Gujarat Ambuja Exports Ltd (GAEL) has been a significant player in India’s agro-processing sector since its incorporation in 1991. Engaged in the manufacturing of Corn Starch Derivatives, Soya Derivatives, Feed Ingredients, Cotton Yarn, and Edible Oils, GAEL has successfully positioned itself as a leading company serving the food, pharmaceutical, and feed industries. With a focus on long-term growth, GAEL continues to expand its footprint, both domestically and internationally, exporting to over 100 countries.
Table of Contents
Take a quick look at the balance sheet dashboard, and let’s break it down step by step for a clearer understanding.
Current Position and Historical Performance
GAEL has demonstrated consistent growth over the years, with its Maize Processing segment leading the charge. The company has diversified its business segments to include other agro-processing, spinning, and renewable energy, ensuring a balanced revenue stream. As of Q1 FY25, the Maize Processing segment contributed approximately 68% of the company’s revenue, highlighting its dominance in this space. However, the company’s journey hasn’t been without challenges, including fluctuating margins and market competition.
Fundamental Analysis of GAEL: A Detailed Breakdown
Sales, Net Profit & Operating Profit
GAEL has seen a steady increase in sales over the years, growing from ₹3,364 crores in March 2018 to an anticipated ₹5,112 crores by March 2025. However, net profit and operating profit have seen some fluctuations, with net profit predicted to be ₹361.84 crores by March 2025. The operating profit margin (OPM) has also varied, peaking at 14.71% in March 2022 but expected to stabilize around 9.17% by March 2025.
Earnings Per Share (EPS)
The company’s EPS has shown an upward trend, growing from ₹3.92 in March 2018 to a predicted ₹7.96 by March 2025. This consistent growth in EPS reflects the company’s ability to generate value for its shareholders.
Return on Equity (ROE)
GAEL’s ROE peaked at 22.33% in March 2022 but has since shown a decline, with a predicted ROE of 13.90% by March 2025. While the ROE is still respectable, the downward trend may be a point of concern for potential investors.
Asset and Liability Distribution
As of the latest data, GAEL’s assets are distributed across capital work in progress(CWIP) (₹153 crores), fixed assets (₹1,037 crores), investments (₹850 crores), and other assets (₹1,264 crores). On the liability side, the company has strong reserve amounting to ₹2,723 crores, along with equity capital of ₹46 crores, other liabilities of ₹337 crores, and borrowings of ₹46 crores.
Capex and Future Growth Potential
GAEL’s capex plans are aggressive, with investments in expanding its maize processing capacity and entering the fermentation business. The company’s focus on high-margin segments like maize processing is expected to drive future growth. However, the large capex and associated debt could pose risks if not managed properly.
Clientele and Market Reach
GAEL boasts a robust clientele, including industry giants like ITC, Dabur, HUL, Colgate, and Mondelez. The company’s strong domestic presence and growing export market (35% of revenue in FY24) make it a well-rounded player in the industry.
Critical Analysis: The Good and The Bad
Positive Points:
- Diversified Revenue Streams: GAEL’s business segments ensure a balanced revenue stream, reducing dependency on a single segment.
- Strong Market Position: GAEL’s leadership in the maize processing sector and its significant market share is a major strength.
- Growth Potential: The company’s capex plans and focus on high-margin segments like maize processing and fermentation show promise for future growth.
Negative Points:
- Fluctuating Margins: The decline in EBITDA margins from 15% in FY22 to 12% in FY24 is concerning, especially in a competitive market.
- Poor Sales Growth: The company has delivered a poor sales growth of 4.15% over past five years.
- ROE Decline: The downward trend in ROE may indicate decreasing efficiency in generating profits from shareholders’ equity.
Now checkout the performance of stock starting from 2018 to till date
The stock was trading at ₹138.70 as on 21/08/2024, it may be bought at current price with stoploss at ₹120 and first target ₹200 and second target ₹260, The stock has potential to easily reclaim ₹200 level within 2-3 months
Conclusion: Is Gujarat Ambuja Exports Ltd a Good Buy?
Gujarat Ambuja Exports Ltd presents a compelling investment opportunity, especially for those looking to tap into India’s growing agro-processing sector. The company’s strong market position, diversified revenue streams, and ambitious growth plans make it an attractive option. However, potential investors should be mindful of the risks associated with fluctuating margins, low sales growth and declining ROE. A balanced approach, considering both the potential rewards and risks, would be prudent.
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