We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.

INVESTING RATIONALE

• We believe GAVL is well placed to scale up, given presence across under penetrated and unorganized segments of the agri value chain coupled with its strong brand, distribution, cash flows and R&D focus.

• Animal feed business: While GAVL is a pan-India market leader in animal feed with 8-10% market share, it has also become market leader in couple of states in organized cattle feed. The company will continue to benefit from customer stickiness, strong R&D, sales on cash & carry and pan-India distribution. Management targets 15% volume growth over next 3-5 years.

• Palm oil: GAVL continues to be the largest domestic producer of crude palm oil and palm kernel oil with control over 1/3rd of India’s palm oil plantations. The division has received allotment of several circles, which will help enhance the area under oil palm plantation from the current ~66,000 hectares.

• Debt Reduction: Management guided for lower receivables by end of FY19 and targets debt reduction by ~Rs 2 bn (currently at ~ Rs 4 bn). We expect the company to be debt-free in next couple of years.

• We expect 20+% PAT CAGR over FY18-21 led by (1) market share gains in animal feed, as yield conscious farmers shift to organized players (10% of overall market); (2) new products and in-license agreements for agri inputs to drive 2x growth; and (3) 20% growth in dairy business as GAVL focuses on value-added products and better operating efficiencies.

• We maintain a BUY with a target of Rs 556.