Big spike today, any good news from the sales front or is it just an speculative move?
Hi Guys,
Long time ...on Kaveri:). Been pre-occupied last few weeks with health issues of elders in extended family.
Here's my quick take on valuations front. Revised upwards post the Q4 results, but factoring in a 1% drop in OPM to 19% levels (higher competitive intensity).
| Numbers | Base Case | Best Case |
|---|---|---|
| Sales (lakh pkts) | 50 | 60+ |
| OPM (%) | 19 | 19 |
| EPS | 100-105 | 120-125 |
| Valuation | 15x | 15x-20x |
| Fair Price | 1500-1600 | 1800-2500 |
Feedback from the ground:
a) Kaveri may do very well in AP. While it dominates in Coastal region (20-25 lakh packets), it is reportedly equally in demand as Nuziveedu in most of Telengana (60 lakh packets) except Adilabad district.
b) Feedback from Maharashtra remains mixed. Hingenghat (Wardha dist/Vidharbha region) reports lacklustre activity dealers fear Kaveri share may fall even, but Amravati District (Vidharbha region) reports encouraging feedback for Jadoo, Jackpot, ATM. Yet to get through to Yavatmal, another very important region in Mahrashtra.
Maintain as before, that Maharashtra Sales is unlikely to impact overall Sales figures, either way. (2-3 lakh packets up or down may not matter).
Net Net, the investment premises haven't changed. Re-iterate Kaveri is a long-term story. If they do well this year, next year will be much easier ride for Jadoo-ATM-Jackpot which look good to continue for next 2-3 years.
By that time Rice Hybrid story will start kicking in, where again Kaveri Seed is one of the leading players. Our next Management meet with Kaveri (around AGM) will look to focus on the longer-term Rice Hybrid Story.
-Donald
Disc: Accumulated significant holdings in Kaveri Seed. Pre Q4 results, had completed all my buying till ~1200. Post Q4 results, revised estimates upward and continued accumulating till ~1400. My views are certain to be biased. Above data does not point to/recommend buying at CMP (~1500). Please do own due diligence.
Very significant observationâŚif things go well its definitely 3-5 or more years story.
The above post was from a long-term perspective on Kaveri. And I certainly invite views/critique on the same from all. However, would venture to say anyone who has invested in Kaveri post the call in August 2012 (and updated ValuePickr Scorecard Dec 2012) anywhere between 800-1200 levels, has a good margin of safety built-in, and can sit pretty for next 2-3 years, and keep enjoying the ride!!
But there are some more adventurous amongst us, who also have a quest to understand Markets better - how they operate & why they operate so - in a bid to keep getting better at the game - especially better Capital allocation. Where is the best bang for my buck?? I can only echo Hiteshâs words - We must learn to RIDE different businesses, differently.
Kaveri is sure one unique business to have in our Portfolio to take advantage of. Q1 does anywhere between 65-70% of the whole year business. A High quality (intellectual Property) Business where you keep getting better (once you have 1 highly successful hybrid, chances of producing the next successful hybrid is much higher, 1 hybrid you can ride for 5-6 years) unless you goof up on execution - calculated-risks while scaling up production/marketing. Sure, its a very attractive bet for the long-term.
What amazes me (when I think about it) that it is also a very very good opportunistic bet, for 3 months every year:). just 2 months - May & June decide, what happens to the near term prospects for the company. What is even better, if you think long & hard about it, the Variables are only 2. a) Demand for its leading Hybrids, b) Production planning/execution by the company. All other factors - Monsoons, Competition intensity, etc do not affect performance by more than 5-10%, amazing, but thatâs how it is!!
So cutting the long story short, I would like Market Experts to comment on how they would play the stock from here on, in the Short-term. (neglecting any long-term allocations by you). Hitesh, Ayush, Hemant, Bala, Safir, Others??
What actions would you take pre and post Q1FY14 results?
a) Given the perceived high uncertainty over Sales, if your avg price is ~1200, and price crosses 1600 before results (we probably have a month for that), will you be happy to pocket a cool 33% (since this is in the bag, and you reckon this wont sustain if company does below company guideline of 20-25%
b) Would you do this for 50% of allocation, or more?
c) If instead of consolidating at CMP (~1500) for some time, price crosses 1600 very fast, what would change in a) & b) above
d) Say couple of more reports come out, and If it crosses 1800 before results?? What actions will change wrt above
e) Will your actions completely depend on the Technicals (that your read for next 3-4 weeks)
f) What if I told you (forget the Skeptics) the company will easily do 60 lakh packets this year (50% higher Sales)- our dealer survey has a margin of error of 5% or less, and you fall for that - would you allocate less sales pre-results? By how much?
g) How much minimum allocation, would you keep for post-results? or none at all, given above possible price actions?
