bgAgria Group Holding offers resilience in bad 2020 and shows upside potential
Agria Group Holding
Agria Group Holding (A72 BU) is a vertically integrated holding with a closed production cycle in grain production, processing and trading. The holding is among the largest farming groups, grain traders and land owners in Bulgaria.
Solid asset base of Agria Group Holding
The Group’s main assets are positioned in the most fertile region on the Balkans – Northeast Bulgaria, cultivating c.15.2k hectares of farmland, including 7.8k own. Storage capacity amounts to 250k tons and provides for 800k tons of annual grain trading – the largest revenue generating segment for the Group.
Farmland and storage capacity investments persist over the last decade as Agria Group Holding steadily adds capacity. To step up growth and solidify vertical synergies, the Group plans a milestone grain sea port investment in 2021-2023.
Strong top line with margins yet to follow suit
The Group booked strong top line with a 23% CAGR for the period FY15-FY19 to BGN 313m. Key drivers were export expansion and strong 19/20 harvest.
Margins, though, are yet to follow suit. EBITDA and net profit margins slashed 50%+ for the FY15-19 to 8.1% and 3.2%, respectively, due to the expansion of the low-margin, high-volume grain trading.
H1 2020 – strong interim results
Strong interim results for 1H’20 with sales up 36.8% y/y to BGN 107.6m while margins rebounding temporarily to 9.7% on EBITDA level. Still, acute drought in 2020 poses a challenge affecting North-Eastern Bulgaria and other European regions’ wheat production. With 25% y/y drop in Bulgaria and 10% y/y in several EU countries, 2020-2021 results are to be subdued.
Undervalued vs book and market value
The Group is considerably undervalue vs. book and market value of its own farmland. The latter, currently amounting to c.7.8 ha, is worth at least c. BGN 150m or 5x higher than the current market cap of the Company.
