GODREJAGRO - Godrej Agrovet Limited Share Price

Management provided an optimistic outlook across key segments, emphasizing margin improvement, strategic shifts, and recovery expectations:

1. Animal Feed: Margins improved sharply (EBIT/ton up 45% YoY) due to favorable commodity prices and operational efficiency. Targets Rs.2,100/ton EBIT in Q4 FY25 and sustainable Rs.1,800"“2,000/ton in FY26. Volume growth expected from cattle, layer, and fish feed.

2. Vegetable Oil: Strong Q3 driven by higher palm oil prices and government policies (e.g., import duty). Margins supported by improved extraction rates. Outlook tied to commodity trends and Indonesia's biodiesel policies.

3. Crop Protection: Subdued Q3 due to low pest incidence and market challenges. Recovery anticipated in Q4 with improved demand and product liquidation. Monsoon trends remain critical.

4. Astec LifeSciences: Reduced EBITDA losses (Rs.4 Cr vs. Rs.18 Cr QoQ). CDMO growth guidance revised to flat FY25 (vs. earlier 30"“40%) but expects 30"“35% growth in FY26. Enterprise business stabilizing with volume recovery.

5. Dairy: Steady revenue; VAP contribution at 34%. Focus on direct procurement (targeting 75"“80%) and volume expansion. Q4 expected to improve with seasonal demand.

6. Poultry: Strategic shift to branded products (RGC/Yummiez) driving margins. Live bird sales reduced to 26% (vs. 41% YoY); profitability to sustain via contracted sales and capacity utilization.

7. Bangladesh JV (ACI Godrej): Challenges due to economic/political instability; revenue declined 13% YoY.

Key Risks: Commodity volatility (animal feed), regulatory changes (palm oil), and inventory management (Astec). Management highlighted structural simplification plans to enhance shareholder value.

Question 1:
Abhijit (Kotak Securities):
"We had expected a significant increase in CDMO revenues this year. I believe in the past we've guided to about 400 crores for the year, about 50% growth. So, just in the context of how the year has unfolded, if you could please update us on what's your current expectations are both for the remainder of this year and then for FY26, please?"

Answer Summary:
Astec maintained its initial guidance of 30-40% YoY CDMO growth for FY25, attributing delays to market conditions and price corrections. FY26 projections anticipate stabilization or slight price increases, with 40% growth expected as projects normalize. However, later clarifications indicated flat FY25 CDMO revenue due to postponed orders, with 30% growth expected in FY26 based on confirmed orders.

Question 2:
Abhijit (Kotak Securities):
"And my second question is with regard to the Animal Feed segment. The EBIT per ton has expanded quite sharply in the first three quarters of this year. How much of this is sustainable and what should we look for margins to be in the coming quarters, maybe for FY26 overall?"

Answer Summary:
EBIT per ton improved to Rs.1,935 in Q3 due to favorable commodity prices, R&D initiatives, and cost optimization. Q4 FY25 is projected to reach Rs.2,100/ton, while FY26 guidance is Rs.1,800"“Rs.2,000/ton, contingent on retaining non-commodity-driven benefits. Regulatory shifts (e.g., ethanol demand for corn) and regional competition remain risks.

Question 3:
Abhijit (Kotak Securities):
"On the standalone crop protection business where things seem to have gotten a little bit challenging in the last couple of quarters because of various reasons, if you could please share your thoughts on how you expect the business to shape up?"

Answer Summary:
Weak Q3 performance stemmed from reduced pest-related demand (e.g., low chilli prices reducing herbicide use) and inventory recalls for quality control. Management expects recovery in Q4 FY25 and FY26, driven by improved kharif season demand and product diversification into other crops like vegetables.

Question 4:
Ashwin Shetty (Marcellus Investment Managers):
"Sir, can you just delve deeper into, you said that there is a lot of materials taken back due to hygiene reason in the crop protection segment, can you delve a little bit deeper into that what exactly happened?"

Answer Summary:
Unused herbicide stocks (linked to low pest infestation in chillies) were recalled to prevent degradation in poor storage conditions. The product, priced at ~Rs.1 crore per KL, is being repositioned for broader vegetable crop use. Liquidation efforts are underway for Q4 and FY26.

Question 5:
Ashwin Shetty (Marcellus Investment Managers):
"Secondly, we saw a very super performance in the palm oil division. How sustainable is that? We saw one of the best EBIT margins ever in the segment. What'll be on the outlook going forward?"

Answer Summary:
Q3 margins surged due to higher CPO/PKO prices, Indonesia's B20 biodiesel mandate, and India's 20% import duty. Only 20% of price benefits accrue to the company (80% to farmers). Sustainability depends on geopolitical factors (e.g., Indonesia's policy shifts) and global palm oil demand trends.

Question 6:
Aejas Lakhani (Unifi):
"Could you call out why did we have a slightly seasonally sequentially tepid quarter [in dairy] and how do you expect the margin trajectory to play out for fourth quarter and the next year?"

Answer Summary:
Q3 EBITDA dropped 5.4% YoY due to delayed price hikes amid rising milk procurement costs (58% direct procurement). Value-added products (VAP) reached 34% of sales. Q4 optimism is tied to seasonal demand (summer beverages) and planned marketing/premium pricing. FY26 targets 75"“80% direct procurement to reduce costs.

Question 7:
Aejas Lakhani (Unifi):
"On poultry, what is the specific cut now of live birds, RGC and Yummiez, give or take as a percentage of our sales say for the nine-months?"

Answer Summary:
Live birds fell to 26% (9M FY25) from 41% (9M FY24), with RGC at 54% and Yummiez at 20%. The shift aims to minimize volatility by prioritizing contracted QSR supplies and branded products. Live birds will stabilize at 20% to ensure processing efficiency, with margin improvements expected in FY26.

Question 8:
Aman Vora (Premier Capital):
"Just like two, three months back in the second quarter call, we've given guidance of about 400 crores of CDMO revenue for FY25. While just in the matter of the last 2-3 months, what has happened is that we are cutting our FY25 revenue guidance by 30%?"

Answer Summary:
FY25 CDMO guidance was revised to flat growth (vs. 40% earlier) due to order postponements/cancellations from global inventory oversupply. FY26 projects 30% growth with cautious optimism, prioritizing confirmed orders over speculative projections. Enterprise business margins turned positive but face pricing pressures.

Question 9:
Aman Vora (Premier Capital):
"If I see Agrovet as a consolidated entity, individually all businesses have a lot of growth opportunities [...] but the issue is that every quarter, one or the other business acts as a negative hedge. [...] As a consolidated entity, we do not see encouraging top line growth over say two years, three years CAGR."

Answer Summary:
Management acknowledges structural complexity and volatility across segments, impacting investor sentiment. Simplification initiatives are under consideration to enhance visibility and value accretion, though specifics remain undisclosed.

Question 10:
Aejas Lakhani (Unifi):
"What is our CAPEX expectation for entire FY26 and what is the CAPEX outlay that we have done for nine-months and what is the pending amount in the last quarter?"

Answer Summary:
FY25 CAPEX is Rs.220 crore (Rs.161 crore spent in 9M), focusing on feed, dairy, and poultry. FY26 CAPEX will mirror FY25 levels, with flexibility to adjust based on working capital improvements and project prioritization.