Stocks to Buy Today: On 9 November 2023, the financial services firm ICICI Securities published the latest research report on Godrej Industries shares, assigning a ‘buy’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
ICICI Securities is Bullish on Godrej Industries and has recommended a ‘buy’ rating on the stock with a target price of Rs 760. Let’s take a closer look at their recommendations for the Godrej Industries share price target set by ICICI Securities.
Godrej Industries Limited (GIL) primarily derives its valuation from its stake in listed entities such as Godrej Consumer, Godrej Properties, and Godrej Agrovet. Based on target prices for these companies provided by I-Sec and accounting for a 50% holding company discount, GIL’s intrinsic value is estimated at INR 760 per share.
However, based on the current market prices of these subsidiaries and associates, the value is slightly higher at INR 830 per share. Despite this, GIL’s stock is currently trading at a 56% discount to the collective market value of its subsidiaries and associates.
The forecast is positive as the subsidiaries and associates are expected to benefit from the economic revival and a shift from unorganized to organized sectors. GIL’s valuation follows the Sum of the Parts (SoTP) methodology, with a target price (TP) of INR 760, and maintains a ‘BUY’ rating.
As a holding company, GIL not only benefits from its stakes in these subsidiaries but also operates its own standalone oleochemical business and palm oil trading through Godrej International, along with recently venturing into housing finance under Godrej Capital. However, the standalone chemical business has seen a revenue decline of 41% year-on-year, with a net loss reported in Q2FY24 due to weak global commodity prices, which is expected to continue affecting the business in the second half of the fiscal year.
GIL has also increased its investment in Godrej Capital, now holding an 88.8% stake after a considerable investment of INR 21,120 million. There is a cautionary note that persistent losses in Godrej Capital could lead to an even greater holding company discount. Nonetheless, the stock’s substantial trading discount compared to the Net Asset Value (NAV) reflects a consistent historical trend, averaging around 56% since Godrej Agrovet’s listing.
- Promoters: Their shareholding has remained unchanged at 67.2% during all three months.
- Institutional investors: Overall, there is a slight increase from 12.5% in March to 12.7% in June and it remained the same in September.
- MFs and others: This category saw a decrease from 1.4% in March to 1.3% in June, followed by a rise to 1.8% in September.
- FIs/Banks: There was a slight decline in their stake from 0.7% in March to 0.6% in June, and it decreased further to 0.5% in September.
- Insurance: There was no investment from this category during the given months.
- FIIs: The ownership by Foreign Institutional Investors increased from 10.4% in March to 10.8% in June but reverted back to 10.4% in September.
- Others: This group’s shareholding slightly decreased from 20.3% in March to 20.1% in June and remained stable at 20.1% in September.
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