MOSL: KAVERI SEED CO. (Buy)-Below expectations; cotton growth strong but maize disappoints
KAVERI SEED CO.: Below expectations; cotton growth strong but maize disappoints
(KSCL IN, Mkt Cap USD0.5b, CMP INR527, TP INR607, 15% Upside, Buy)
- Miss on all fronts: KSCL's revenue grew 3% YoY to INR744m (our estimate: INR1,220m) in 2QFY20. EBITDA was up 43% YoY at INR113m (our estimate: INR146m), with the margin expanding 410bp YoY to 14.6% (our estimate: 12%), led by gross margin expansion of 370bp YoY. However, adj. PAT was down 42% YoY at INR69m (our estimate: INR164m) due to lower other income. For 1HFY20, revenue/EBITDA/PAT increased 12%/16%/6% YoY.
- Spillover impact drives cotton volumes/revenues: Cotton revenue grew 87% YoY to INR356m, primarily driven by spillover of sales volume from the prior quarter to 2QFY20 (as the late onset of monsoon delayed the timing of sowing). Volumes thus increased 73% YoY to 0.52m packets and realization improved 8% YoY to INR684/packet in 2QFY20. Non-cotton revenue declined 26% YoY to INR418m due to lower maize volumes (-33% YoY to INR1.2m packets) on account of reduced government orders.
- Key concall highlights: (i) KSCL maintained its revenue growth guidance of 15-20% for FY20. (ii) Cotton volume growth guided at 10-15% for FY21. (ii) Capex of INR300-400m planned for FY20.
Kaveri Seed Company Ltd. Kaveri Seed Company Limited is an India-based seed company. The Company is engaged in the production, processing and marketing of hybrid seeds. It owns over 600 acres of farm land. It offers products in two categories: filed crops and vegetables. Its range of field crops includes corn, paddy, cotton, sunflower, mustard, sorghum, pulses, bajra and wheat. Its range of vegetables includes tomatoes, okra, chilies, watermelon, gourds and brinjal. Its range of corn seeds includes Kaveri 225, Kaveri 2288 (Ekka), Kaveri 244+, Kaveri 50 and Kaveri 25K55. Its range of paddy seeds includes Supreme Sona, Kaveri 9090, Kaveri 108 (Sampurna), KPH 412 and Chintu. Its range of cotton seeds includes Jaadoo, Jackpot, ATM and Singha. Its range of sunflower seeds includes Kaveri 678 (Leader), Kaveri 618 Extra, Kaveri 7049 (Champ), KSFH 7032 (Sunkranti) and Kaveri 9004. Its range of mustard seeds includes Kaveri AK47 and Kaveri 36.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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