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Near-term weakness with recovery underway

* Godrej Agrovet (GOAGRO) reported subdued operating performance in 1QFY27, with EBIT declining ~13% YoY due to a significant 35% YoY decline in the Crop Care business caused by delayed monsoons and slower kharif sowing. In contrast, Animal Feed and Vegetable Oil businesses delivered strong performance, with EBIT growth of 30%/15% YoY, respectively.

* The company’s strategic move of product diversification across key crops in the Crop Care business, the evolution of the Animal Feed business into animal nutrition, downstream expansion in Palm Oil business, and enhancing share of value-added products in Godrej Foods are expected to drive earnings going forward. Moreover, the ramp-up of the Astec business is likely to further accelerate the company’s growth trajectory.

* We have broadly maintained our earnings estimates for FY27 and FY28 and reiterate our BUY rating on the stock with an SOTP-based TP of INR675.

Highlights from the management commentary

* Crop protection: The company aims to recoup the lost business in the coming quarters and remains positive on achieving 26-27% EBIT margin in FY27. GOAGRO’s product diversification has gained momentum, with Ashitaka and Takai scaling up and contributing ~18-20% to 1QFY27 sales, partially offsetting the weak demand environment. Further, in May’26, GOAGRO entered the soyabean herbicides segment through the Ghassnash product, with further ramp-up planned in 2QFY27.

* Palm oil: Margins were temporarily impacted by formula-based pricing, with management expecting recovery in the coming quarters amid a constructive outlook for the segment. Over the medium term, growth is expected to be driven by plantation expansion, the maturation of existing plantations, and downstream integration. At scale, the downstream expansion is likely to enhance overall margins by ~200bp.

* Poultry business: The company is strategically shifting its portfolio toward the higher-growth branded consumer business, with Yummiez volumes constituting ~28% in 1QFY27 and management targeting a ~65-70% contribution mix over the coming years. Investments in new products (frozen chicken, momos) are expected to support growth, while the live bird business will gradually transition into backend supply.

Valuation and view

* GOAGRO’s outlook remains positive, supported by its strategic portfolio realignment initiatives, including:

i) diversification of its crop protection portfolio

ii) targeted geographic expansion in animal nutrition

iii) investments across the palm oil value chain

iv) the transition of the animal feed business toward an ‘animal nutrition’ model.

* Further, improvement in volumes, realizations, and capacity utilization across both Enterprise and CDMO businesses at Astec positions the company for sustained recovery and profitable growth in the coming years.

* We have built in Revenue/EBITDA/Adj. PAT CAGR of 11%/16%/18% over FY26- FY28E. We reiterate our BUY rating on the stock with an SOTP-based TP of INR675.

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