Motilal Oswal Financial Services has reiterated a Buy rating on Godrej Agrovet, holding its sum-of-the-parts-based target price at Rs 675 — implying 24% upside from the current market price of Rs 545. In an August 6 results update titled "Near-term weakness with recovery underway," the brokerage said the diversified agribusiness conglomerate's first-quarter operating performance missed expectations on weaker-than-expected gross margins, with a sharp decline in the crop protection business more than offsetting strength in animal feed and vegetable oil.

Q1FY27: Consolidated Numbers Miss On Margins

Consolidated revenue rose 9% year-on-year to Rs 28.5 billion, broadly in line with the brokerage's estimate. But profitability fell short: EBITDA margin contracted 190 basis points year-on-year to 8.4%, below the brokerage's 10.1% forecast, as gross margin compressed 275 basis points to 24.9%. EBITDA declined 11% year-on-year to Rs 2.4 billion, versus an estimate of Rs 2.8 billion, while adjusted profit after tax fell roughly 16% year-on-year to Rs 1.3 billion, short of the Rs 1.6 billion the brokerage had modelled. Overall EBIT declined approximately 13% year-on-year, a drop the brokerage attributes almost entirely to one segment.

A Tale Of Two Businesses

Crop protection was the primary drag: delayed monsoons and slower kharif sowing during one of the driest Junes on record hit demand for the company's in-house cotton herbicide, dragging consolidated segment revenue down 13.3% and EBIT down 35.1% year-on-year. Animal feed ran in the opposite direction, with volumes up roughly 7% and realisations improving 5%, pushing EBIT margin up 85 basis points to 6.4% on the back of better commodity sourcing and operating leverage. Palm oil revenue jumped 24% on sharply higher crude and kernel oil realisations, though EBIT margin still contracted 131 basis points to 16.1% due to temporary formula-based pricing effects that management expects to unwind in coming quarters.

What Management Is Watching

1. Crop protection recovery hinges on new products. Management remains confident of achieving a 26-27% EBIT margin for the segment in fiscal 2027, pointing to newer products Ashitaka (maize herbicide) and Takai (paddy insecticide) — which scaled to 18-20% of first-quarter sales — along with a fresh entry into soyabean herbicides via the Ghassnash product, launched in May 2026.
2. Palm oil margins should normalise, with medium-term growth expected from plantation expansion (17,000 hectares planned in fiscal 2027), maturing existing plantations, and downstream integration that could add roughly 200 basis points to overall margins at scale.
3. Poultry is pivoting toward branded consumer products. The Yummiez brand grew volumes 22% year-on-year and now constitutes roughly 28% of the poultry business, with management targeting a 65-70% branded contribution mix over the coming years as the lower-margin live-bird business is gradually wound down to serve as backend supply.
4. Dairy margins were squeezed by elevated milk procurement costs amid industry-wide supply constraints and geopolitically driven packaging cost inflation, though the value-added product mix improved to 49% of the segment from 42% a year earlier as part of a broader premiumisation push.

Stock Levels To Watch

The stock has fallen sharply from its 52-week high of Rs 851 and now trades closer to its 52-week low of Rs 506, with a 12-month relative performance of negative 35% — among the weakest in this batch of names — reflecting the market's reaction to the crop protection weakness even as the brokerage argues the setback is cyclical rather than structural.

Estimates And Sum-Of-The-Parts Valuation

The brokerage trimmed its fiscal 2027 and 2028 EBITDA estimates by roughly 4% and 3%, respectively, to reflect the softer margin trajectory, while leaving revenue estimates broadly unchanged. It continues to project a Revenue/EBITDA/adjusted profit compound annual growth rate of 11%/16%/18% over fiscal 2026-28.

On earnings, the brokerage projects adjusted profit after tax rising from Rs 5.0 billion in fiscal 2026 to Rs 6.9 billion by fiscal 2028, with the stock currently valued at roughly 21 times trailing earnings, compressing to 15.1 times by fiscal 2028 as profit growth catches up.

Promoter holding stood at 67.7% as of June 2026, unchanged from March 2026, with domestic institutional investors holding 7.7% and foreign institutional investors 4.1% of the company.