Please feel free to substitute/add to my questions with those that make sense:), any that will enrich us in understanding Opportunistic Capital allocation, better!
Cheers. Keen for some insights from you guys:)
-Donald
The above post has been copied in a new thread in the Techno-Funda Picks section.
KAVERI SEED - HOW DO YOU RIDE IT IN THE SHORT TERM- PRE & POST Q1FY14 RESULTS?
Its better that the Opportunistic Capital allocation takes place there (for more focus, better quality of discussion, and does not dilute the ongoing Kaveri discussion, here).
Comments/Discussion specifically on this aspect, may kindly be shifted here,
http://www.valuepickr.com/forum/techno-funda-picks/513756454
-Thanks
Please check this thread for reference/context for post below.
http://www.valuepickr.com/forum/techno-funda-picks/513756454
Re: CONSENSUS Over-Bullish sentiment on Kaveri
Going by the responses so far from our Trading Experts, this can only mean everyone is SUPER CONVINCED of super-results from Kaveri. Guys, I canât help but think our field-work may have unwittingly overly biased you/and anyone else who has accessed the field reports.
There IS that chance that Kaveri gets routed in Maharshtra!
Critics of our field-work point out that last year in Maharshtra was different. Mahyco and Ajeet could not supply, so Kaveri could step in and grab some share off them. This year both Mahyco (#1 in Maharashtra) and Ajeet (#3) as per current demand, have doubled the inventory and Nuziveedu (#2) also has higher inventory. Between them they will corner Maharashtra market and crowd out Kaveri.
Kaveri does not have a single region (in Mah) where it is dominant or within top 3 in farmerâs mindshare. Kaveri may fall back to 2011 levels - 5 lakh packets - half the Sales of 2012!!
Counter-views invited.
How does it all add-up in this scenario of Kaveri faring poorly in Maharashtra/MP, doing extremely well in AP, and holding other Markets??
| KAVERI COTTON MARKET PRESENCE | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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IF Kaveri does really this bad in Maharshtra/MP, there is a good chance of underperformance even from 20-25% guidelines, isn't there?? Going by how fast the stock is zooming, Mr Market seems to be completely discounting this possibility? But should we?? Guys in Maharashtra - time for some quick reality checks?? Please get to work. I am also trying working the phone. |
AP Govt directs Mahyco to supply 15 lakh packets of cotton seed- This is what they are saying about cottonseed in AP this year (link of the newspiece appended) -
"The State expects a demand for 1.31 crore packets of Bt cottonseed in the kharif. But the availability is put 87 lakh packets only, leaving a shortfall of about 40 lakh packets. The Government, however, is confident of meeting the shortfall.
The country is saddled with about eight crore packets stock as against the expected demand of four crore packets. But the problem is, the demand is high for a handful of varieties"
From last four days , In daily NewspaperLokmatdata about cotton seeds bags is published forWardha district, the breakup for different seed companies is as follow,
| Sr No | Name of Seed | No of Packet for Sale | % of Total Packet for Sale |
|---|---|---|---|
| 1 | Ajeet Seeds | 52220 | 8.28 |
| 2 | Ankur Seeds | 375000 | 59.52% |
| 3 | Kaveri Seeds | 68160 | 10.82% |
| 4 | Tulsi Seeds | 41140 | 6.53% |
| 5 | Krushidhan Seeds | 93400 | 14.82% |
| Total | 629940 | 100% |
Now from above data its clear inWardhaDistrictAnkurSeeds is clear leader with almost60%of packet for sales of totalWardhaDistrictCotton seeds packetfor sales available.
Will try to come with same data for Yavatmal District Soon.
With respect to the data, kaveri leading than ajeet is a positive!!! in Wardha as i believe Ajeet was a contender after Ankur. We will wait for the final data by the end of the season.
Surprised that Krushidhan could become second.
Any news for sudden fall today?
5% fall after 35% rise is not abnormal.
Hi Kiran,
Any news on how the price war is playing out ? In Kaveri call, mgmt. had indicated that prices for some other seeds have gone down to even 450 per packet. Could the surprise from Krushidhan be because of lower price ?
