Have a $76.00 target. GLTA
Ag Growth International Inc.
(AFN-T) C$57.76
Q4/23 First Look
Event
AFN reported adjusted EBITDA of $73.1mm, essentially in line with
consensus of $72.5mm (very strong margin performance offset lower-than-
expected revenue).
Management introduced 2024 adjusted EBITDA guidance of "at least
$310mm" (vs. $293.9mm in 2023), which compares with consensus of
$307.3mm. In addition, AFN's overall order book was at a record level and +25%
y/y at YE2023.
Conference call at 8:00 a.m. ET
Impact: NEUTRAL
We view Q4/23 as a solid quarter (supported by impressive margin performance),
and we are encouraged by AFN's outlook. That said, with Q4/23 adjusted EBITDA
and 2024 adjusted EBITDA guidance essentially in-line, we have characterized
the release as NEUTRAL.
Q4/23 adjusted EBITDA was $73.1mm (+43.3% y/y) versus consensus/TD at
$72.5mm/$71.7mm.
Adjusted EBITDA margin was very strong at 19.3% (+563bps y/y) vs.
consensus/TD at 17.5%/17.3%. Farm segment EBITDA margin was 24.7%
(+678bps y/y and above our 23.3% estimate), supported by manufacturing
efficiencies, a favourable mix of portable equipment, and Digital's reorganization.
Commercial segment EBITDA margin was 18.8% (+295bps y/y and ahead of our
17.0% estimate), with the y/y improvement supported by operational excellence
initiatives, including effective manufacturing expense management.
Revenue was $379.3mm (+1.4% y/y), below consensus/TD at $413.4mm/
$413.3mm. Farm segment sales were +4% y/y, driven primarily by strong demand
in the U.S. Commercial segment sales were -1% y/y, as strong growth in India
was offset by areas with challenging y/y comparable results (particularly Canada).
AFN's total net leverage ratio was 2.8x (vs. 3.2x in Q3/23).
Guidance/Outlook Commentary:
AFN introduced 2024 adjusted EBITDA guidance of "at least $310mm".
However, we note that AFN increased its 2023 adjusted EBITDA guidance
twice last year, and then wound up slightly outperforming its most recent
2023 adjusted EBITDA guidance (reaffirmed alongside Q3/23 results release).
Accordingly, we believe there may be some conservatism in AFN's newly
introduced 2024 guidance.
Management sees AFN as positioned to realize accelerating growth in 2024,
with the company's order book at record levels and continued demand for
equipment to protect/move crops worldwide. Still, AFN expects a gradual ramp-
up of its 2024 results, given the project-based nature and timing of commercial
segment orders.