................................................................................. 3
Company overview............................................................................................... 5
Crop protection biz aided by multiple pillars of strength........................................ 7
Palm oil - a steady cash generating segment ....................................................... 12
Cattle feed – a long runway for organized players ............................................... 18
Dairy - increase in share of VAP to aid margin expansion ..................................... 25
SWOT Analysis ................................................................................................... 27
Bull & Bear case
................................................................................................. 28
Expect EBITDA CAGR of 16% to INR7b over FY18-21 ............................................ 29
Valuation and view............................................................................................. 31
Key risks............................................................................................................. 33
Management overview....................................................................................... 34
Financials and valuations .................................................................................... 35
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Initiating Coverage | Sector: Agriculture
Godrej Agrovet
BSE Sensex
38,673
S&P CNX
11,624
CMP: INR509
TP: INR610 (+20%)
Buy
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
GOAGRO IN
192
97.8 / 1.4
737 / 462
-1/-7/-37
88
31.2
Godrej Agrovet (GOAGRO) is a diversified agri company with pan-India presence and
operations spread across five business verticals. It comprises (i) the crop protection
business, where it is a dominant player in plant growth regulators and triazole chemistry
(via its subsidiary Astec Life Science), (ii) palm oil, where it enjoys leadership in India, (iii)
animal feed- amongst the top player in cattle feed , (iv) dairy and (v) processed foods.
Agri behemoth in the making
Riding on the back of crop protection and the palm oil business
Financial Snapshot (INR b)
Y/E Mar
FY19E FY20E FY21E
Sales
58.6 64.9
73.0
EBITDA
4.7
5.9
7.0
NP
2.4
3.0
3.7
EPS (INR)
12.6 15.7
19.0
EBITDA Gr. (%)
5.2 26.0
18.6
EPS Gr. (%)
11.8 24.0
21.5
RoE (%)
16.4 18.3
19.6
RoCE (%)
14.8 16.8
18.3
EV/ EBITDA (x)
22.3 17.7
14.9
P/E (x)
40.3 32.5
26.7
Shareholding pattern (%)
As On
Dec-18 Sep-18 Dec-17
Promoter
68.8
68.8
68.8
DII
2.9
3.4
17.2
FII
3.0
2.6
3.4
Others
25.3
25.3
10.7
FII Includes depository receipts
Agri behemoth in the making
Godrej Agrovet
The diverse nature of GOAGRO’s various businesses de-risks its operations, enabling
it to focus on growth, optimize capital efficiency and to maintain its competitive
advantage. It undertakes dedicated R&D in existing products, focusing on improving
yields and process efficiencies. Strength of the 'Godrej' brand and its association with
trust, quality and reliability help the company across segments, particularly in those
involving direct sales to retail consumers.
In crop protection, GOAGRO is focusing on multiple product launches with category
expansion; it has guided for ~10 launches over the next 3-5 years with a potential of
INR10b. Growth in Astec will be driven by capacity expansion; GOAGRO plans to
invest INR350-400m every year over the next 3-4 years in triazole chemistry. At a
fixed asset turnover of 2-2.5x, it should aid in revenue CAGR of 15% over FY18-21.
Demand for palm oil in India is not a constraint as >90% of the domestic demand is
imported. To augment the supply of fruits for palm oil manufacturing, the
government has introduced a program to promote its cultivation. GOAGRO — India’s
largest palm oil processor is well placed to capitalize on this opportunity; we expect
revenue/ EBITDA CAGR of 11%/ 12% over FY18-21.
Low compound feed penetration, decline in fodder availability and increasing
crossbred cattle should drive industry-wide growth for cattle feed. GOAGRO, a
leading player in cattle feed is at the forefront to tap this opportunity with the Indian
poultry feed industry expected to grow at 14.9% CAGR over FY17-20. But, pure feed
players like GOAGRO face stiff competition from integrators. We expect the animal
feed segment to deliver revenue/EBITDA CAGR of 14%/12% over FY18-21.
We expect consolidated revenue/ EBITDA CAGR (FY18-21) of 12%/ 16% to INR73b/
INR7.0b. We initiate coverage on GOAGRO with Buy rating and SOTP-based target
price of INR610.
Crop Protection business aided by multiple pillars of strength
Sumant.Kumar@motilaloswal.com
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Sumant Kumar
GOAGRO is the market leader in the domestic plant growth regulators (PGR)
segment and one of the leading players in the cotton herbicide segment. Also,
through its subsidiary — Astec, the company has a strong foothold in the triazole
group of fungicides, selling in India and 24 other countries. Both GOAGRO’s crop
protection business and Astec are well placed to scale up from hereon. In the
standalone business, the company guided for ~10 launches over the next 3-5 years
together with a potential of INR10b, with 2-3 of these expected by Mar’20.
Further, given the abundant demand for triazole chemistry and Astec’s utilization
touching 95%, the company plans to invest INR350-400m every year over the next
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3-4 years for capacity expansion in triazole chemistry. This would ensure its
consolidated crop protection revenue will grow at CAGR of 15% over FY18-21E.
Palm oil – a steady cash generating business
India has a huge opportunity in the palm oil business as it imports more than 90% of
its demand due to supply constraint of fresh fruit brunches (FFBs). Oil palm
plantation in India is regulated and GOAGRO has participated in the government’s
Oil Palm Development Program (OPDP) for accessing FFB produce from farmers in
designated areas, thus being an asset-light model. As at FY17, only 0.3m hectares
are under palm oil cultivation with scope for an additional 2m hectares. GOAGRO
being the largest palm oil manufacturer in India (35% market share) is well placed to
capitalize on this opportunity as the government increases the area under
cultivation. We expect the segment to deliver revenue CAGR of 11% over FY18-21 to
INR8,046m by FY21 on account of increasing availability of FFBs (on higher mix of
mature plants), increase in oil plantation area (currently has access to ~66k hectares
of land and plans to add 2-2.5k hectares per year), and improvement in the Oil
Extraction Ratio (OER). EBITDA margin is likely to expand by 60bp to 22.3% on
operating leverage and improvement in OER.
Animal Feed — strong growth prospect
The overall animal feed industry is expected to grow at ~14% CAGR over FY17-20 to
INR1,065b by FY20 (as per CRISIL).
Cattle feed
— low compound feed penetration,
declining availability of fodder and increased crossbreeding of cows and buffaloes
offers huge opportunity for GOAGRO (being one of the leading players). Also, scaling
up its dairy segment should provide an additional revenue stream for selling its feed
to farmers (over the long term).
Poultry feed —
expect overall poultry feed to grow
at 14.9% CAGR over FY17-20 (65% is organized due to high penetration of
compound feed), but pure feed players like GOAGRO are facing stiff competition
from integrators who supply feed directly to farmers. Thus, scaling up its poultry
processing segment is critical to compete with integrators. Addressing this, the
company has already entered into the live bird market, which constitutes 98% of the
poultry market. In 9MFY19, segment revenue grew 17% YoY to INR22,147m backed
by volume growth of 15.7%, but segment EBIT declined 23.1% YoY to INR824m due
to an increase in raw material prices. However, from FY20, we expect margins to
start inching up on the price hike taken by the company in 4QFY19 and several R&D
initiatives, which should help in cost reduction over the next 2-3 years. Hence, we
expect this segment to clock in revenue CAGR of 14% over FY18-21 to INR37.8b
(EBITDA margin to remain flat over FY18-21).
Initiating coverage with a Buy rating
We expect consolidated revenue/ EBITDA CAGR (FY18-21) of 12%/16% to INR73b/
INR7b. We expect GOAGRO to generate strong CFO of INR12b over FY19-21 and
RoCE should increase to 18.3% by FY21 from 14.7% in FY18. We ascribe (i) 18x
EV/EBITDA multiple to crop protection (avg. RoCE of 35.6% over FY13-18) and 16x to
the oil palm business segment, given GOAGRO’s strong positioning and growth
prospects (avg. RoCE of 30.1% over FY13-18), (ii) 14x EV/EBITDA to animal feed
segment considering its strong RoCE profile (avg. RoCE of 51.3% over FY15-18), and
(iii) 15x EV/EBITDA to dairy and the processed food business, considering its strong
growth prospects. Our SOTP-based target price stands at INR610 implying 20%
upside. We initiate coverage on GOAGRO with a
Buy
rating.
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Company overview
GOAGRO is a diversified agri-business company with operations across five verticals:
(a) animal feed, (b) crop protection, (c) oil palm, (d) dairy, and (e) poultry and
processed foods. The company is focused on improving productivity of farmers by
innovative products and services that increase crop and livestock yields.
GOAGRO operates in the following five verticals:
1. Crop Protection:
Manufactures wide range of products catering to the entire
crop lifecycle, including plant growth regulators, organic manures, generic
agrochemicals and specialized herbicides.
2. Animal Feed:
GOAGRO is one of the largest organized players in the compound
animal feed market in India. Its product portfolio comprises cattle feed, poultry
feed (broiler and layer), aqua feed (fish and shrimp) and specialty feed.
3. Palm Oil:
It produces a range of palm plantation products such as crude palm
oil, crude palm kernel oil and palm kernel cake.
4. Dairy:
GOAGRO operates the dairy business through its subsidiary — Creamline
Dairy Products Limited, selling milk and milk-based products under the ‘Jersey’
brand, mainly in Southern India.
5. Poultry and Processed foods:
In 2008, GOAGRO entered into a JV with US-based
Tyson Foods to manufacture and market processed poultry and vegetarian
products through ‘Real Good Chicken’ and ‘Yummiez’ brands. Now, the
company has acquired majority stake in the JV.