NewspaperLokmatdata forWardha district,
1 | Ajeet Seeds | 52220 | 8.28
2 | Ankur Seeds | 375000 | 59.52%
3 | Kaveri Seeds | 68160 | 10.82%
4 | Tulsi Seeds | 41140 | 6.53%
5 | Krushidhan Seeds | 93400 | 14.82%
| Total | 629940 inWardhaDistrictAnkurSeeds almost60%of totalWardhaDistrictCotton seeds packetfor
Fantastic effort Kiran. Thanks for the data points.I am happy that local scuttlebutt is catching on with ValuePickrs!
Few observations:
1. Is this Sales till date in this season? Dis you compile this from one consolidated report or from different reports on the last 4 days which had details of 1 or 2 companies in each??
There is no mention of Nuziveedu and Mahyco. So the data is not complete. Hingenghat main distributor informs Mahyco and Nuzivvedu are selling well in Wardha district.
Is it possible for you to trace the local reporter:). just call Lokmat and ask for agriculture section head, and enquire about the author(s). Just by the way, we could meet at short notice MDs and Senior Management of competitors to Kaveri ....mostly due to a friend in Agriculture section of Eenaadu...if that's any inspiration!
2. From what I remember of the discussions, Krishidhan sells well in Wardha district. It has a few hybrids well-suited for the local climate & soil conditions prevalent in Wardha. They are able to compete with bigger brands by offering substantial discounts, though.
3. Wardha is Ankur's homeground and they are the leader by far. They have the best hybrids for local conditions. Besides they are very well respected as they have never indulged in the premium game...and have always offered slightly better discounts than Nuziveedu and others.
4. Some info on approximate Market size, prices prevailing for some of the main districts, that Nishant Sinha sent in yesterday
| District | Mkt Size (lakh pkts) |
Dealer Price |
Farmer Retail Price |
|---|---|---|---|
| Yavatmal | 22 | 760 | 830 |
| Wardha | 10 | 750 | 850 |
| Amravati | 5.5 | 780 | 850 |
| Parbhani | 5 | 750 | 850 |
| Nagpur | 1.5 | 750 | 850 |
| Washim | 0.75 | 790 | 840 |
5. This info more or less tallies with what I have also gathered in bits & pieces. for example in Wardha I was told almost everyone is offering Dealers an overall discount of 180+ from MRP @930. However Kaveri seed is not following suit, and not even committing what they will offer end-of-season closure time (Dealer price is computed by adding up upfront discounts, schemes, total volume discount, etc) - reason why they said Kaveri is not going to do well this year. When I mentioned the company is on record (in Conference calls to analysts) that realisation will be 780-800, which means they will end up offering between Rs. 150-180, their refrain was ...at least they could have disclosed that...they are keeping us guessing...and thus sort of dis-incentivising us:(
6. So when I put the posure do you think Kaveri then will do very badly this year...end up doing much less than what they did last year. They said actually on an overall basis in Maharashtra Kaveri may end up maintaining flat (cf last year) ....because lot of back-sales end up in neighbouring districts of AP where Kaveri allocates much less than bookings! In Wardha district they say typically this inter-state trade, premium playing, etc. is much less widespread than say in Yavatmal and other places. I reckon probably because Ankur meets more than 50% requirement and ensurescopioussupply in its Home district.
Keep the scuttlebutt going guys! As you can see, this gets infectious, and may set in a virtuous circle...exactly what we have been aiming for, hoping for. Time for Team Hyderabad top report some... GS Ramakrishna, Om, Tirumal ...whats happening in your backyard?
-Donald
Donald ,
Thanks for encouragement ,
1). till date
No its cotton seeds packet available for sale to every stockist who directly sale to farmer , this data is published from seeds company to local farmer interest . Its different report of different seeds companies published in Local newspaper âLokmatâ ,between date 1/06/2013 to 5/06/2013.
Below is newspaper cutting of data for Wardha District published by different seeds companies,
1). Ajeet Seeds http://sharesend.com/hwgqtyxs
2). Ankur Seedshttp://sharesend.com/pqoj0jdu
3). Kaveri Seedshttp://sharesend.com/08t0pto6
4). Tulsi Seeds http://sharesend.com/qxa7zbqr
not complete.
