Godrej Agrovet Ltd's consolidated revenue for Q1FY19 came in at Rs1,484.36cr, up by 11% yoy (excluding excise duty of Rs27.30cr in Q1FY18). The operating EBITDA for the quarter came in at Rs139.29cr, which increased by 10.7% yoy. The operating EBITDA remained stable at 9.4% in Q1FY19. The adjusted consolidated net profit after tax (attributable to equity shareholders) stood at Rs80.24cr for Q1FY19, up by 8.65% yoy. The consolidated revenue, operating profit, and net profit of the company for Q1FY19 were in-line with street estimates of Rs1,469cr, Rs139cr, and Rs84cr, respectively.
• In Q1FY19, consolidated revenue growth was driven by higher sales in the animal feed and vegetable oil businesses.
• The company’s gross profit margin increased by ~44bps yoy to 23.9% in Q1FY19 on account of overall improvement in the segment mix.
• EBITDA margin remained stable despite an increase in the gross margin due to likely lower operating leverage. Employee benefits and other expenses increased 13.1% and 9.4% yoy to Rs77.89cr and Rs137.47cr, respectively, in Q1FY19.
• The effective tax rate of the company also increased 32.7% in Q1FY19 vs. 31.0% in Q1FY18 dragging down the net profit of the company.
• Animal feed segment revenue increased 16.2% yoy to Rs737.27cr in Q1FY19. It witnessed a volume growth of 19.0% driven by momentum in cattle feed, layer feed, and broiler feed during the quarter. However, moderation was witnessed in the yoy margins for aqua feed due to rising input costs, causing a decline in the segment EBIT by 9.3% yoy to Rs36.13cr. The segment EBIT margin declined ~138bps to 4.9% with a segment RoCE of 16.2% in Q1FY19. The company's focus remains on increasing market share and distribution reach in all the feed categories.
• Godrej Agrovet is the largest domestic producer of crude palm oil and palm kernel oil. Segment revenue from the vegetable oil segment increased significantly by 28.5% yoy to Rs168.26cr in Q1FY19. The segment EBIT increased by 67.5% to Rs35.8cr in Q1FY19 with a significant rise in the EBIT margin by ~495bps to 21.3% and segment ROCE of 14.7% in Q1FY19. This is on account of high palm oil prices during the quarter. Proactive import duty tweaks by the government augurs well for the business (import duty for crude palm oil increased from 30% to 44% in early March 2018). Commissioning of a new palm oil mill in Andhra Pradesh is expected to be completed by Q2FY19E.
• Revenue from the crop protection business increased marginally by 1.8% yoy to Rs256.73cr in Q1FY19 (excluding excise duty from Q1FY18 segment revenue). The standalone crop protection business of the company remained strong backed by traction in plant growth regulators, insecticides, and new product launches. However, the crop protection business revenue from Astec Lifesciences declined due to deferment of export orders. The domestic sales of Astec Lifesciences witnessed a growth of 42% yoy in Q1FY19. The segment EBIT increased by 6.8% to Rs76.18cr in Q1FY19 with a rise in EBIT margin by ~139bps to 29.7% and segment ROCE of 11.4% in Q1FY19. The company has incurred capex to de-bottleneck existing capacities consisting new intermediates and backward integrated products. The projects are expected to go live in FY19.
• Dairy segment revenue increased 1.5% yoy to Rs312.9cr in Q1FY19. However, the segment EBIT reported a weak profit of Rs0.2cr in Q1FY19 vs. a profit of Rs1.24cr in Q1FY18. Profitability was impacted by high provisioning costs due to poor butter prices during the period. The company’s focus remains on strengthening the Jersey brand with continued marketing investment in the states where it is present.
• Revenue under ACI Godrej Agrovet Private Limited, Bangladesh, declined 7.4% yoy during Q1FY19. Revenue under Godrej Tyson Foods Ltd increased 8.1% yoy to Rs123.9cr in Q1FY19.
Godrej Agrovet Ltd is currently trading at Rs. 645.90, down by 2.75 points or 0.42% from its previous closing of Rs. 648.65 on the BSE.
The scrip opened at Rs. 650 and has touched a high and low of Rs. 655 and Rs. 638 respectively. So far 70,267 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 100 DMA.
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