Exhibit 1: Diversified across business segments
GODREJ AGROVET
Crop Protection
(Revenue
Contribution: 17% )
Astec
LifeSciences
(B2B)
Poultry &
processed food
business
Godrej Tyson
Foods
JOINT VENTURE
Dairy (22%)
Cattle, Poultry
and Fish feed
ACI Godrej
Bangladesh
Animal Feed (50%)
Cattle
Poulty
Aqua
Palm Oil (11%)
Source: Company, MOSL
Exhibit 2: Revenue mix trend
Crop Protection
10%
12%
Animal Feed
12%
7%
11%
Palm Oil
21%
10%
82%
79%
78%
68%
53%
16%
FY17
Dairy
22%
11%
50%
17%
FY18
Exhibit 3: EBITDA mix trend
Crop Protection
24%
22%
Animal Feed
19%
19%
Palm Oil
10%
21%
35%
Dairy
6%
22%
33%
57%
57%
59%
54%
8%
FY13
10%
FY14
10%
FY15
13%
FY16
19%
FY13
20%
FY14
22%
FY15
26%
FY16
34%
FY17
39%
FY18
Source: Company, MOSL
Source: Company, MOSL
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Exhibit 4: Inter-linkages between business verticals
Source: Company, MOSL
Exhibit 5: Snapshot of GOAGRO’s businesses
Particulars
Revenue (INRm) - FY18
Revenue Contribution (%)
EBITDA (INRm) - FY18 *
EBITDA Contribution (%)
EBITDA Margin (%)
FY13-18
Revenue Growth
EBITDA Growth
Avg. RoCE
FY18-21
Revenue Growth
EBITDA Growth
Industry
Market Size (INRb)
Unorganized Players (%)
Market Share of GOAGRO (%)
Key raw materials
Crop Protection
8,818
17%
2,215
39%
25.1%
31.8%
34.5%
35.6%
15.2%
15.6%
296 (FY17)
NA
2.6%
Not available
Animal Feeds
25,760
50%
1,856
33%
7.2%
2.8%
4.3%
51.3% ***
13.7%
12.4%
720 (FY17)
Poultry – 15-20%
Cattle- 88%
Aqua – 28%
Poultry – 2.4%
Cattle- 7.4%
Maize, Soybean, Rice
Oil Extraction, DORB
Palm Oil
5,854
11%
1,270
22%
21.7%
16.3%
15.6%
30.1%
11.2%
12.2%
483 (FY17)
NA
35%
GOAGRO purchases
Fresh Fruit
Bunches from farmers
Dairy
11,577
22%
342
6%
3.0%
106.0%**
197.4%**
2.5% **
5.8%
26.1%
6,911 (FY16)
74%
0.04%
Milk
* Unallocated expenses has not been taken into account in EBITDA calculation | ** Over FY15-18
*** Excluded FY13 & FY14 as company outsourced its manufacturing activity
Source: Company, Industry, MOSL
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Crop protection biz aided by multiple pillars of strength
Capacity expansion in Astec and new launches to drive growth
The company has guided for ~10 product launches over the next 3-5 years in its
standalone crop protection business with a potential of INR10b. 2-3 out of the 10 new
products should hit the market by Mar’20.
GOAGRO’s subsidiary, Astec LifeSciences, plans to invest INR350-400m every year to
expand capacity in triazole chemistry over the next 3-4 years. This should aid revenue
CAGR of 15% over FY18-21 for Astec.
Backward integration of intermediates is expected to result in ~200bp margin
expansion over FY18-21 in Astec.
GOAGRO has a strong presence in the crop protection market with plant growth
regulators, organic manures, generic agrochemicals and specialized herbicides. It
also has a subsidiary — Astec LifeSciences, which manufactures and sells AI (Active
Ingredient), bulk and formulations, and intermediate products with a focus on the
triazole group of fungicides across India and 24 other countries. As of FY18,
GOAGRO’s standalone business contributed 58% to the overall crop protection
revenue while Astec contributed the remaining 42%.
Exhibit 6: Mix of consolidated crop protection revenue (FY18)
GOAGRO
Standalone
58%
Astec
42%
Astec
Domestic
20%
Astec Export -
Triazole
13%
Astec
Export -
CRAMS
9%
Source: Company, MOSL
Due to the complimentary nature of GOAGRO and Astec’s operations, a scale-up in
operations can be achieved. In India, GOAGRO sells its entire range of products to
retail consumers via 6,000 distributors and 20,000 retailers; Astec, on the other
hand, caters to institutional customers with focus on triazole chemistry. Hence,
GOAGRO can leverage Astec’s AIs and develop formulations for the retail market.
We expect GOAGRO’s consolidated crop protection revenue to grow at a CAGR of
15% over FY18-21E.
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Exhibit 7: Consolidated crop protection revenue to post 15%
CAGR over FY18-21E
Total crop protection revenue (INRm)
48
37
10
15
16
14
15
503
659
859
1,012 1,825 2,215 2,503 2,937 3,419
54
22.7
21.7
Growth %
Exhibit 8: Consolidated crop protection margins to expand
30bp over FY18-21E
Total crop protection EBITDA (INRm)
25.6
20.4
23.9
25.1
24.5
Margin %
25.2
25.4
2,213 3,040 3,352 4,959 7,647 8,818 10,199 11,675 13,476
FY13
FY14
FY15
FY16
FY17
FY18 FY19E FY20E FY21E
Source: Company, MOSL
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E
Source: Company, MOSL
New launches, category expansion in standalone crop protection business
The company is the market leader in plant growth regulators’ (PGR) segment, with
Vipul, Double, Combine, Bountee
and
Zymegold
as the key products. The overall
market size of the PGR segment in India is INR12-13b, growing at 3-4% CAGR. The
company hopes to maintain its fast pace of growth over the next three years,
beating industry growth rate due to new combination formulations. But, it is
challenging to consistently expand within a segment that is growing at a slow rate.
Hence, GOAGRO expects to diversify with new launches in existing segments and
through category expansion. The company has guided product launches with a
potential of INR10b over the next 3-5 years.
GOAGRO is one of the leading players in cotton herbicide with its product
Hitweed,
a
9(3) product patented until 2022 and catering to plants with broad leaves. Plans are
afoot to launch a superior version of
Hitweed
to continue enjoying the strong
market share even after its patent expiry. Besides, the company plans to launch
products catering to tea, chilli and cotton, and also to expand into an all-together
new category. Overall, its launch pipeline over the next 3-5 years has ~10 products;
of this 2-3 are expected to hit the market by Mar’20.
Exhibit 9: The following new products were launched in 1HFY19:
Type
Herbicides
Insecticides
Fungicides
Product
Reflex, Pixel
Annova, Beleaf, Czaar Green, Fimecta, Dartus
Oute
Source: Company, MOSL
We believe multiple product launches from GOAGRO’s crop protection business
should translate into standalone revenue CAGR of 15% over FY18-21.
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Exhibit 10: Standalone crop protection business to post
revenue CAGR of 15% over FY18-21E
Standalone Crop Protection Revenue (INRm)
Growth %
25
16
10
4,661
FY17
5,142
FY18
12
18
21.7
Exhibit 11: Margins in standalone crop protection business
to contract by 100bp over FY18-21E
Standalone Crop Protection EBITDA (INRm)
Margin %
29.1
28.8
28.6
25.6
22.9
22.6
28.1
10
3,040
FY14
3,352
FY15
11
3,725
FY16
5,751
6,671
7,872
659
FY14
859
FY15
854
FY16
1,054
FY17
1,495
FY18
1,658
1,911
2,214
FY19E FY20E FY21E
Source: Company, MOSL
FY19E FY20E FY21E
Source: Company, MOSL
Astec — Steady triazole chemistry to lead the way
Astec is one of the established names in the manufacture and sale of triazole
chemistry. As of FY18, 50% of Astec’s business (B2B sale of technical and bulk
triazole chemistry) is in the domestic market, while the remaining 50% is the exports
business (60% triazole chemistry and 40% contract manufacturing (CRAMS)).
Collectively, 80% of Astec’s overall business (as of FY18) is primarily into triazoles.
At present, Astec is involved with four triazoles — tropiconazole, hexaconazole,
depaconazole and disiliconazole, which are used in solo triazole products or
combination products. But, even if the industry introduces new triazole
combinations, the company is capable of venturing into them given its expertise and
strong technical knowledge in triazoles.
Exhibit 12: Astec’s domestic revenue to grow at 18% CAGR
over FY18-21E
Astec Domestic Revenue (INRm)
29
22
15
1,305
-13
1,305 1,498
FY14
FY15
FY16
1,587 1,600 2,070 2,329 2,608
FY17
FY18 FY19E FY20E FY21E
Source: Company, MOSL
758
FY14
1,163
FY15
1
13
12
-23
892
FY16
1,302
FY17
1,965
FY18
2,378
2,675
2,996
Growth %
Exhibit 13: Astec’s export revenues to grow at 15% CAGR
over FY18-21E
Astec Exports Revenue (INRm)
53
46
51
21
Growth %
13
12
FY19E FY20E FY21E
Source: Company, MOSL
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Exhibit 14: Astec’s product portfolio
Technicals
Tebuconazole technical
Propiconazole technical
Hexaconazole technical
Difenoconazole technical
Metalaxyl technical
Tricyclazole technical
Imazethapyr technical
Lambda cyhalothrin
Formulations
Tebuconazole
Propiconazole
Hexaconazole
Difenoconazole
Metalaxyl
Tricyclazole
Imazethapyr
Lambda cyhalothrin
Source: Company, MOSL
Combination Fungicides
Difenoconazole 13.9% + Propiconazole 13.9% EC
Difenoconazole 15% + Propiconazole 15% EC
Difenoconazole 25% + Propiconazole 25%
Cyproconazole 8% + Propiconazole 25%
Metalaxyl 8% + Mancozeb 64%
Intermediates
2,4 – dichloro acetophenone
4 – phenyl 1- butane
2 – chloro 4 – fluoro acetophenone
4 – methyl pthalic anhydride
Thiophene 2 – ethanol
Backward integration makes production cost efficient:
By far, Astec is a superior
player in terms of operational efficiency at low cost of production due to its fully
backward integrated capabilities. Therefore, it’s a preferred supplier for many global
giants like Sumitomo, Adama and Nufarm; and for players in domestic market like
Adama, Syngenta, Dhanuka, Bharat Rasayan and Insecticides India.
Due to backward integration, it has reduced its dependency on intermediates supply
from China significantly (from 35-40% of raw material cost to 20-25% now). Most
recently, it has backward integrated another set of intermediates at a capex of
INR400m, which should aid in margin expansion of ~200bp over a period of 2-3
years.