Yes Mahyco & Nuziveedu sell well in Wardha district , both companies data yet to publish , as it publish I will update it . As you reported Wardha District market size is 10 lack packet, already we have data for 6.33 lack packets rest 3.66 lack may be of Mahyco & Nuziveedu combine . Its initial Guess.
Regards
KIRAN
**
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Fantastic effort Kiran. Thanks for the data points.I am happy that local scuttlebutt is catching on with ValuePickrs!
Few observations:
1). Is this Sales till date in this season? Dis you compile this from one consolidated report or from different reports on the last 4 days which had details of 1 or 2 companies in each??
There is no mention of Nuziveedu and Mahyco. So the data is not complete. Hingenghat main distributor informs Mahyco and Nuzivvedu are selling well in Wardha district.
reporter
.
2).
3).
4).
Dealer
Price
| Yavatmal | 22 | 760 | 830
Wardha | 10 | 750 | 850
Amravati | 5.5 | 780 | 850
Parbhani | 5 | 750 | 850
Nagpur | 1.5 | 750 | 850
Washim | 0.75 | 790 | 840
5).
us
6).
ensurescopioussupply
Mahrashtra Update -15 June, 2013
This is based on one authoratitive source. Needs to be authenticated by taking feedback from others too. There is good and bad news.
First the bad news!
1). Something like 30-35% less acreage under cotton this year. Primarily because of shift away to Soyabean and Maize and in some places to Bazra also.
2). The main centres in Vidharbha - viz: Yavatmal, Wardha, Amravati, Akola, Buldhana has seen >20% shift. Some regions have seen a 40% shift away from Cotton. Marathawada and Khandesh regions have also seen atleat 20% less acreage
3). The main reasons for shift are respectively a) Labour is cheaper b) Fertiliser cost is less c) Cotton MSP levels were not high enough to incentivise farmers vis-a-vis Soyabean and Maize pricing. Most farmers sold cotton stock at Rs 4200. Now the prices are higher at 5100/- (which benefits the Trade, not the farmer).
4). Last year Total Maharashtra Sales was around 1.2 Cr pkts. Vidharbha accounted for 50 lakh packets. Marathawada (45) and Khandesh (25) accounted for 70 lakh pkts. This year Vidharbha will do atmost 35-40 lakh pkts.
5). Good Monsoons now doesnât change the picture as 80% plus sales are over. In Vidharbha they are saying atmost 3-4 days of Sales left. Farmers have already decided and bought the seeds for this season!
Some Good news!
6). There are only two Seed companies which are likely to show growth (over 2012 June Sales) Ajeet & Kaveri. All others will be showing degrowth because of excess supply in market. Ajeet has been doing extremely well all over Maharashtra and selling at MRP. Nuziveedu - only Mallika hybris has sold well, all other hybrids from its stable have registered very poor sales. All others Ankur, Mahyco will show degrowth
7). Kaveri had done around ~9 lakh pkts in Maharshtra last year. They may do atleast 20% more as per the source.
Those local to Maharahtra, please try and get some corroboration from your contacts with dealers/distributors.
I expect similar shifts to Soyabean and Maize in Andhra Pradesh. Team Hyderabad can you please post an update after making enquiries?
-Donald
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Mahrashtra
20131).
**
Iâm bit surprised to see very less acreage under cotton in Maha. I had read somewhere in the local newspaper some 2-3 weeks back that some cotton growing council/association(donât remember the name) had said that the cotton acreage in India wonât fall much owing to normal monsoon forecast and recent surge in cotton prices however they were pegging the total cotton production to fall by 5-10%(looked contradictory). Gujarat may not see more than 5-10% fall in cotton acreage.
âCotton has been planted in 1.58 million hectares, 0.6 per cent more than last yearâs.â
From the PI Industries thread, posted by Mahesh. Seems data from Agriculture department.
Manish & Akbar,
Yes I was also pointed to several reports in the Media - proclaiming larger acreage under cotton. But that was from the Media:)
Our report is from the field. When confronted with the good monsoon projections, the answer was SirâŚby the time good monsoons lashed Vidharbha (last week) Seed sales were almost completedâŚfarmers had committed to shift to Soya and Maize and bought the SeedsâŚhardly 2-3 days of Sales are left!!
Am trying to tap other on-the-field folks in Maharshtra to see if this is indeed true. Btw similar signs were heard from AP. Letâs wait for more filings from the field.
-Donald
has anyone studied the impact of impending food security bill on agri sector as a whole and seed indunstry in particular. this sector may get rerated with lot of focus on agriculture.