Buy Godrej Industries; target of Rs 1030: ICICI Securities

ICICI Securities's research report on Godrej Industries

Godrej Industries (GIL) generates major value from its listed subsidiaries and associates viz. Godrej Consumer, Godrej Properties and Godrej Agrovet. As per I-Sec’s target prices for Godrej Consumer, Godrej Properties and Godrej Agrovet and 55% holdco discount, GIL’s value works out to INR 1,030/share. At current market prices of listed subsidiaries and associates, GIL’s value works out to INR 1,150/share. Godrej Group in Apr’24 had announced to simplify group structure via ownership realignment of shareholdings in the group. We believe further simplification (if any) of the group may result in value unlocking. Further, it may result in lower holdco discount in the long term. At present, the stock trades at a discount of 64% to the combined market value of subsidiaries and associates.

Outlook

We believe, the subsidiaries as well as associates of Godrej Industries, shall be the net beneficiaries of recovery in end-user industries. We also model these businesses to benefit with value migration from unorganised to organised sector. Our revised SoTP-based TP for GIL is INR 1,030. We maintain BUY. Prolonged losses (if any) at Godrej Capital may result in higher holdco discount.