Exhibit 15: Astec’s margins to expand by 190bp over FY18-21E
Astec EBITDA (INRm)
25.8
20.3
16.4
12.8
19.6
19.0
20.5
21.5
Margin %
Astec’s strengths
340
FY14
541
FY15
316
FY16
771
FY17
721
FY18
845
FY19E
1,026
FY20E
1,205
FY21E
Source: Company, MOSL
Investments in capacities to propel growth in triazole
Currently, Astec’s capacities have hit 95% utilization mark and more capex is
required to push volumes higher. With land and basic infrastructure in place, the
company plans to invest INR350-400m every year over the next 3-4 years for
capacity expansion focused towards triazole chemistry. Given that a typical capex
entails a total asset turnover of 1.3x and a fixed asset turnover of 2-2.5x, the
revenue CAGR of 15%+ for the next 3-4 years is achievable. We expect revenue
CAGR of 15% over FY18-21.
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Exhibit 16: Sales growth movement vis-à-vis gross block movement
Astec Gross Block Growth %
18
17
7
-13
-48
FY16
29
Astec Sales Growth %
28
19
23
21
FY14
FY15
FY17
FY18
Source: Company, MOSL
Vast opportunity in CRAMS; growth to be lumpy but strong
Currently, the CRAMS business forms ~20% of Astec’s total revenue. As it is highly
dependent on contracts/tie-ups with clients, the business is expected to witness
gradual expansion.
As it is witnessing traction in terms of enquiries from global giants like Bayer,
Syngenta and many Japanese companies; it has kept basic infrastructure for capacity
expansion ready to jump on the bandwagon as and when the order book demands.
The revenue share of CRAMS business is expected to increase significantly in the
next 4-5 years from 20% currently. However, growth is not likely to be consistent on
a YoY basis as it is highly dependent on contract initiation and execution. But, the
CRAMS business is expected to grow faster than the triazole business over the next
five years, increasing its share in overall revenue.
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Palm oil - a steady cash generating segment
Largest palm oil producer in India
Global palm oil consumption for 2017 stood at 65MMT with India accounting for
~14% share. India has huge opportunity in the palm oil business as it imports more
than 90% of its demand due to supply constraint of FFBs.
For FY18-21, we expect the palm oil segment’s revenue CAGR at 11% to INR8,046m,
which is due to increased availability of FFBs (as higher maturity plants start yielding
fruits), increase in coverage area and improvement in OER.
We expect palm oil’s EBITDA margins to expand by 60bp over FY18-21 to 22.3% on
account of operating leverage, improvement in the OER directly flowing to EBITDA,
and any improvement in palm oil prices.
Demand not a constraint as >90% of domestic demand is imported
In the global supply of vegetable oils, palm oil accounts for the highest share at 30%,
despite having a meager 6% share in the global harvest area. It is a critical ingredient
in most consumer products from soaps and shampoos to margarine and chocolates,
cosmetics and even biofuels. Palm oil has good consumer acceptance as a cooking
medium too as it is cheaper than most other vegetable oils.
Exhibit 17: Uses of palm oil
Food Products
Cooking Oil, Dough fat, Vanaspati
Vegetable Ghee
Margarine
Salad Oil
Chocolate/Ice-cream/ Frying fats, Specialty fats for coatings
Cocoa Butter substitutes
Non Food Products
Bio fuel and Bio lubricants
Cosmetic products/Aromatherapy
Pharmaceuticals products
Toiletries, Detergents including soaps & soap Blends
Esters
Oleo chemicals, Fatty acids & Fatty Alcohols
Source: Industry, MOSL
Exhibit 18: Palm plantation occupies 6% of harvested area…
Gloabl Harvested Area - 276mn ha
6%
29%
43%
9%
13%
Palm
Soya
Rapeseed
Sunflower
Others
Exhibit 19: …but forms 30% of total vegetable oil production
Global Oil Production - 214mn ha
Palm Oil
25%
30%
Soya Oil
Rapeseed Oil
8%
12%
25%
Sun Oil
Others
Source: Advance Enzyme Presentation , MOSL
Source: Advance Enzyme Presentation, MOSL
Palm gives the highest oil yield of 4-6 tons per hectare/year with a global average of
3.74 tons per hectare/year, which no other oilseed crop produces. In India, farmers
have obtained 6-8 tons per hectare/year, highest being 10 tons per hectare/year.
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Exhibit 20: Palm oil prices are lower amongst other
vegetable oils…
Exhibit 21: …and has higher yields/hectare
Yield/ hectare (MT)
3.74
0.38
Soybean
Source: Greenpalm.org , MOSL
0.48
Sunflower
0.67
Rapeseed
Palm Oil
Source: Advance Enzyme Presentation, MOSL
In the last 15 years, global demand for oils and fats (vegetable oil) has doubled from
92MMT in FY2000 to 180MMT in FY15. The four major vegetable oils — palm (30%),
soya bean (25%), rape seed and mustard (12%), and sunflower (8%) contributed 75%
to the total world oil production. Of the total palm oil production of 62.4MMT
(FY17), ~85% of the palm oil is produced by Indonesia and Malaysia. In 2017, global
palm oil consumption stood at 65MMT. India’s share in total palm oil consumption
stood at 14% at ~9.3MMT, with over 90% being met by imports.
Exhibit 22: Palm oil has a 64% share in edible oil imports in
India
Import share of edible oils in India - FY17 (15.1MMT)
2%
Palm oil
11%
Soybean oil
15%
64%
Sunflower oil
Rapeseed oi
19%
25%
Exhibit 23: India is the largest palm oil importer
Top 6 Palm Oil Importing Countries - FY17
5%
5%
34%
India
European Union
China
Pakistan
Bangladesh
United States
18%
Source: CARE, MOSL
Source: USDA Estimates (Aug 2017), MCX, MOSL
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Exhibit 24: Top-2 countries contribute 85% to the global
palm oil production (62.2MMT – FY17)
Nigeria; 2% Others; 9%
Colombia;
2%
Thailand;
3%
Indonesia;
55%
Pakistan; Malaysia;
5%
4%
Exhibit 25: India has a 14% market share in global palm oil
consumption (65MMT – 2017)
Indonesia;
15%
Others;
45%
India; 14%
Indonesia
India
EU
China
EU; 10%
China; 8%
Malaysia
Pakistan
Others
Malaysia;
30%
Source: USDA Estimates (Aug 2017), MCX, MOSL
Source: USDA Estimates (Aug 2017), MCX, MOSL
Government’s push to encourage oil palm plantation
More than 90% of India’s palm oil requirement is imported from Indonesia and
Malaysia. Thus, in order to encourage oil palm plantation in India, the government
launched the Oil Palm Development Program (OPDP) during 1991-92 to promote the
culture of palm oil plantation.
In India, ~1.9m hectares can be brought under oil palm cultivation, of which ~24% is
located in Andhra Pradesh (AP). In 2QFY19, GOAGRO commenced operations of its
new palm oil processing plant located in AP with 0.24MMT processing capacity
(capex of INR1,800m), thereby taking its total processing capacity to 1.04MMT.
Thus, the new plant will be able to process arrival of additional FFBs over the next 3-
4 years.
Exhibit 26: Additional area of 2.0m Hectare can be brought
under palm oil cultivation
Current Area
(m Hectare)
0.3 *
* as on FY17
Potential area for cultivation
(m Hectare)
2.0
Total
2.3
Exhibit 27: AP has the highest potential area to be brought
under cultivation
States
Andhra Pradesh (AP)
Gujarat
Karnataka
Tamil Nadu
Bihar
Maharashtra
Meghalaya
Mizoram
Others
Total
* as on FY17
Potential Area Identified
(m hectares)
0.47
0.26
0.26
0.21
0.20
0.18
0.05
0.06
0.25
1.93
% share
24
13
13
11
10
9
3
3
13
100
Source: Company, MOSL
Source: Company, MOSL
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Exhibit 28: GOAGRO has the highest market share of 35% in
palm oil production
Exhibit 29: Yield if the oil palm plant increases progressively
Bearing Potential (MT/Ha)
16%
8%
11%
30%
35%
GOAGRO
Ruchi Soya
Nava Baharat
3F
Others
0.0
0-3
years
Source: Company, MOSL
4th
year
5th
year
6th
year
5.0
8.0
11.0
15.0
18.0
18.0
18.0
7th
year
8th
year
9th
year
10th
year
Source: NMOOP, MOSL
Import duty of 40% on crude palm oil
An increase in palm oil plantation led to subdued palm oil prices globally. To support
the domestic palm oil industry, the Indian government increased import duty on
crude palm oil to 44% in Feb’18, but later reduced it to 40% in Jan’19.
Exhibit 30: Import duty providing support amidst declining global palm oil prices
Crude palm oil
Refined palm oil
40%
25%
15.0%
7.5%
FY2016-17
Aug-17
Nov-17
Feb-18
Jan-19
Source: CRISIL, MOSL
15%
30%
44%
54%
40%
45%
Higher fruit availability to drive revenues
We expect revenues to grow at 11% CAGR over FY18-21 to INR8,046m mainly on
account of an increase in availability of FFBs (as higher maturity plants start yielding
fruits), increase in coverage area and improvement in the OER.
Well distributed maturity profile of plants to ensure higher fruit availability with
an increase in the plant’s age, yield also increases (refer exhibit 29). Well
distributed maturity profile of the oil palm plantation (66,400 hectares as of
6MFY19) would ensure higher availability of FFBs in the coming years as the age
of plants increases.
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Exhibit 31: Well distributed maturity profile of plantation to
ensure higher availability of FFBs
GOAGRO - Age profile of area under cultivation
(hectares) - FY18
Exhibit 32: Area under cultivation grew at 8% CAGR over
FY13-18
GOAGRO's oil palm plantation area (hectares)
1/3rd
1/3rd
1/3rd
21,354
21,354
21,354
64,125 66,400
55,287 58,430 61,700
43,507 50,324
Upto 3 years
3-8 years
>8 years
Source: Company, MOSL
FY13
FY14
FY15
FY16
FY17
FY18
1HFY19
Source: Company, MOSL
GOAGRO targets to add 2,000-2,500 hectares land every year GOAGRO has
66,400 hectares (as on Sept’18) under coverage for oil palm plantation (area
under coverage has increased at 8% CAGR over FY13-18). Management targets
to add 2,000-2,500 hectares to its land under cultivation every year to ensure
FFBs availability.
