Ag Growth International Inc T.AFN.DB.J

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

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 Aug 14, 2023 1:41pm

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Post# 35587349

TD Now Have Highest Target

Ag Growth International Inc.

(AFN-T) C$59.15

Q2/23: Strong EBITDA Beat on Impressive Margins; Guidance Raised

Event

Q2/23 adjusted EBITDA was $88.2mm (a quarterly record), which was ~17% above consensus. The beat was driven by exceptionally strong margins, which more than offset lower-than-expected revenues.
Management increased its 2023 adjusted EBITDA guidance to "at least $290mm" (from "at least $265mm"), which compares favourably with the pre-quarter consensus of $267.6mm. Further, AFN raised its 2023 adjusted EBITDA margin target to "at least 18%" (from 17%, while pre-quarter consensus was at 16.6%).

Impact: POSITIVE

Adjusted EBITDA was $88.2mm vs. consensus/TD at $75.2mm/$75.9mm.
Adjusted EBITDA margin was 22.6% (+565bps y/y) vs. consensus of 17.5% and TD at 17.3%. Margins benefited from AFN's various operational excellence initiatives, including manufacturing efficiencies, centralized procurement, and workforce optimization (benefits being realized more quickly than originally expected). Pricing and mix were also supportive of the margins in the quarter. The Farm segment's EBITDA margin was 30.0% (+740bps y/y and well above our 23.1% estimate), while Commercial's EBITDA margin was 18.5% (+390bps y/y and ahead of our 14.8% estimate).
Revenue was $390.3mm (flat y/y), below consensus/TD at $428.5mm/ $439.1mm. Farm sales were +3% y/y, while Commercial sales were -4% y/y (weakness in food and fertilizer, in particular).
AFN's total net leverage ratio was 3.3x (vs. 3.6x in Q1/23). Management reiterated its expectation that leverage will trend towards the 3x level by YE2023.
We have increased our adjusted EBITDA forecasts, driven by our higher margin expectations, which more than offset a modest decline in our revenue estimates. Our target price increases to $83.00 (from $77.00) on the back of our higher adjusted EBITDA forecasts.

TD Investment Conclusion

Overall, global agriculture fundamentals are supportive of AFN's outlook, in our view, and we are attracted to the company-specific revenue growth and margin improvement opportunities that AFN offers. Meanwhile, we view AFN's valuation as attractive. We reiterate our BUY rating.