Godrej Agrovet portfolio reset targets branded growth and oil palm value addition

Investment View and Strategic Reset

ICICI Securities’ October 11, 2026 company update views Godrej Agrovet as being in a three- to five-year strategic reset towards a simpler and more consumer-facing portfolio. The broker maintains a BUY recommendation, arguing that portfolio pruning, investment in brands and route-to-market capabilities, technical services, product development and downstream value addition can reduce dependence on a small set of products, crops, cities and commodities.

However, ICICI Securities stresses that operating proof points remain ahead and that the transformation may cause selective near-term revenue contraction and margin normalisation.

Management intends to exit unprofitable or unrelated activities, lower exposure to selected live-bird and broiler operations, reduce presence in low-priority territories and review businesses where Godrej Agrovet has no clear right to win. Astec, characterised by management as a specialised CDMO business outside the preferred consumer-facing portfolio, could potentially be moved out of Godrej Agrovet.

The group is prioritising palm oil, branded foods, cattle nutrition and crop care, supported by science-led product development, stronger market access and better customer and farmer engagement.

Financial Performance and Forecasts

In Q1 FY27, net sales rose 22 per cent year on year to Rs 28,552 million. ICICI Securities reduced FY27E and FY28E EPS by 6.5 per cent and 2.3 per cent respectively, reflecting weaker dairy, poultry and crop-protection performance. Nevertheless, the broker expects around 16 per cent EPS growth and improving RoE and RoCE through FY28E.

Business Portfolio Transformation

Dairy

Dairy contributes around 16 per cent of revenue and is undergoing an 18-month route-to-market reset. Management aims to simplify distribution, optimise milk and FMCG-style routes, improve net realisation and raise the share of value-added products from about 40 per cent to about 60 per cent.

Milk-cost inflation has reduced gross margin to about 22 per cent from roughly 27 per cent before the recent inflation cycle. Management expects recovery towards about 25 per cent as costs normalise, while the larger opportunity is better gross-margin-to-EBITDA conversion.

Foods

Foods is shifting from live-bird trading and B2B food service towards branded, protein-led B2C products. Management plans to reduce the B2B share from roughly 60 per cent to 20 per cent over five years. Quick commerce represents about half of the Foods B2C business, although repeat purchase, cold-chain execution, marketing intensity and margins remain key validation points.

Crop Care

In crop care, management is diversifying beyond concentrated cotton and chilli exposure. This includes the cotton herbicide Hitweed, which is approaching patent expiry, and the weather-sensitive chilli insecticide Rashinban. Ashitaka, a maize herbicide, is an early addition.

Diversification may reduce EBITDA margin from the low-to-mid-20 per cent range to around 20 per cent, but should broaden earnings.

Animal Nutrition

Animal nutrition is being repositioned towards premium products and technical services. Shrimp feed may be exited, fish feed is targeted for profitability and selective broiler exposure will be reduced. Cattle-feed profitability remains concentrated in Maharashtra, and dairy feed contributes about 60 per cent of animal-nutrition profit.

Oil Palm

Oil palm is a long-duration growth driver through acreage, yield, processing and downstream products. Management has discussed raising yields from roughly 21 to 22 tonnes per hectare to 28 to 30 tonnes per hectare and reducing the juvenile period from four years to three. Material benefits may only emerge from FY31 to FY32.

Godrej Agrovet plans about Rs 1,000 crore of oil-palm investment and aims eventually to sell 40 to 50 per cent of output beyond refined oil.

Valuation and Target Price

ICICI Securities uses a sum-of-the-parts valuation, including the following FY28E EV/EBITDA multiples:

• 12.5 times for animal feeds
• 14 times for vegetable oil
• 10 times for dairy
• 11 times for Godrej Foods

The revised target price is Rs 845, versus Rs 865 earlier.

Key Risks

• Weak monsoon
• Competition
• Higher raw-material prices
• Weak new-product offtake
• Dairy milk-cost inflation
• Crop and weather concentration
• Delayed oil-palm execution