Biomass - providing an additional revenue stream
In the palm oil production chain, large quantities of biomass by-products (up to
almost ~4-5x of the oil production) are produced. For instance, 100MT of FFBs
processed produces 20% of palm oil (including palm kernel) while the rest is
biomass (80%). Of the biomass generated, small portion is sold in the form of
briquettes and protein with the rest sold as fiber.
Thus, some of the biomass produced is used as an animal feed ingredient, which
provides additional source of revenue to the palm oil business, as well as
strengthens the cost competitiveness of the animal feed business.
The revenue generated from biomass is sufficient to assist in covering the fixed
cost (3-4% of the sales) of the business.
Improvement in OER and global palm oil prices to aid in expanding margin
We expect EBITDA margins to expand by 60bp over FY18-21 to 22.3% on account of
improvement in OER, operating leverage (improvement in the utilization of the new
plant) and any improvement in global palm oil prices.
Improvement in OER to directly flow to EBITDA
Currently, OER for FFBs stands at 16-18%. The new plant in Andhra Pradesh is
expected to improve OER. Any improvement in OER would directly flow to EBITDA
and thus aid in expanding margins.
Exhibit 33: Revenue to grow at 11% CAGR over FY18-21E
Palm Oil Revenue (INRm)
25.3
18.2
15.5
4,042
2.6
FY16
5,066
FY17
5,854
FY18
6,713
FY19E
14.7
7.5
7,219
FY20E
8,046
FY21E
734
FY16
1,157
FY17
1,270
FY18
1,350
FY19E
1,573
FY20E
1,796
FY21E
11.4
Growth (%)
Exhibit 34: Margin to expand by 60bp over FY18-21E
Palm Oil EBITDA (INRm)
22.8
21.7
20.1
Margin (%)
21.8
22.3
Source: Company, MOSL
Source: Company, MOSL
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Any improvement in global palm oil prices should aid in margin expansion
GOAGRO directly purchases FFBs from farmers based on the prices determined by
the government (linked to global palm oil prices). Indian palm oil prices are
protected by the government, thanks to the import duty, but international prices
still have a bearing on the prices in India. Thus, any improvement in global palm oil
prices will directly flow to the EBITDA of the company.
Exhibit 35: Global palm oil price trend
1,500
1,250
1,000
750
500
250
0
(20.1)
8,924
(7.5)
10,803
12,528
(19.5)
Malaysia/ Indonesia Crude Palm Oil
Realization/ MT USD (CIF Rottterdam)
Exhibit 36: Global palm oil prices and GOAGRO’s EBITDA/MT
trend
GOAGRO's EBITDA/MT
Growth in Global Crude Palm Oil Prices (%)
24.9
13,810
Source: Bloomberg, MOSL
Source: Bloomberg, Company, MOSL
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Cattle feed – a long runway for organized players
Pure broiler feed players facing competition from integrators
The Indian animal feed industry is expected to grow at 13.9% CAGR over FY17-20 to
INR1,065b (as per CRISIL). The growth can be mainly attributed to the poultry segment
(14.9% CAGR over FY17-20 to reach INR735b by FY20).
Decline in fodder availability (due to declining pasture land), increased cross-breeding
in cows and buffaloes, and the shift from unorganized to organized players should aid
in driving cattle feed sales of GOAGRO.
Though, the poultry feed industry in India is expected to grow at 14.9% CAGR over
FY17-20, pure feed players like GOAGRO are facing stiff competition from integrators.
Therefore, scaling up Godrej Tyson is critical for the company to compete with forward
integrated players.
Hence, we expect the animal feed business revenue/ EBITDA to grow at 14%/ 12%
CAGR over FY18-21 to INR37,875m/ INR2,638m.
GOAGRO is one of the largest organized players in the compound animal feed
market in India. Its product portfolio comprises cattle feed, poultry feed (broiler and
layer) and aqua feed (fish and shrimp), manufactured at its 31 plants spread across
India. Also, GOAGRO has an established strong network of over 4,000 distributors.
Exhibit 37: Animal feed industry to grow at 13.9% CAGR over FY17-20
Feed Segment
Poultry Feed
Cattle Feed
Aqua Feed
Total
Volume MMT
FY17
FY20
16-17
20-21
7.5-8.5
9-10
1.6-1.8
2.1-2.3
25.1-27.3
31.1-33.3
Volume Growth %
FY17-20
7.5%
5.9%
9.0%
7.1%
Value INR b
FY17
480-490
148-150
85-86
715-725
FY20
730-740
197-199
131-132
1,060-1,070
Value Growth %
FY17-20
14.9%
9.9%
15.4%
13.9%
Source: Company, MOSL
Exhibit 38: Poultry feed dominates the animal feed market
Indian Animal Feed Industry Size (FY17- INR715-725b)
12%
21%
67%
Exhibit 39: Poultry & cattle feed constitute 87% share in
GOAGRO’s revenue
GOAGRO Animal Feed Revenue - INR25.8b (FY18)
13%
45%
42%
Poultry Feed
Cattle Feed
Aqua Feed
Poultry Feed
Cattle Feed
Aqua Feed
Source: Company, MOSL
Source: Company, MOSL
In the overall animal feed industry, poultry feed occupies the largest share of
volume/value mix at 63%/67% on increased penetration of compound feed,
especially in the broiler segment. In contrast, the share of cattle feed is lower at
21% (volume: 31%) as farmers rely on pasture land as a means of feed.
The total animal feed segment contributed ~50% to the revenue of the company
with an EBITDA contribution of 33%. Segment EBITDA margin has declined to
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7.2% in FY18 from 9.1% in FY15 (with flat revenues over the same period),
mainly due to increasing competition from unorganized players on low entry
barriers, increasing raw material price pressure and rising competition from
integrators in poultry feed.
We expect the animal feed segment to post revenue CAGR of 14% over FY18-21
to INR37.8b. Segment EBITDA margins should decline by 20bp over FY18-21.
Cattle-feed:
The animal feed segment revenue grew at a meager 0.4% CAGR
over FY15-18 to INR25.8b; while revenue from cattle feed grew at 16.4% CAGR
over the same period to INR10.8b. This led to the cattle feed segment
increasingly contributing to animal feed revenues in FY18 at 42%, which stood at
27% in FY15.
Poultry-feed:
This segment’s performance has remained subdued (de-grew at
7.7% CAGR) over FY15-18 due to food processing players integrating backwards
into the broiler feed segment. Processing companies/ integrators directly supply
feed to farmers, thus, pressurizing pure feed players like GOAGRO.
In 9MFY19, the animal feed segment registered revenue growth of 17% YoY to
INR22,147m, backed by volume growth of 15.7%. The growth is attributable to
the broiler segment wherein (a) the company launched products catering to
small integrators, and (b) the layer segment witnessed strong growth. However,
segment EBIT declined by 23.1% YoY to INR824m, mainly due to an increase in
raw material prices. However, from FY20, we expect margins to start increasing
as the company took a price hike in 4QFY19 and also due to some R&D
initiatives, which would aid in reducing costs over the next 2-3 years.
GOAGRO has a strong presence in the cattle feed segment and it intends to
scale up volumes in the broiler/ layer segment (tailor-made product for small
integrators).
Exhibit 41: EBITDA margin to decline by 20bp over FY18-21
Animal Feed EBITDA (INRm)
8.2
11.9
13.1
7.4
7.2
5.0
Margin (%)
7.0
Exhibit 40: Revenue to grow at 14% CAGR over FY18-21
Animal Feed Revenue (INRm)
16.2
25,442
26,208
3.0
0.0
25,760
(1.7)
29,929
FY16
FY17
FY18
FY19E
33,482
FY20E
37,875
FY21E
Growth (%)
6.4
2,077
FY16
1,926
FY17
1,856
FY18
1,493
FY19E
2,133
FY20E
2,638
FY21E
Source: Company, MOSL
Source: Company, MOSL
Recently Amul (India’s largest milk processor) has started supplying cattle feed
directly to farmers. Therefore, over the long term, scaling up of GOAGRO’s
processed food manufacturing (Godrej Tyson) and dairy (Creamline) businesses
is critical for its feed business. The company may also resort to inorganic
acquisitions to scale-up at a faster pace.
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Milk production in India expected to grow at 4% CAGR over FY17-23 to 209MT
India is the world’s largest milk producer producing 165MMT (FY17) of milk.
Majority of the milk produced is consumed domestically and surplus production is
converted
in
to Skimmed Milk Powder (SMP) for export. Milk prices were subdued in
the last four years due to a supply glut. Additionally, global SMP prices tumbled
from USD4,744/ton in FY14 to USD1,925/ton in FY18, making SMP exports unviable
(cost of manufacturing SMP is above USD2,857/ton).
Exhibit 42: Milk production grew at 6.0% CAGR over FY13-17
All India Milk Production (In 000 Tonnes)
6.3
4.0
6.3
Growth (%)
6.4
Cattle feed: a leading player in the segment
Exhibit 43: Milk prices increased by 2.4% CAGR over FY15-18
Avg Wholesale Milk Price (INR/litre)
12.7
13.8
Growth (%)
6.7
7.6
37.0
2.6
37.1
4.5
0.1
38.7
FY17
39.5
9MFY19
132,431
FY13
137,686
FY14
146,314
FY15
155,491
FY16
165,404
FY17
24.5
FY11
27.6
31.4
FY13
33.5
36.1
FY15
Source: DAHD, MOSL
Source: CEIC, MOSL
Shortage of Fodder supply
Preference given to food
crops and cash crops over
fodder cultivation
Diversified use of
agricultural residues has led
to grazing lands gradually
diminishing
Increased mechanization in
farming activity has led to a
decline in agricultural
waste, a source of fodder
Compound cattle feed - the only resort to shortage of fodder supply
Genetics, feed and fodder, cattle management and environment have a significant
bearing on the milk producing capability of cattle (quantity and nutritive value).
Livestock reared by villagers depend on crop byproducts, grass from roadside and
other marginal lands for feed. Wheat, maize and rice bran are commonly used as
feed, but the use of concentrates is rather limited. Thus, a major share of this
industry is still unorganized as small-scale farmers do not use compound cattle
feed, while large-scale dairy farms using compound feed are few.
