Some rough notes from Kaveri Seeds Q2 Conf call
Revenue Contribution for first half year - (rough)
Cotton - 360 cr. - 40 lac packets, 2nd to Nuziveedu
Paddy - 40 cr. - 200 tons
Bajra - 30cr. - bazra - 1550 tons
maize - 65 cr. - 6000 tons of maize
Revenue Guidance for FY-14 - 20%
Cotton seed Market Share - State-wise
Andhra - 12% (15-16 lac packets out of 40 lacs total)
MH/MP - 5% ( 12 lac packets)
gujarat - 2.5% ( Has a market size of 40-50 lac packets, only 2 lac packet sold this year. Looks like next area of focus for growth)
KexVegshouldbreak eventhis year.
Inventory )- standing crops are taken as inventory. Inventory are 209 cr. (last year was 140cr.) - more than 120 cr. is ofcotton, 25-20 cr. maize, 10 cr of packing material etc⌠This is key item to monitor and giving a half year balance sheet i think has helped.
The company is generating considerable amountâs of cash, so whatâs the plan of usage:
)- No major capex plan in near future, the business doesnât require much capex on an on-going basis and they have done 200cr. capex in last 4-5 years. May be 15-20 cr. needed for somemachinerythis year.
)- Board will decide on the dividend policy going forward. No plan for buyback. The company wants to stay in Agri businesswhich does not require much capex. 2 institutions had the same question and i think now there should be some pressure on the mgmt. to consider it seriously.
Controversy about thesupremecourt panelsrecommendationfor 10 yr moratorium on bt seed field trial - and itâs impact on seeds market
)- setback for ppl in genetically modified crops. Specially maize & rice.
)- may not have great impact on companies already dealing with bt cotton.
)- If they stop trials of bt. cotton, then they will have not evidence if to allow GM or non GM
-Monsantois coming with some new genes. There is dilemma if this ruling will impact them.
)- they have already taken trial, the issue may get clarified in next 1 or 2 months. They donât see much impact hybrid market.
Again, here is the latest news, whereby center has opposed the moratorium on field trials of gm crops
http://www.thehindu.com/news/national/supreme-court-refuses-to-stay-field-trial-of-gm-crops/article4081555.ece
Taxation -
)- There is no tax on seeds business. Tax is paid for only the 10% ofcottonseeds which is soldthroughco-marketers and micro-nutrient business. Co-Marketing is done Mainly to penetrate some new markets. Company is trying to move away with this as margin here is only 40-50 rs per packet (cotton).
Am getting little uncomfortable now as the valuation seems to have caught up w.r.t to current year expected earningsAlso, the uncertainty about the gm crop is a dampener.But on the positive, I think rate of growth in inventory (50% -which was identified as key item to monitor) is telling a different story than the 20% revenue guidance (which is not bad). Also, it just takes the first quarter of the next FY to get an idea about the FY14 earnings for this company. Anyone has any record of managementâs record in terms meeting guidance or over-delivering etc ?
Disc: I am invested since 430 odd levels and done major addition at 800 levels.
