Godrej Agrovet Ltd Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Netural

Strong growth in profitability, better recovery expected ahead

Godrej Agrovet Ltd. reported a 4.5% year-on-year revenue growth, reaching Rs. 24,496 million, slightly exceeding market expectations of Rs. 24,400 million. The company saw growth in its Vegetable Oil (+37%), Dairy (+1%), and other businesses (+27%), while its Animal Feed (-1%), Crop Protection (-13%), and Poultry and Processed Food (-3%) segments experienced declines. EBITDA increased by 38.3% year-on-year, reaching Rs. 2,200 million, with a margin of 9%, up 220 basis points from last year. The net profit grew by 32.4% year-on-year to Rs. 1,098 million, beating market expectations of Rs. 835 million. The company’s profitability improved significantly, especially in the Vegetable Oil, Animal Feed, and Poultry sectors, while margins surged due to higher gross margins. Management also mentioned plans to simplify the company’s structure, which could unlock more value in the future.

Key Concall Highlights

Animal Feed Business Outlook:

EBIT per metric ton increased by 45% YoY to Rs. 1,935.
Aided by favorable commodity prices, R&D-driven efficiencies, and cost optimization.
10% sequential volume increase, driven by cattle, broiler, and layer feed.
Margins are expected to improve, with EBIT likely exceeding Rs. 2,100 per ton in Q4FY25.
Company focusing on innovation, supply chain efficiencies, and expanding value-added products for growth.

Oil Palm Business Outlook:

Strong growth due to higher crude palm oil (CPO) and palm kernel oil (KPO) prices.
Improved oil extraction ratio (OER) and favorable government policies (20% import duty).
Expect strong performance in Q4FY25, aided by Indonesia’s B20 biodiesel mandate.
Expansion in plantation areas in Telangana and Northeast expected to drive long-term growth.

Domestic Crop Protection:

Revenues dropped by 24% YoY due to lower sales of in-licensed products.
Extreme weather and low crop prices affected demand.
Some materials were withdrawn for quality control.
Expect improvement in Q4FY25 with increased demand and better farmer sentiment.
Focus on expanding the product portfolio to reduce dependency on specific segments.

Astec LifeSciences:

Significant improvement in performance, with reduced EBITDA losses.
Higher CDMO volumes and a 30% recovery expected in FY26.
Recovery signs in the enterprise business, with stabilizing prices and rising volumes.
12 CDMO projects underway, expected to commercialize in the next 3-4 quarters.

Dairy Business Outlook:

Steady revenue performance, though EBITDA fell by 5.4% YoY due to rising milk procurement prices.
Expect strong Q4FY25 performance as demand for value-added products increases with warmer weather.
Plans to expand the product portfolio and strengthen brand marketing.

ACI Godrej:

Revenue declined annually due to economic challenges and political instability in Bangladesh.
Remains profitable despite the challenges.

Capex Plan:

Planned capex of Rs. 220 crores for FY26.
Debt raise of Rs. 1,000 crores deferred, potentially reduced to Rs. 500-600 crores through internal accruals.

Valuation and Outlook

Godrej Agrovet showed strong profit growth in Q3FY25, driven by good performance in its vegetable oil, animal feed, and poultry businesses. The Animal Feed segment saw better margins due to lower costs and better commodity management, while the Vegetable Oil segment grew 45% in revenue, helped by higher crude palm oil prices and better oil extraction. This segment is expected to continue benefiting from favorable market conditions and government policies. However, the Crop Protection business struggled due to lower sales caused by extreme weather and weak crop prices. Astec LifeSciences reduced its losses significantly, thanks to higher volumes in its CDMO business, though overall growth expectations for FY25 have been lowered, with a stronger outlook for FY26. The Dairy segment faced margin pressure due to higher milk costs, but an increased focus on direct farmer procurement should help improve profits. In Poultry, the company shifted towards branded products, reducing live bird sales, which should improve margins. Overall, the company’s Q3FY25 results are promising, and while more consistency is needed, its turnaround efforts are on the right track, with a positive long-term outlook.