But, with increasing scarcity of fodder, farmers will have to use compound feed to
ensure balanced nutrition for cattle.
Exhibit 45: Dry fodder supply deficit trend
Dry Fodder
Demand (MMT)
Supply (MMT)
Exhibit 44: Green fodder supply deficit trend
Green Fodder
Demand (MMT)
Supply (MMT)
1995
2000
2005
2010
2015
2020
2025
1995
2000
2005
2010
2015
2020
2025
Source: DAHD, MOSL
Source: DAHD, MOSL
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Genetics do matter, but compound feed ensures higher yields
Genetics of the breed is a key factor for gauging milk production — 76% of the
milk production is contributed by crossbred cows (27%) and buffaloes (49%),
despite forming just 47% of the total animal population; this is on account of its
higher yields.
The total number of milk producing animals (crossbred cows, indigenous cows,
buffaloes and goats) grew at 2% CAGR over FY13-17 to 124.3m. However, during
the same period, number of crossbred cows and buffaloes grew at 5.9% and
2.1%, respectively.
Farmers usually feed their animals with locally available concentrate
ingredients, unmindful of an animal’s requirement. This leads to lower milk
production v/s the genetic potential of the animal or higher production cost due
to imbalance feeding. Thus, in order to ensure cattle/ buffaloes produce milk
according to their producing capacity, compound feed should be used.
Exhibit 46: Feed requirement per cow (in kg)
S. No.Type of animal
1
6 to 7 liters milk
per day
8 to 10 liters milk
per day
Feeding during
Lactation days
Dry days
Lactation days
Dry days
Green Fodder Dry Fodder Concentrate/ Compound
20 to 25
5 to 6
3.0 to 3.5
15 to 20
25 to 30
20 to 25
6 to 7
4 to 5
6 to 7
0.5 to 1.0
4.0 to 4.5
0.5 to 1.0
Source: DAHD, MOSL
2
Poultry feed market to grow at 14.9% CAGR over FY17-20
The poultry industry can be broadly divided into two segments — broiler and layer.
The broiler segment represents chicken for meat consumption while the layer
segment represents egg-laying chickens. Poultry egg and meat are important
sources of high quality proteins, minerals and vitamins for a balanced diet.
As per OECD-FAO Agricultural, India’s protein consumption (gm/day/person) grew at
1.0% CAGR over 2000-13 to 61.5gms/day in 2013. However, going forward, it is
expected to grow at 1.3% CAGR over the next 10 years to 70.3gms/day by 2023; the
higher growth is on account of increasing per capita income, change in consumption
pattern and increased urbanization.
Broiler segment — forward integration the only resort for pure feed players
While Meat production in India grew at 8.9% CAGR over FY01-17 to 7.4MMT;
poultry at ~47% is the highest contributor, followed by buffaloes at ~20%.
In the broiler segment, 90-95% of the feed production is in the form of compound
feed. Majority of the organized feed is manufactured by integrators who produce
70-75% of the total manufactured feed, which is typically used for captive purposes.
The balance feed is sold to individual farmers. In contrast, specialist feed
manufacturers primarily sell the feed.
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Exhibit 47: Meat production grew at 5.6% CAGR over
FY13-17
Meat Production (In 000 Tonnes)
7.3
4.8
4.9
5.2
Growth (%)
Exhibit 48: Broiler prices grew at 3.6% CAGR over FY13-18
Broiler Rates/kg (INR)
15.3
70.3
65.0
-3.1
-7.6
FY16
8.9
6.4
Growth (%)
5,948
FY13
6,235
FY14
6,691
FY15
7,020
FY16
7,386
FY17
62.9
FY13
72.6
FY14
FY15
70.8
FY17
75.3
FY18
76.1
10M
FY19
Source: DAHD, MOSL
Source: Poultry Bazar, MOSL
Exhibit 49: …contribution of poultry is 47%
Species-wise meat contribution (FY17)
6%
5%
47%
Poultry
Buffalo
Goat
Sheep
Pig
20%
Cattle
Exhibit 50: Proforma P&L of farmer
Particulars
Sales
Less: Direct Cost
Cost of chicks
Cost of feed
Cost of medicine and labor cost
Gross Profit
Margin %
INR (based to 100)
100.0
78.4
16.4
54.9
7.1
21.6
21.6%
Source: Industry, MOSL
8%
14%
Source: DAHD, MOSL
Evolution of chicken vertical integration in the US; India on the same path
In the early days of the broiler business, the different stages of producing broiler
meat were all separate businesses. There were independent feed mills, hatcheries,
farms and processors. However, in the 1940s, ‘integrators’ combined the different
stages of production by coordinating the production capacity of each stage; thereby
reducing costs. Thus, integrators started supplying feed to farmers giving stiff
competition to pure feed players.
Backward integration by integrators – a threat to pure feed player
Integrated poultry players use the contract farming model, rather than indulging in
captive farming. Under contract farming, integrators provide day-old chicks with
feed, medications, vaccinations and advisory services to farmers. The health, feed
intake, growth, and mortality level of these day-old chicks is the responsibility of the
farmers and is monitored by the integrator. In the case of broiler farming, at the end
of six weeks, the full grown bird is returned to the integrator, who then sells this
bird as live or processes it. In the Indian market, pure feed manufacturers like
GOAGRO are facing stiff competition from integrators/ processing companies like
Venky/ Suguna.
Tyson Foods, USA, to compete with other industry players
In 2008, GOAGRO entered into a JV with Tyson Foods, USA, to manufacture and
market processed poultry and vegetarian products through its two brands ‘Real
Good Chicken’ and ‘Yummiez’. Through this JV, GOAGRO is combining its supply
chain expertise and Tysons’ capabilities in vertically-integrated poultry processing
and product development (currently company has acquired 51% stake in Godrej
Tyson).
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GOAGRO — a leading player in the layer feed segment
India has emerged as the third largest egg producer (88b eggs) in the world growing
at 5.6% CAGR over FY01-17.
The total poultry feed requirement in India has been estimated at 21-22MMT, based
on the overall poultry population and typical feed conversion ratios. Of this, ~16-
17MMT was contributed by compound feed in FY17.
In FY17, the poultry feed industry (comprising broiler and layer feeds) was worth
INR480-490b. The same is growing at CAGR of 14-15% and is expected to be worth
INR730-740b by FY20.
Broiler feed comprised 85% of the industry (13.5-14.5MMT) in FY17, while layer
feed stood at 2-3MMT. In the layer segment, 25-35% of the feed production is in the
form of compound feed as against 90-95% in the broiler segment. Usage of layer
feed is expected to increase with a rise in usage of compound feed and growth in
the overall egg production. Production cost of eggs is directly proportional to the
feed cost. Egg-laying chicken are fed maize, corn, broken rice, groundnut cakes,
jowar, bajra, and soya (mixed with amino acids) to augment yields. As a result, when
grain prices increase, egg production costs rise in tandem. That apart, distance
between the egg and the feed production centers also determines the price of eggs.
Exhibit 51: Egg production grew at 6% CAGR over FY13-17
India Egg Production (In lakh nos.)
7.2
5.0
5.7
Growth (%)
6.3
Exhibit 52: Proforma P&L of farmer
Particulars
Sales
Less: Direct Cost
Cost of chicks
Cost of feed
Cost of medicine and labour cost
Gross Profit
INR (based to 100)
100.0
86.9
3.4
75.8
7.7
13.1
13.1%
Source: DAHD, MOSL
697,307
FY13
747,519
FY14
784,839
FY15
829,294
FY16
881,386
FY17
Margin %
Source: DAHD, MOSL
Bangladesh Animal Feed Business:
GOAGRO has 50:50 JV with Bangladesh-based
Advanced Chemical Industries Limited (ACI). Incorporated in 2004 and named ACI
Godrej Agrovet Private Limited (ACI Godrej), it produces cattle, poultry and fish
feed. Over the last decade, it has become a leading player and ranks among the top-
4 players across all categories of animal feed in Bangladesh.
Aqua Feed contributes ~6% to the GOAGRO’s overall revenue
In FY18, revenue from aqua feed stood at INR3,349m (contributed ~13% to the total
animal feed segment revenue and 6% to overall GOAGRO’s revenue), of which a
major part was contributed by the fish feed segment.
Fisheries industry in India:
The industry is concentrated in the southern and the
eastern parts of India. The export market is relatively smaller than the domestic
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market, but is largely organized. In sales volume, the organized fish feed market is
expected to grow at 3-4% CAGR over FY17-20 to 0.8-0.9MMT in FY20 from 0.7-
0.8MMT in FY17.
Shrimp industry in India:
As ~80% of the shrimp cultivated in India is exported, the
industry uses compound shrimp feed and complies with the international quality
standards. In volume terms, the shrimp feed industry in India grew at 13-14% CAGR
over FY13-14 to 0.9-1.0 MMT in FY17. However, in FY19, decline in global shrimp
prices and increase in raw material costs, adversely impacted shrimp feed
manufacturing companies in India.
A large part of the shrimp exports market is catered to by aquaculture leading to
higher usage of shrimp feed by organized players. But, wild catch commands a
higher share in case of fisheries, leading to a lower usage of fish feed.
Exhibit 54: Shrimp feed to grow at 17-18% CAGR over FY17-
20
Shrimp Feed Industry in India
Sales Value (INRb)
104-105
64-65
27-28
Exhibit 53: Fish feed to grow at 8-9% CAGR over FY17-20
Organized Fish Feed
Industry in India
21-22
16-17
Sales Value (INRb)
26-27
FY13
FY17E
FY20P
Source: Company, MOSL
FY13
FY17E
FY20P
Source: Company, MOSL
Key raw material for the animal feed segment
Exhibit 55: Maize price trend
Maize (INR/Quintal)
2,200
1,900
1,600
1,300
1,000
4,400
4,000
3,600
3,200
2,800
Exhibit 56: Soybean price trend
Soybean (INR/Quintal)
Source: AgMarknet, MOSL
Source: AgMarknet, MOSL
Decline in realization for farmers can adversely affect choice in feeds
Feed cost accounts for ~60-70% of the total direct cost to farmers. Thus, any decline
in realization leads to the farmer cutting the feed quantity or using a cheaper,
unbranded compound feed with lower nutrients. Additionally, any increase in raw
material prices may be difficult for a company to pass on to farmers as it already
accounts for
a higher share in the cost.
