Table of Contents
Sector Outlook: Netural
Mixed result across segments
Godrej Agrovet reported a 4.8% YoY revenue drop (up 4.2% QoQ) to ₹24,488 mn, slightly beating expectations. Growth was seen in Dairy (+3%) and other segments (+145%), while Animal Feed (-3%), Crop Protection (-22%), Poultry (-17%), and Vegetable Oil (-2%) faced declines. EBITDA rose 10.9% YoY to ₹2,234 mn, with margins up to 9.1% due to better gross margins. Net profit fell 7.8% YoY and 27.2% QoQ to ₹958 mn, missing expectations. Despite challenges at Astec and price/weather pressures, H2FY25 is expected to improve with higher CDMO revenues, palm oil price gains, and seasonal recovery.
Key Concall Highlights
Animal Feed Business Outlook:
The segment reported a 3% YoY revenue fall for Q2FY25, led by a volume decline of 3% YoY due to lower volumes in cattle feed due to lower milk prices. However, the EBIT margin improved significantly due to favourable commodity positions and optimisation measures. EBIT per ton stood at Rs. 1,953 for Q2FY25, up from Rs. 1,531 in Q2FY24 but down from Rs. 2,258 in Q1FY25. Fish feed revenues were impacted due to erratic rainfall this year. Overall, animal feed volumes have shown a 10% increase month-on-month in October 2024, and demand seems to have recovered.
Oil Palm Business Outlook:
The Segment revenues declined 1.5% YoY, led by the delay in the arrival of fresh fruit bunch (volume down 13% YoY), majorly offset by higher realizations in Crude Palm Oil (CPO) and Palm Kernel Oil (PKO). However, the EBIT margin expanded 135bps YoY to 16.7%, leading to an EBIT growth of 7% YoY to Rs. 736m, led by an improved oil extraction ratio (OER) and increased downstream VAP. Management expects a benefit of Rs130-150 mn during H2FY25 due to the recent rise in palm oil prices, which is considered sustainable.
Domestic crop protection:
In the domestic Crop Protection business segment, revenues dropped by 24% YoY due to erratic rainfall in key states and sales returns in the herbicides category—farmers skipped some pesticide sprays due to excessive rainfall. However, EBIT increased 10% YoY, as margins came in extremely strong at 43% due to lower doubtful debts and control over fixed costs. The company expects to maintain FY24 margin levels in FY25 as well but cautioned that climatic conditions may pose a risk to growth.
Astec LifeSciences:
The company’s topline & profitability were severely impacted due to lower realizations in key enterprise products coupled with lower-than-expected volumes in the CDMO segment due to the cautious approach adopted by CDMO customers. However, a gradual uptick in demand resulted in sequential improvement in performance. In a seasonally weak quarter for the Poultry business, while live bird volumes decreased in line with the strategy to focus on branded business, branded volumes improved marginally, resulting in the shrinking of the top line. Profitability was severely impacted due to unfavourable channel & product mix and elevated input cost. The company is expected to breakeven in H2FY25 and achieve profitability by Q4FY25.
Dairy Business Outlook:
Dairy business revenues increased by 3% annually; demand in this segment was impacted by heavy rainfall, which hurt sales of flavoured milk and other summer products. The salience of value-added products stood at 32% of sales for the quarter. However, management guided to a VAP salience of over 40% for FY25.
Godrej Tyson:
Revenues declined in Q2FY25 compared to Q2FY24, primarily due to lower volumes in the live bird business as Godrej Tyson continued to focus on branded business and reduced exposure to the live bird business.
Valuation and Outlook
Godrej Agrovet delivered a strong Q2FY25, with notable improvements in Animal Feed margins driven by favorable commodity pricing and cost optimization. The Dairy segment also saw enhanced profitability due to operational efficiency and a favorable milk price spread. The domestic Crop Protection business achieved margin growth through better cost control. While Astec faces short-term challenges in its enterprise products and CDMO segment, recovery is anticipated from H2FY25. Rising palm oil prices are boosting the Vegetable Oil segment, with palm fruit volumes expected to increase in H2FY25. Overall, Godrej Agrovet’s performance outlook remains positive for FY25.
