Go­drej Agrovet Ltd

Money Times - - Stock Watch -

(BSE Code: 540743) (CMP: Rs.509.45) (FV: Rs.10)

In­cor­po­rated in 1991, Go­drej Agrovet Ltd (GAL) be­long­ing to the Go­drej In­dus­tries group op­er­ates through the fol­low­ing seg­ments: An­i­mal Feed; Crop Pro­tec­tion; Veg­etable Oil; and Oth­ers. It of­fers an­i­mal feed such as cat­tle, poul­try, aqua and spe­cial­ity feed along with on-farm tech­ni­cal sup­port ser­vices. It is en­gaged in oil palm cul­ti­va­tion with ~61,700 hectares of plan­ta­tions across Andhra Pradesh, Te­lan­gana, Tamil Nadu, Goa, Ma­ha­rash­tra and Mi­zo­ram pro­duc­ing crude palm oil, crude palm ker­nel oil and palm ker­nel cake. It also pro­duces plant growth reg­u­la­tors and bio-stim­u­lants, which are sold un­der the ‘Vipul’, ‘Dou­ble’ and ‘Com­bine’ brands in In­dia and are ex­ported to USA, Kenya and Mau­ri­tius as well. It of­fers her­bi­cides, in­sec­ti­cides, fungi­cides and soil con­di­tion­ers and or­ganic ma­nures. It sells poul­try and meat prod­ucts un­der the ‘Real Good Chicken’ brand; veg­e­tar­ian and non-veg­e­tar­ian ready-to-cook prod­ucts un­der the ‘Real Good Yum­miez’ brand; and milk and milk-based prod­ucts un­der the ‘Jer­sey’ brand. It pro­duces agro­chem­i­cal ac­tive in­gre­di­ents, in­ter­me­di­ates and phar­ma­ceu­ti­cal in­ter­me­di­ates. It also of­fers off-patented chemistries to do­mes­tic agro­chem­i­cal mar­keters and also for ex­ports to USA, Europe, West Asia, South East Asia and Latin Amer­ica. It is also in­volved in the seed and real es­tate busi­nesses as well as en­ergy gen­er­a­tion through its wind­mill.

In H1FY19, GAL adopted a strat­egy to ag­gres­sively en­hance its fo­cus on driv­ing vol­ume growth in its An­i­mal Feed seg­ment. The man­age­ment plans to op­er­ate at lower mar­gins but con­cen­trate more on vol­ume-growth ahead. This stance some­what dis­ap­pointed us as GAL re­quires price-offs/ pro­mo­tions to push vol­umes in a large seg­ment with var­i­ous smaller un­or­gan­ised com­peti­tors. Com­mod­ity (milk, egg, shrimp) prices are in a de­fla­tion zone now. Though ris­ing labour charges are re­sult­ing in a struc­tural shift from un­or­gan­ised to or­gan­ised feed, we be­lieve that com­mod­ity prices also play an im­por­tant role in driv­ing de­mand for an­i­mal feed. Lower com­mod­ity prices will dis­suade farm­ers from shift­ing to or­gan­ised an­i­mal feed in the near term, im­pact­ing vol­ume growth for GAL. Soy­bean prices have de­clined from the peak at­tained in April 2018 but are still rul­ing higher on YoY ba­sis. Maize prices are also up 12% YoY. Given the cur­rent raw ma­te­rial prices, we be­lieve GAL does not have much scope to cut sell­ing prices/ in­crease pro­mo­tions to push vol­ume growth. We ex­pect GAL to re­port rev­enue and PAT CAGR of 10.8% and 15.5% re­spec­tively over FY18-FY20. In or­der to boost vol­umes, the man­age­ment has taken an ag­gres­sive stance to com­pro­mise on mar­gins.

The GAL share looks good on the daily chart for medium-term in­vest­ment. It has formed a down­ward chan­nel and is con­sol­i­dat­ing near its lower chan­nel line. The stock trades be­low all im­por­tant mov­ing av­er­ages like the 200 DMA level on the daily chart.

Start ac­cu­mu­lat­ing at this level of Rs.509.45 and on dips to Rs.485 for medium-to-long term in­vest­ment and a pos­si­ble price tar­get of Rs.585+ in the next 6 months.

Tech­ni­cal Out­look:

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.