About the
company
Kaveri seeds, incorporated in
1986, is one of the high growth company in India dealing in the field crops and
vegetables space. The company has also received the "Best under a Billion" award from Forbes this year. The company has a strong network of around 15,000 dealer
across the country. Their seeds portfolio includes corn, paddy, cotton,
sunflower, mustard, sorghum, pulses, bajra, wheat and their vegetable portfolio
includes tomato, brinjal, okra, gourd, watermelon, chillies. The company is
backed with strong management who are specialized in this agri domain of the business.
Industry
Over half the population of the
world lives in rural part and their main occupation is agriculture. Majority of
the Indian population relies on agriculture for employment and livelihood. In
India, agriculture accounts for 14% of the GDP. In value India is estimated at
12154 Cr. and 6th in rank after USA, China, France, Brazil and Canada. Indian
seed industry is undergoing metamorphosis with increased role of private seed
companies, entry of MNCs, joint ventures of Indian companies with multinational
companies and a wave of consolidations. Cotton, Maize and paddy are expected to
be the main growth drivers.
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| Financial Performance Source: Company |
Strengths
·
Significant investment in R&D in the last
five years.
·
Developed proprietary germplasm and hybrids.
· Multi-location
breeding and trial stations.
Financials
The company has faced a slowdown
due to weak markets in Karnataka and some other southern parts of India. This
slow down occurred due to weak rainfall. The company has improved both its
operating and net profit margin even in this slowing market.
Valuation
The firm is currently trading at 11x compared to industry average of 10x. Considering weak monsoons in FY16, we expect the firm to generate less volumes of sales but improving margins maybe able to offset this decline a bit. The stock can move to reach Rs 600 by the end of FY16.
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| Kaveri Seeds vs NIFTY Source: Reuters |
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