Hindalco and Godrej Agrovet: Weekly Recommendations

The two stocks recommended by SMC Global Securities’ Research Team this week are Hindalco and Godrej Agrovet. These two stocks have shown great potential with positive financial estimates for the next two financial years. So, let’s go through the details of the two stock recommendations for the period between February 17, 2025 and February 21, 2025.

Hindalco Industries Limited

Hindalco Industries share price is ₹605.80 (as on February 14, 2025) and its target price is set at ₹722 with an upside potential of 19%.

Hindalco Industries Limited: Investment Rationale

• Hindalco Industries, the metals flagship of the Aditya Birla Group, is the world’s largest aluminium rolling and recycling company, a major copper player, and one of Asia’s largest producers of primary aluminium.
• In India, Hindalco’s aluminium manufacturing units cover the complete value chain, from bauxite mining, alumina refining, coal mining, captive power generation, and aluminium smelting, to downstream value-addition of aluminium rolling, extruding, and foil making.
• Hindalco has delivered robust consolidated results in the third quarter despite global uncertainties, driven by an excellent performance of its India business. The Aluminium India Upstream business achieved record quarterly EBITDA, with industry-leading margins of 42%. The downstream segment experienced consistent growth posting a 36% increase in EBITDA.
• The Copper business delivered a robust 18% growth in EBITDA. Moreover, the business marked a significant milestone by achieving the ‘Copper MarkJDDS’ for its responsible and sustainable production practices.
• During Q3 FY25, Hindalco reported an 11% rise in consolidated revenue at ₹58,390 crores in Q3 FY25 as against ₹52,808 crores in Q3 FY24 and net profit of ₹3,735 crores, up 60%, driven by a strong operational performance by the India business.
• EBITDA at ₹8,108 crore, up 28% and margin improved to 13% vs 11.1%. Net Debt to EBITDA at 1.33x as of December 31, 2024.

• On the segmental front, Aluminium Upstream EBITDA stood at an all-time high of ₹4,222 crores, up 73%, supported by lower input costs. The copper business recorded an EBITDA of ₹777 crores, up by 18%, backed by continued strong domestic sales and higher by-product realisations.
• Novelis’, US-subsidiary, revenue stood at $4.1 billion, mainly driven by higher average aluminum prices with total rolled product shipments of 904 kilotonnes largely comparable to the prior year period.
• Novelis’ Adjusted EBITDA at $367 million, down 19% due to higher aluminum scrap prices and unfavourable product mix. According to the management of the company, Novelis continues to focus on operational and cost-efficiency initiatives in the face of current pressures on scrap pricing.
• During the quarter, the company secured vital resources for its India upstream business, strengthening its global cost leadership. Key growth initiatives, including the alumina refinery, aluminium smelter expansion, copper smelter expansion, and the FRP project, are progressing as planned.

Hindalco Industries Limited: Shareholding Pattern

The promoters shareholding is highest in Hindalco Industries at 34.64%.

Hindalco Industries Limited: Valuation

Hindalco Industries is in a strong position for the next phase of transformative growth, supported by its robust balance sheet. A Hindalco Industries Q3 results FY25 performance, fueled by record aluminium earnings, higher copper profits, and the strategic coal mine acquisition, signals promising prospects.

With sustained demand for aluminium, copper, and a focus on sustainability, the company is well-positioned for long-term success, driven by operational efficiency and market expansion.

Thus, it is expected that the stock will see a price target of ₹722 in 8 to 10 months’ time frame on a 2 year’s average P/BV of 1.23x and FY26 (E) BVPS of ₹587.11.

Hindalco Industries Limited: Risk

• Sizeable capex and associated risks
• Volatility in raw material prices

Godrej Agrovet Limited

Godrej Agrovet share price is ₹705.05 (as on February 14, 2025) and its target price is set at ₹913 with an upside potential of 30%.

Godrej Agrovet Limited: Investment Rationale

• Godrej Agrovet Limited (GAVL) is a Research & Development focused agribusiness Company. It is engaged in the business of Animal Feed, Crop Protection, Oil Palm, Dairy and Poultry, and Processed Foods.
• In the crop protection segment, the company meets the niche requirements of farmers through innovative agrochemical offerings. Through its subsidiary Astec Life Sciences Limited, is also a business-to-business (B2B) focused bulk manufacturer of fungicides & herbicides. It has a joint venture with the ACI group of Bangladesh for animal feed business in Bangladesh.
• Godrej Agrovet has entered into a strategic collaboration with US-based Provivi, a global crop protection company, to deliver sustainable pest control solutions tailored for rice and corn farmers in India.
• The company will distribute Provivi’s YSB Eco-Dispenser, specifically designed to control Yellow Stem Borer (YSB) in rice, and will hold exclusive commercialization rights for the FAW Eco-Dispenser targeting Fall Armyworm (FAW) in corn in India.
• In Q3 FY2025, Godrej Agrovet continues to show robust performance in the vegetable oil, animal feed, and poultry businesses. Revenue growth by 4% to ₹2,450 crores, EBITDA margins improved to 9.3% as compared to 7.3% in Q3 FY2024.

• Net profit was up by 17% to ₹99 crores. In the Animal Feed segment, margins improved sharply from 4% in Q3 FY24 to 6% in Q3 FY25 on account of favorable commodity position. The Vegetable Oil segment delivered strong results driven by higher Crude Palm Oil and Palm Kernel Oil prices and an improved Oil Extraction Ratio.
• Its Dairy segment saw steady performance in segment revenue and margin. The company expects the trend to continue in Value Added Products which reached 34% of total sales, improving both year-on-year and sequentially. Astec Life Sciences made significant progress in Q3 FY25 and the company expects this positive momentum to continue in the coming quarters.
• It has recently announced the launch of Godrej Pride Hog, a scientifically developed pig feed range designed to provide optimal nutrition at each stage of a pig’s lifecycle. The range includes Starter, Grower, and Finisher variants, ensuring balanced nutrition for better health, immunity, and growth.
• According to the management, the company in the current fiscal has done capex of ₹161 crores and expects to end up doing a capex of ₹220 crores for next year; it has a similar capex plan.
• Godrej Agrovet continues to invest strategically in cutting-edge R&D capabilities across its business segments. Its subsidiary, Astec LifeSciences Limited, recently launched an advanced R&D Center for Chemical Research, complementing its existing facilities in Animal Feed, Oil Palm, and Crop Protection.

Godrej Agrovet Limited: Shareholding Pattern

In the overall shareholding of Godrej Agrovet, promoters have the highest shareholding of 67.56%.

Godrej Agrovet Limited: Valuation

The company by strengthening its R&D infrastructure aims to accelerate the development and commercialization of new products, enabling it to achieve sustainable growth and market leadership in the coming years. Its recent launch of Godrej Pride Hog and strategic collaboration with Provivi indicates sustained growth visibility.

Thus, it is expected that the stock may see a price target of ₹913 in 8 to 10 months’ time frame on one year average P/BV of 5.4x and FY26 BVPS of ₹169.15.

Godrej Agrovet Limited: Risk

• Unfavorable local and global weather patterns
• Supply Chain Issue

Conclusion

These two stocks, one from the metal sector and the other from the agri-business sector can reach their target price in the coming 8 to 10 months. However, it is always better if you do your analysis before investing and set a stop-loss target. To keep track of your invested stocks, open a free demat account with SMC Global Securities and invest on the go.

Reference:
https://www.smctradeonline.com/research/wise-money/241

Author: All Content is verified by SMC Global Securities.