Ag Growth International Inc T.AFN

Alternate Symbol(s): AGGZF | T.AFN.DB.H | T.AFN.DB.G | T.AFN.DB.I | T.AFN.DB.J

Industrials

Ag Growth International Inc. is a provider of the equipment and solutions required to support the storage, transport, and processing of food globally. The Company provides equipment solutions for agriculture bulk commodities, including seed, fertilizer, grain, rice, feed, and food processing systems. It has manufacturing facilities in Canada, the United States, Brazil, Italy, France, and India and distributes its products globally. Its segments include Farm and commercial. Its Farm segment focuses on the needs of on-farm customers, and its product offerings include grain, seed, and fertilizer handling equipment; aeration products; grain and fuel storage solutions, and grain management technologies. Its Commercial segment focuses on commercial entities, such as port facility operators, food processors and elevators. Its product offerings include larger diameter grain storage bins and high-capacity grain handling equipment; food and feed handling storage and processing equipment.

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Ag Growth International Inc

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Post by retiredcfon May 11, 2022 8:54am

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Post# 34673403

RBC

May 10, 2022

Outperform

TSX: AFN; CAD 36.64

Price Target CAD 50.00

All values in CAD unless otherwise noted.
Priced as of prior trading day's market close, EST (unless otherwise noted).

AGI (Ag Growth International)

Q1/22 results broadly in line with expectations, backlogs continue to signal positive outlook

Sentiment: Neutral

Our view: We think Ag Growth reported a solid quarter that was broadly in line with expectations and we were encouraged by the company’s reiterated guidance for strong EBITDA growth in 2022. We continue to see ag fundamentals as very supportive due to both high crop prices and strong grain volumes, which should drive strong demand for Ag Growth’s products.

Actual: $41.3M EBITDA | RBCe: $45.6M | Cons.: $40.3M

Summary: Q1/22 results were broadly in line with expectations, as higher sales from the commercial segment partially offset lower margins. Farm segment sales were slightly below our estimate ($144M vs. RBCe $146M), as higher-than-expected sales in the US and International offset lower sales in Canada—weakness was expected in Canada due to drought conditions in the prior period but was worse than expected, while the US and Brazil may have benefited from strong crop production. In the Commercial segment, sales were well above our estimate ($141M vs. RBCe $128M) on the back of better than expected sales in Canada and the US across both the Commercial and Food platforms. Sales in the Digital segment were in line with our estimate ($7M vs. RBCe $8M), although the company noted that they were impacted by the global chip shortage. Cash gross margins were in line with expectations at 33%, but SG&A costs were higher than expected, which ultimately weighed on EBITDA margins (13.6% vs. RBCe 16.2%).

Outlook: Ag Growth reiterated its expectation that the company should generate EBTIDA of more than $200M in 2022, vs. our estimate of $210M. Growth in 2022 is expected to be most significant in Q2 and Q3. The company also provided additional outlook commentary:

Total Farm backlogs are up 8% y/y, primarily due to the US at +30% and International at +19%, while Farm backlogs in Canada are down 23% y/y.
Total Commercial backlogs are up 31% y/y, primarily due to Canada, which is +136% y/y, while US Commercial backlogs are up 49% and

International up 10%.
In the Digital Segment, Ag Growth notes record order intake in Q1/22,

although chip availability issues continue to restrict the company’s ability to produce some IoT hardware, which is impacting timing of revenue recognition.