Godrej Agrovet Limited (GAL) is part of the Godrej group, has presence across the animal feed, palm oil, crop protection, dairy and poultry and processed foods segments with about 30+ facilities and a wide distribution network across the country. The company is one of the largest organised animal feed manufacturers in India offering cattle, layer, broiler, shrimp, fish and other feeds.
The company’s focus on diversification into newer segments such as palm oil, crop protection, dairy and poultry over the past 7-8 fiscals in order to lower its concentration in the animal feed business (revenue contribution down to around 49% in fiscal 2022 from 80% in fiscal 2012) supports its overall business risk profile and provides cushion against slowdown in any particular business segment.
In view of the changed product mix of the company over the last 6-7 years, the working capital requirement has increased thereby giving rise to borrowings by the company.
Over the last 3 years the company’s sales have increased by 12%, profits by 19% on a CAGR basis whereas the share price has not gone anywhere, remained flat.
Considering the diversified nature of the company’s business, the fact that it has Godrej pedigree and that it trades at a price to earning ratio of about 25 which is significantly below its historical average, the share can be bought with a medium to long term horizon.
Inputs from : Credit Rating report by Crisil, Company’s Annual Report and investor presentation