Godrej Has Potential Upside Of 54.41%, ICICI Securities Suggests A 'Buy'

Brokerage firm ICICI Securities suggests investors to buy shares of Godrej Industries Limited (GIL) for it feels the stock can fetch a return of nearly 54.41%. The company is a leading manufacturer of oleochemicals and more than a hundred various other chemicals for use in over two dozen industries.

GIL, a mid-cap company, is a part of Godrej Group established in 1897. Later, it entered into the security equipment and soaps segments and is now over a $1.875-billion conglomerate.

According to the research note of ICICI Securities, the company derives major value from its listed subsidiaries and associates, viz. Godrej Consumer, Godrej Properties, and Godrej Agrovet. GIL is also running the oleo-chemical business (standalone operations) and the palm oil trading business is under its 100% subsidiary Godrej International. The company has also commenced a housing finance business under Godrej Capital.

Fourth quarter performance
The company's standalone business reported revenue growth of 6.1% YoY. Gross and EBITDA margins expanded 550bps and 310bps respectively YoY due to lower commodity prices and a better revenue mix. Godrej Industries reported a net loss of Rs 262 million in Q4FY23 vs Rs 441 million in Q4FY22.

Valuation
The stock is trading at a holding company discount of 65% to the combined market valuation of its listed subsidiaries and associates. The average discount is ~56% since the listing of Godrej Agrovet.

"We believe subsidiaries as well as associates of Godrej Industries to be the net beneficiaries of revival in the economy. We also model these businesses to benefit from value migration from the unorganised to the organised sector. We value the stock as per SoTP methodology at a target price of Rs 731. We maintain BUYrating on the stock." the securities firm added.

Share price movement
The latest market price of Godrej Industries stock closed at Rs 474.45, it ended up by 1. 02% over the previous day's closing price. The share price has rallied by 9.16% in the last one year and over three years it has surged by 48.73%.

Disclaimer
The stock has been picked up from the brokerage report of ICICI Securities. Greynium Information Technologies, the author, or the brokerage firm will not be liable for any losses caused as a result of decisions based on the write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.