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Dairy - increase in share of VAP to aid margin expansion
Godrej Tyson shifting focus to the live bird market
The organized players in the Indian dairy industry are expected to grow at 20% CAGR
over FY16-22 to INR5,321b (grew at 17.5% CAGR over FY10-16).
Increasing share of value added products (VAP) (currently less than 25%) and
procuring milk directly from farmers should aid margin improvement. Thus, we expect
the dairy segment revenue/ EBITDA to grow at 6%/ 26% CAGR over FY18-21 to
INR13,722m/ 686m by FY21.
In the processed food segment, the company intends to scale up its presence in the
live bird market (as it accounts for 98% of the poultry market in India). We expect
Godrej Tyson’s revenue/ EBITDA to grow at 12%/ 33% CAGR over FY18-21 to
INR6,142m/ 491m.
We believe over the long term, GOAGRO is well placed to scale up its dairy and poultry
processing businesses by leveraging the Godrej brand, which should also aid
GOAGRO’s animal feed sales.
Organized dairy industry in India to grow at 20.0% CAGR over FY16-22
GOAGRO operates the dairy business through its subsidiary Creamline Dairy selling
milk and milk-based products under the ‘Jersey’ brand. It owns and operates nine
milk processing units catering to the states of Telangana, Andhra Pradesh, Tamil
Nadu, Karnataka and Maharashtra. Milk procurement by GOAGRO is done through
its network of 120 chilling centers spread across six states.
Although India is the largest producer and consumer of milk, the per capita
consumption of milk stood at 97 liters/year, which is well below other major milk
markets (except for China). Milk production in India is expected to increase from
165MMT in FY17 to 209MMT in FY23 (4.0% growth CAGR), and total consumption of
milk and dairy products is expected to increase from 154MMT in FY17 to 205MMT in
FY23 (4.9% growth CAGR).
Increase in share of value added products (VAP) to aid in expanding dairy
segment margins
Creamline Dairy grew its revenues at 11.2% CAGR over FY13-18 to INR11.6b in
FY18 through a wide distribution network of ~4,000 milk distributors, ~3,000
milk product distributors and 50 retail parlors, while it also sold directly to
institutional customers. The revenue/ EBITDA contribution from the dairy
segment stood at 22%/6% in FY18.
Currently, value added products like curd,
lassi,
butter milk,
paneer, ghee,
doodh-peda,
milk powder, ice-cream, flavored milk contribute less than 25% to
the revenue of the dairy segment. Management intends to increase this further
by leveraging its distribution network, which would also aid in improving the
margin profile of the company.
Currently, GOAGRO procures ~85% of its milk requirement from agents or from
smaller companies, but going forward, it intends to directly procure from
farmers, which would benefit in multiple ways: (a) decrease the procurement
cost, (b) improve the quality of milk, and (c) cross-selling—sale of GOAGRO’s
cattle feed to farmers (over the long term).
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Thus, scaling up of the dairy business is also critical to the cattle feed business as
going forward, cooperative societies/ private companies may start with
backward integration (similar to broiler processing companies).
GOAGRO’s growth strategy for the dairy business is to: (i) leverage its brand to
increase its market share in India’s southern states, (ii) increase margins by
increasing share of value-added products in the portfolio and (iv) increase the
milk procurement base directly through farmers, which would also aid in
increasing sales of its cattle feed division.
The company has changed its strategy of milk procurement; it procures more
milk from cows now rather than buffaloes due to a decline in SMP and butter
prices. Currently, 70% of its milk requirement is met by cows, which was 52% a
year ago.
Hence, we expect the segment to deliver revenue CAGR of 6% over FY18-21 to
INR13,722m in FY21. We expect, EBITDA margin to expand by 200bp to 5.0% by
FY21.
Exhibit 58: EBITDA margin to expand by 200bp
Dairy Revenue (INRm)
5.2%
5,321
3.0%
3.6%
EBITDA Margin (%)
4.5%
5.0%
Exhibit 57: Organized dairy industry growth to outperform
the unorganized sector over FY16-22
Indian Dairy
Industry
Unorganized (INRb)
Organized (INRb)
1,784
677
2,643
FY10
5,127
FY16
11,047
1.4%
2,729
10,099
FY17
11,577
FY18
11,766
FY19E
12,589
FY20E
13,722
FY21E
FY22
Source: Company, MOSL
FY16
Source: Company, MOSL
Godrej Tyson - focus shifts to scaling up in the live bird market
In FY16, India’s per capita poultry meat consumption was ~3.7kg/year,
compared to the world average of ~17kg/year. Although, India’s per capita
consumption is lower, overall poultry consumption has been growing at 15-20%
CAGR over the last decade. This growth is attributable to an increase in the
average household income, increase in popularity and number of fast food
restaurants, as well as a shift in preference for white meat over red meat.
In FY17, poultry meat production in India was ~3.5MMT. The poultry market,
currently valued at INR5.65b, contributes ~48% to the total meat output. Of the
total poultry meat market, the live poultry market constitutes 98% of total sales
since most consumers prefer freshly culled chicken meat, while processed
chicken meat production comprises 2%.
GOAGRO operates its processed foods business through Godrej Tyson (earlier JV
with Tyson Foods, USA; but, GOAGRO increased its stake to 51% in Godrej Tyson
on 27th March, 2019). Since India is a live bird market, GOAGRO is increasing its
focus in this space and in processed foods (would also aid in scaling up broiler
feed sales).
Against this backdrop, we expect Godrej Tyson’s revenue/ EBITDA to grow at
12%/ 33% CAGR over FY18-21 to INR6,142m/ 491m by FY21.
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SWOT Analysis
Strong brand
pedigree aids in
attracting and
retaining customers
Operates across
diversified business
segments
Market leader in PGR
Seasonal nature of
business leads to
volatility in earnings
Feed cost accounts
for 60-70% of the
total cost for the
farmer, therefore, it
may be difficult for
GOAGRO to pass on
the price increase in
raw materials
Lower penetration of
compound feed in
cattle and layer
segment provides huge
runway for growth
Scaling up of dairy and
processed food
segments to provide
complementary sales of
feed to farmers
Scaling up the
consumer businesses by
leveraging the Godrej
brand
Increased raw material
prices in animal feed
and crop protection can
affect profitability
Intense competition
from fully-integrated
players in broiler feed
Decline in rainfall can
impact crop protection
and palm oil business
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Bull & Bear case
Bull case
In the crop protection business, we have factored in higher sales/ EBITDA CAGR
of 17%/21% over FY18-21 v/s base case assumption of 15%/ 16% CAGR due to
line-up of product launches in the domestic business and capacity expansion in
Astec. We have also factored in higher EV/ EBITDA multiple of 19x v/s base case
multiple of 18x.
In palm oil, we have factored in higher processing volume growth of 14% CAGR
over FY18-21 v/s our base case assumption of 10%.
In animal feed, new launches should aid revenue growth. Easing of raw material
prices should help in improving margins. Thus, we have factored in higher
revenue/ EBITDA CAGR of 15%/ 19% over FY18-21 v/s base case assumption of
14%/ 12%.
Carrying the above assumptions, we get a bull case target price of INR729
(upside of 43%) based on FY21E EBITDA (v/s base case target price of INR610).
Bear Case
In the crop protection business, we have factored in lower sales/ EBITDA CAGR
of 10%/ 10% over FY18-21 v/s base case assumption of 15%/ 16% CAGR as the
line-up of product launches may fail to pick up as expected (have also factored
in the decline in margins).
In palm oil, we have factored in lower processing volume growth of 8% CAGR
over FY18-21 v/s our base case of 10%. We have factored in lower EV/ EBITDA
multiple of 13x v/s base case multiple of 18x in palm oil & crop protection.
In animal feed, competition from integrators, especially in the broiler segment
should intensify further and therefore, we have factored in a decline in margins.
We have factored in revenue/ EBITDA CAGR of 11%/ 9% over FY18-21 v/s base
case assumption of 14%/ 12%. We have also factored in lower EV/ EBITDA
multiple of 11x v/s base case multiple of 14x.
Carrying the above assumptions, we get a bear case target price of INR395
(downside of 22%) based on FY21E EBITDA (v/s base case target price of
INR610).
Exhibit 59: Scenario analysis – bull case
Bull Case
Sales (INR m)
Sales growth (%)
EBITDA (INR m)
EBITDA Margin (%)
EBITDA growth (%)
PAT (INR m)
PAT growth (%)
Target price (INR)
Upside/downside (%)
FY19E
58,276
11.9
4,694
8.1
6.0
2,494
14.8
FY20E
66,136
13.5
6,207
9.4
32.2
3,288
31.8
FY21E
75,772
14.6
7,718
10.2
24.4
4,230
28.6
729
43
Source: Company, MOSL
Exhibit 60: Scenario analysis – bear case
Bear Case
Sales (INR m)
Sales growth (%)
EBITDA (INR m)
EBITDA Margin (%)
EBITDA growth (%)
PAT (INR m)
PAT growth (%)
Target price (INR)
Upside/downside (%)
FY19E
57,118
9.7
4,596
8.0
3.7
2,422
11.5
FY20E
62,492
9.4
5,363
8.6
16.7
2,708
11.8
FY21E
67,980
8.8
6,017
8.9
12.2
3,058
12.9
395
(22)
Source: Company, MOSL
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Expect EBITDA CAGR of 16% to INR7b over FY18-21
To generate CFO of INR12b over FY19-21
Animal feed and crop protection to drive revenue
We expect GOAGRO’s revenue to grow at 12% CAGR over FY18-21 to INR73b on
growth in the animal feed and crop protection business. Animal feed (AF) which
accounted for ~50% (FY18) of the overall revenue is expected to grow at 14%
CAGR over FY18-21 to INR37.9b driven by cattle and the layer feed segment.
In the crop protection segment, we expect revenue CAGR of 15% over FY18-21
to INR13,476m on increasing product launches, abundant demand of triazole
chemistry, and the company’s strategy to strengthen its presence in PGR (via
combination of products).
Palm oil segment is expected to clock in revenue CAGR of 11% over FY18-21 to
INR8,046m mainly due to an increase in the availability of fruits.
