MOSL: KAVERI SEED CO. (Buy)-Subdued FY19 attributed to lower acreage
Kaveri Seed Co.: Subdued FY19 attributed to lower acreage
(KSCL IN, Mkt Cap USD0.5b, CMP INR532, TP INR630, 18% Upside, Buy)
- performance improves in fourth quarter: Revenue increased 7.5% YoY to INR447m (our estimate: INR421m) in 4QFY19. KSCL reported an operating loss of INR59m (our estimate: INR141m), as against a loss of INR133m in the year-ago period. Margin was at -13.3% (our estimate: -33.5%) versus -32.1% in 4QFY18. Consequently, the company reported a net loss of INR114m, lower than our estimate of INR171m and also below INR184m in 4QFY18. For FY19, revenue declined 1% YoY to INR8,094m. Margin shrank 100bp YoY to 26.1%, while adj. PAT was up 2.9% YoY to INR2,175m.
- Turnaround likely led by acreage recovery; non-cotton biz to grow faster: KSCL's performance in FY19 was marred by subdued acreage, which led to lower volumes in cotton (-11% YoY) and maize (-4% YoY). However, with firm commodity prices likely translating into increased acreages, cotton volumes are expected to grow by 13% YoY to 7m packets in FY20 (company has maintained an inventory of 9m packets). KSCL has guided for volumes decline of 0.1-0.2m packets in Andhra Pradesh, the impact of which is likely to be more than offset by growth in Maharashtra, MP, Gujarat and Karnataka. The market share in north is also likely to improve owing to new launches in cotton. Separately, the company has guided for faster growth of 20%+ YoY in the non-cotton business in 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.
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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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