AGRIA: WHERE GROWTH MEETS VALUE • We reinitiate our coverage on Agria Group Holding with a “BUY” recommendation and target price of BGN 34.39. Our valuation approach combines FCFF model with 75% weight and multiples with 25% weight. • Agria had a record 2021 year with revenue jumping 26.5% YoY and operating margin improving by 3.4 p.p. to 14.4%. Consequently, net profit more than doubled to over BGN 25m. Efficiency has also been improving as cash conversion cycle has been trending downwards. In 2021 the company announced its first dividend, since going public and implemented a share buyback program. A dividend increase in 2022 may boost investor confidence further. • Revenue growth has been impressive with 5-year CAGR of 19.9%. The ambitious expansion plans, focused around the construction of own port facility – Agria port in Beloslav, will offer a competitive advantage in the grain trading segment and support the growth of the company in the future. The project is expected to be completed in 2023, but supply chain disruptions may cause a delay. • The recent Russian invasion in Ukraine poses a threat of severe supply crunch in corn, wheat and especially sunflower, which will likely support record high prices of those commodities. Furthermore, with around 80k daa of own land in Northeast Bulgaria and 290k tonnes storage capacity, Agria seems to be a great pick for high inflationary environment. • Skyrocketing fertilizer and energy prices pose a risk on company’s profitability. While grains price increase will likely offset that, supply chain issues may make the situation difficult. EU sanctions on Russian and Belarusian companies, combined with the dependency of Bulgarian fertilizer producers to natural gas from Russia could make it hard for farmers to get their hands on fertilizers, thus lowering crop yield.