Exhibit 62: Crop protection and AF dominates revenue mix
Crop Protection
7%
11%
21%
10%
Animal Feed
22%
11%
50%
20%
11%
51%
Palm Oil
19%
11%
52%
Dairy
19%
11%
52%
Exhibit 61: Revenue to grow at 12% CAGR over FY18-21
Revenue (INRm)
31.2
Growth (%)
13.4
5.7
37,550
FY16
49,264
FY17
52,059
FY18
12.5
10.8
12.5
68%
53%
58,588
FY19E
64,895
FY20E
73,004
FY21E
13%
FY16
16%
FY17
17%
FY18
17%
FY19E
18%
FY20E
18%
FY21E
Source: Company, MOSL
Source: Company, MOSL
EBITDA margins to expand across businesses except animal feed
Overall EBITDA margins are expected to expand by 100bp over FY18-21 to 9.5%
mainly due to improvement in the crop protection and palm oil business. Margin
expansion in the crop protection segment is expected on account of an increase
in backward integration in Astec and line-up of new launches over the next 2-3
years.
In the palm oil segment, operating leverage due to improving utilization of the
new plant and improving OER directly flows to EBITDA to aid margin expansion
(60bp over FY18-21 to 22.3%).
In the dairy segment, increase in share of value added products and direct
sourcing of milk from farmers is expected to expand margins by 200bp over
FY18-21 to 5.0%.
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Exhibit 63: EBITDA margin to expand by 100bp over FY18-21
EBITDA (INRm)
7.9
8.9
8.5
8.0
Margin (%)
9.0
9.5
Exhibit 64: EBITDA mix
Crop Protection
1%
19%
54%
10%
21%
35%
34%
FY17
Animal Feed
6%
22%
33%
39%
FY18
7%
23%
26%
43%
FY19E
Palm Oil
8%
22%
30%
41%
FY20E
Dairy
8%
21%
31%
40%
FY21E
2,965
FY16
4,380
FY17
4,430
FY18
4,660
FY19E
5,870
FY20E
6,963
FY21E
26%
FY16
Source: Company, MOSL
Source: Company, MOSL
To generate CFO of INR12b over FY19-21
We expect GOAGRO to generate strong CFO of INR12,032m over FY18-21, which is
mainly deployed towards capex and reducing debt. RoE/ RoCE are expected to
increase from 17.9%/ 14.7% in FY18 to 19.6%/ 18.3% by FY21.
Exhibit 65: Adj. PAT to grow at 19% CAGR over FY18-21
Adj PAT (INRm)
35.1
24.0
1,693
(2.5)
2,287
FY16
FY17
FY18
2,172
(5.1)
2,428
FY19E
3,010
FY20E
3,657
FY21E
11.8
3,293
1,587
FY15
FY16
FY17
FY18
FY19E
FY20E
FY21E
3,721
3,688
3,773
21.5
Growth (%)
Exhibit 66: To generate CFO of INR12b over FY19-21
Reclassification of acceptance
under IndAS in FY17
9,534
4,570
CFO (INRm)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 67: ROE and RoCE to improve going ahead
30.0
23.8
RoE (%)
25.5
17.9
17.5
13.2
15.7
16.4
14.8
18.3
16.8
19.6
18.3
RoCE (%)
Exhibit 68: Net DE ratio to improve further
Net Debt (INRm)
1.6
1.0
0.6
0.3
6,307
12,744
FY16
6,102
FY17
FY18
FY19E
FY20E
0.2
0.2
Net DE Ratio (x)
3,799
3,345
2,965
2,225
14.7
0.1
FY21E
FY15
FY16
FY17
FY18
FY19E
FY20E
FY21E
FY15
Source: Company, MOSL
Source: Company, MOSL
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Valuation and view
Initiating with Buy
GOAGRO is a diversified, research and development focused agri-business with
operations spread across five business verticals.
Crop protection:
Given GOAGRO’s strong growth prospects backed by capacity
expansion in Astec, 2-3 planned product launches by FY20, and better return
ratios (avg. RoCE of 35.6% over FY13-18), thus, we ascribe
EV/EBITDA FY21 of
18.0x
to the standalone crop protection business and Astec.
Palm Oil:
There are no listed companies in India into palm oil processing. But,
globally, palm oil processing companies also engage in plantation, thus, making
it an asset-heavy business. However, Indian palm oil processing companies
operate through an asset-light business model (get access to fruits without
owning the land), which leads to higher return ratios. Thus, we assign
EV/EBITDA FY21 of 16.0x
considering the asset-light business model and its
return profile (avg. RoCE of 30.1% over FY13-18).
Animal Feed:
Increasing competition from integrators in the broiler segment
and increasing raw material cost pressure are the key near-term concerns;
however, given the strong RoCE profile (avg. RoCE is 51.3% over FY15-18) as
GOAGRO operates through negative working capital, we assign
EV/ EBITDA FY21
of 14x.
Dairy:
Increase in share of VAP and direct sourcing of milk from farmers would
improve the margin profile of the business (EBITDA CAGR of 26% over FY18-21);
thus, we assign
EV/EBITDA FY21 of 15.0x.
Processed Foods:
Apart from processed food, GOAGRO intends to scale up its
presence in the live bird market (as it forms 98% of the poultry market in India).
We assign
EV/ EBITDA FY21 of 15x
considering the strong brand of the Godrej
group, which can be leveraged to scale up the business.
We expect consolidated revenue/ EBITDA CAGR (FY18-21) of 12%/ 16% to
INR73b/ INR7b. Our SOTP-based target price stands at INR610, which implies
20% upside. We initiate coverage on GOAGRO with a
Buy
rating.
Exhibit 70: 1year forward P/E
Avg (x)
Min (x)
-1SD
P/E (x)
Min (x)
57
49
41
37.6
33.7
33.7
50.3
43.9
Avg (x)
+1SD
Max (x)
-1SD
Exhibit 69: 1year forward EV/EBITDA
EV/EBITDA (x)
Max (x)
+1SD
30
26
22
18
14
17.9
17.9
26.8
23.4
33
25
Source: Bloomberg, MOSL
Source: Bloomberg, MOSL
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Exhibit 71: Initiate with an upside of 20%
Particulars
Standalone
Crop Protection
Palm Oil
Animal Feed
Unallocated expenses
Total
Subsidiaries
Astec
Creamline Dairy
Godrej Tyson Foods Limited
JV/ Associate
ACI Godrej Agrovet Private Limited
Total
CMP (INR)
Upside (%)
668
8,383
15.0
16.9
10,013
141,737
10,013
139,512
50
5,006
26
610
509
20
4
100
1,205
686
491
18.0
15.0
15.0
21,688
10,292
7,371
911
204
20,777
10,088
7,371
57
52
51
11,937
5,237
3,759
62
27
20
10
4
3
2,214
1,796
2,638
(1,314)
5,334
18.0
16.0
14.0
10.0
17.3
39,854
28,731
36,929
-13,141
92,374
1,110
39,854
28,731
36,929
-13,141
91,263
100
100
100
100
100
39,854
28,731
36,929
-13,141
91,263
208
150
192
(68)
475
34
25
32
-11
78
EV
EBITDA
EV/
FY21E
EBITDA (x) (INR m)
(INR m)
Net Debt
(INR m)
Equity
GOAGRO's Value
Value
share (%) (INR m)
(INR m)
Value/
share
(INR)
% Share
Exhibit 72: Peer comparison
Company Name
M Cap
(INR b)
Revenue CAGR % EBITDA CAGR %
FY18-21E
FY18-21E
19.2
14.3
9.1
12.8
13.9
15.2%
14.7
NA
NA
14.7
13.7%
13.0
15.8
14.2
10.6
13.6
5.8
NA
12
11.9
15.1
23.7
6.5
13.2
14.6
15.6
0.0
NA
NA
0.0
12.4
20.4
19.2
15.1
22.9
19.1
26.1
NA
33
16.3
RoCE %
FY18
20.8
15.8
21.8
14.6
18.3
22.6
53.6
21.8
60.4
53.6
38.5
25.4
13.0
6.7
9.2
9.6
1.8
31.9
14.7
EV/ EBITDA (x)
FY20E
FY21E
19.3
23.7
10.3
9.3
15.6
16.4
19.4
9.1
8.0
13.2
PE (x)
FY20E
FY21E
27.6
41.0
14.9
14.9
24.6
23.4
31.3
13.2
12.7
20.1
Crop Protection:
PI Industries Ltd
142
Bayer CropScience Ltd
149
Dhanuka Agritech Ltd
19
Rallis India Ltd
31
Average
GOAGRO's Crop Protection Segment
Animal Feed:
Avanti Feeds Ltd
58
Waterbase Ltd
7
KSE Ltd
4
Average
GOAGRO's Animal Feed Segment
Dairy:
Hatsun Agro Product Ltd
108
Parag Milk Foods Ltd
22
Prabhat Dairy Ltd
8
Heritage Foods Ltd
25
Average
GOAGRO's Dairy Segment
Processed Food (PF):
Venky India
33
GOAGRO's PF Segment
Godrej Agrovet
98
10.1
NA
NA
10.1
7.7
NA
NA
7.7
15.4
NA
NA
15.4
NA
NA
NA
NA
21.9
8.4
4.7
12.1
11.8
17.0
7.2
4.2
10.1
7.2
64.5
15.7
10.3
24.3
16.8
45.7
13.0
9.1
19.3
13.8
7.7
17.7
NA
14.9
13.6
32.5
NA
26.7
Source: Bloomberg, MOSL
1 April 2019
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Godrej Agrovet
Key risks
Decrease in realization for milk/ broiler/ eggs
Feed cost usually accounts for 60-70% of the total direct cost for farmers. Thus, any
decrease in the realization of milk/ broiler/ egg for farmers will directly impact the
feed consumption as farmers would either resort to unbranded feed or compromise
on the quality of feed.
Increase/ shortfall in the availability of raw material
GOAGRO does not enter into long-term contract with its supplier for raw material.
Rather, it acquires from the open market. Thus, it is difficult for GOAGRO to pass on
an increase in raw material prices to farmers, as feed cost accounts for 60-70% of
the total direct cost.
Decrease in palm oil import duty by the government
The Government of India plays a vital role in development of the palm oil industry
providing various subsidies to farmers, processing companies and imposing import
duty on crude palm oil. More than 90% of the domestic palm oil demand is
imported, and therefore, global palm oil prices have a significant bearing on
domestic realizations. Average price of crude palm oil has declined over the last 2-3
years; thus, making it difficult for the domestic palm oil industry to compete. Against
this backdrop, the government increased import duty on crude palm oil to 40% due
to declining prices. In case of a further decline in palm oil prices, the government
may not be able to raise duty, which in-turn could affect the realization of GOAGRO
and affect the farmer’s interest in cultivating the oil palm plant.
Unfavorable weather patterns may have an adverse effect on the business
Adverse weather conditions may cause volatility in commodity prices and hence in
the acreage of crops, thereby impacting the consumption of agrochemicals.
Resistance development reduces life of product
The effective life of agrochemicals gets reduced over time, as the targeted pests
develop resistance to them. Constant innovation and regular introduction of newer
agrochemicals is essential for effectively eliminating pest attacks.
1 April 2019
33
 Motilal Oswal Financial Services
Godrej Agrovet
Management overview
Mr. Nadir B. Godrej, Chairman
Mr. Nadir B. Godrej with a rich experience in leading businesses has played an
important role in developing the animal feed, crop protection and chemical
businesses owned by the Godrej group. His active interest in research has resulted
in several patents for the company in the field of agricultural chemicals and
surfactants. He is a member of the CII National Council, the President of Alliance
Française de Bombay, and was the Chairman of the CII National Committee on
Chemicals. He has a Bachelor's degree in Science from the Department of Chemical
Engineering, Massachusetts Institute of Technology, and has a Master's degree in
Business Administration from Harvard University.
Mr. Balram Singh Yadav, Managing Director
Mr. Yadav has been associated with GOAGRO since 1992. He has experience in sales,
marketing and operations in animal feed, crop protection, poultry and the palm oil
businesses. He became Business Head for the integrated poultry business in 1999,
and was involved in establishing the ‘Real Good Chicken’ and ‘Yummiez’ brands in
India. He was appointed Executive Director and President of the company in 2007
and as the Managing Director in 2009. He has a Bachelor's degree in Agriculture
from the Haryana Agricultural University and has a Post Graduate Diploma in
Management from the Indian Institute of Management, Ahmedabad.
Mr. S. Varadaraj, Chief Financial Officer
Mr. Varadaraj took over as the Head of Finance and Systems in 2005. He is a
Chartered Accountant, a qualified Cost Accountant and also holds a Master's degree
in Financial Management. He joined GOAGRO as a Management Trainee in May
1994.
1 April 2019
34
 Motilal Oswal Financial Services
Godrej Agrovet
Financials and valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Raw Material Cost
Employees Cost
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
FY14
31,025
12.4
25,041
1,298
2,272
28,610
92.2
2,414
7.8
276
2,139
403
149
1,885
0
1,885
506
26.9
-186
1,565
1,565
62.8
5.0
FY14
132
5,055
5,187
0
6,205
435
11,827
5,234
578
4,655
0
1,492
1,288
8,326
3,193
2,259
1,145
1,729
3,934
2,296
1,519
120
4,391
11,827
FY15
33,118
6.7
26,157
1,334
2,568
30,059
90.8
3,059
9.2
370
2,690
655
137
2,172
364
2,536
605
23.9
-170
2,101
1,736
10.9
5.2
FY15
926
5,478
6,404
0
6,848
565
13,818
6,417
975
5,443
0
1,380
1,858
8,847
3,888
2,693
175
2,092
3,711
2,141
1,434
136
5,136
13,818
FY16
37,550
13.4
29,451
1,557
3,577
34,585
92.1
2,965
7.9
524
2,441
977
627
2,091
946
3,037
754
24.8
-356
2,639
1,693
-2.5
4.5
FY16
926
6,906
7,832
2,323
13,757
1,458
25,369
12,139
564
11,575
1,949
638
2,140
14,930
6,665
4,545
420
3,299
5,862
3,349
2,312
202
9,067
25,369
FY17
49,264
31.2
37,905
2,328
4,651
44,884
91.1
4,380
8.9
747
3,633
863
590
3,360
200
3,560
1,018
28.6
55
2,487
2,287
35.1
4.6
FY17
1,851
8,237
10,088
2,541
6,641
1,663
20,933
14,109
1,329
12,779
1,949
504
1,755
15,157
7,381
5,219
538
2,019
11,212
8,408
2,496
308
3,946
20,933
FY18
52,059
5.7
39,536
2,763
5,329
47,629
91.5
4,430
8.5
859
3,571
453
318
3,436
121
3,557
1,207
33.9
57
2,292
2,172
-5.1
4.2
FY18
1,920
12,193
14,114
2,693
4,098
1,730
22,635
15,185
2,214
12,971
1,949
1,904
1,952
16,749
7,629
6,315
299
2,507
12,890
9,550
2,955
385
3,859
22,635
FY19E
58,588
12.5
45,177
2,990
5,762
53,929
92.0
4,660
8.0
990
3,670
349
521
3,842
0
3,842
1,298
33.8
116
2,428
2,428
11.8
4.1
FY19E
1,920
13,582
15,502
2,899
3,848
1,730
23,979
17,833
3,204
14,629
1,949
1,506
1,952
18,783
8,717
6,742
503
2,821
14,840
11,081
3,326
433
3,943
23,979
FY20E
64,895
10.8
49,191
3,245
6,590
59,026
91.0
5,870
9.0
1,121
4,749
328
389
4,811
0
4,811
1,636
34.0
165
3,010
3,010
24.0
4.6
FY20E
1,920
15,552
17,472
3,163
3,598
1,730
25,963
20,163
4,325
15,838
1,949
1,426
1,952
20,928
9,703
7,467
633
3,125
16,130
11,967
3,684
479
4,798
25,963
(INR m)
FY21E
73,004
12.5
55,191
3,577
7,272
66,040
90.5
6,963
9.5
1,260
5,703
306
445
5,843
0
5,843
1,987
34.0
200
3,657
3,657
21.5
5.0
(INR m)
FY21E
1,920
17,938
19,858
3,471
3,348
1,730
28,408
22,554
5,585
16,969
1,949
1,535
1,952
23,894
10,856
8,400
1,123
3,515
17,892
13,208
4,144
539
6,003
28,408
1 April 2019
35
 Motilal Oswal Financial Services
Godrej Agrovet
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
8.2
9.6
27.0
1.3
18.8
FY15
9.0
11.0
33.4
3.7
39.3
FY16
8.8
11.5
40.8
2.1
18.8
FY17
11.9
15.8
52.5
4.5
41.9
42.7
32.2
9.7
2.2
24.3
0.9
36.6
25.5
15.7
12.9
3.5
2.4
55
39
62
1.4
4.2
0.6
FY17
3,727
747
715
-800
5,145
9,534
-561
8,973
-1,949
7,024
610
366
-974
8
-7,027
-861
0
0
-7,881
119
419
538
FY18
11.3
15.8
73.5
4.5
45.6
45.0
32.3
6.9
2.0
23.5
0.9
5.7
17.9
14.7
12.9
3.4
2.3
53
44
67
1.3
7.9
0.3
FY18
3,717
859
453
-837
-471
3,721
-183
3,538
-2,448
1,091
-131
51
-2,528
2
-2,571
-455
-1,045
2,818
-1,250
-240
538
299
FY19E
12.6
17.8
80.7
4.5
42.8
40.3
28.6
6.3
1.8
22.3
0.9
7.5
16.4
14.8
12.6
3.3
2.4
54
42
69
1.3
10.5
0.2
FY19E
3,842
990
-172
-1,298
326
3,688
0
3,688
-2,250
1,438
0
611
-1,639
0
-250
-349
-1,040
-206
-1,845
204
299
503
FY20E
15.7
21.5
91.0
4.5
34.5
32.5
23.7
5.6
1.6
17.7
0.9
7.9
18.3
16.8
14.9
3.2
2.5
55
42
67
1.3
14.5
0.2
FY20E
4,811
1,121
-62
-1,636
-461
3,773
0
3,773
-2,250
1,523
0
488
-1,762
0
-250
-328
-1,040
-264
-1,881
130
503
633
FY21E
19.0
25.6
103.4
5.5
34.8
26.7
19.9
4.9
1.4
14.9
1.1
10.8
19.6
18.3
16.5
3.2
2.6
54
42
66
1.3
18.7
0.1
(INR m)
FY21E
5,843
1,260
-140
-1,987
-406
4,570
0
4,570
-2,500
2,070
0
554
-1,946
0
-250
-306
-1,271
-309
-2,135
489
633
1,123
0.3
1.5
33.6
16.5
21.6
5.9
2.6
38
27
27
2.1
5.3
1.0
FY14
2,071
276
375
-421
-29
2,271
-172
2,099
-1,818
281
-68
-16
-1,901
0
1,402
-421
-251
0
729
927
219
1,146
0.7
0.0
30.0
17.5
22.4
5.2
2.4
43
30
24
2.4
4.1
1.0
FY15
2,706
370
620
-557
-1,552
1,587
-499
1,088
-1,094
-5
-131
-44
-1,269
0
566
-650
-706
0
-790
-970
1,146
175
0.4
2.4
23.8
13.2
11.3
3.1
1.5
65
44
33
2.5
2.5
1.6
FY16
3,364
524
885
-456
-1,024
3,293
-1,610
1,683
-1,223
460
581
-3,581
-4,223
39
4,168
-972
-452
0
2,784
244
175
419
1 April 2019
36
 Motilal Oswal Financial Services
REPORT GALLERY
RECENT INITIATING COVERAGE REPORTS
.
Rs
 Motilal Oswal Financial Services
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
*
In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
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company at the end of the month immediately preceding the date of publication of the Research Report.
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short
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Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may
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Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
Godrej Agrovet
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
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Disclosure of Interest Statement
Analyst ownership of the stock
Godrej Agrovet
No
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Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or
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distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all
jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees
to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm
Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-38281085.
Registration details of group entities: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100.Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409)
offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate
products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
*MOSL
has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f. August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench. The existing registration no(s) of
MOSL would be used until receipt of new MOFSL registration numbers.
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