Andhra market is 3.4 - 3.6 million packets which kaveri garnered. Maharashtra more than 1.1 - 1.2 million. Rest from other states.Sees good scope in Maharashtra and be a brand leader in Maharashtra in coming 2-3 years. Last year sold 7 lakh packets in Maharashtra.
Hybrid paddy garnered 30- 35 crores. This year will do 1400- 1500 tonnes compared to 1000-1050 tonnes last year.
Last year there were spill over sales in Q2. This is not the case this year. Mgmt clarified that 90% of the sales for the year has happened.
Margins were compressed for cotton this year but it was compensated by higher margins in hybrid corn and rice.
Acreage and hybridization of corn going up.
Last year done total 200 crores in 3 quarters combined(Q2-Q4), this may not happen this year. Can degrow???
Advances would be coming down in future. Cut down the production activity for the coming year.
earned 550 crores from - cotton, 80-85 crores from corn - 40 crores from paddy.
Confident of growing cotton at 20% next year too.
Cash balance is 100 crores which will be mainly utilized in the coming quarters for payments to growers.
Investors expecting increased dividend payout ratio will be disappointed. No increase in dividend payout with a cash balance of 100 crores!!!
One interesting point which came in concall was suitability of Jadoo for all over India except for Punjab & Haryana. Co has only 3-4% mkt share in Gujarat & 15 odd % in MP n only 11% in Maharashtra which can substantially go up thanks to much better quality of Jadoo & ATM. Company will keep on aggressively eat the mkt share from competitors specially Nuzhiveedu. Mkt share has increased in Maharashtra from 7 to 11% inspite of decreasing acreage & Kaveri being 1 year late there.
Govt regulated cotton price can increase by 100-150 rs provided a favourable court ruling expected shortly.
Kaveri is slowly on the way to become no 1 cotton seed co in the country displacing Nuzhiveedu thanks to its superior R&D.
Corn & specially Rice hybrid will see exponential growth where importantly competition intensity is very less when compared to Cotton. Kaveri USP in Rice hybrid is increased yield .
A bit dated but apt article but highlights Axis Holdings who were visionary enough to invest USD 5 million in Kaveri seeds & are still invested.the guy says that Indian seed business is a 20 year old story. Rabo Bank the biggest international agricultural specialist organization is equally positive on the assured growth in Indian seed industry.
Kaveri performance for full FY14 - touching or exceeding Rs.140 for the full year - as is being already projected by the Bulls - is NOT A GIVEN. Adding EPS Rs. 20 or more (or 200 Cr Sales or more) in 3 next qrs may not be possible - for reasons mentioned by Management (unlikely spillover cotton sales this year, finished inventory for other crops,etc.). Since Maize contributes again only in Q3 and if spillover Cotton is absent in Q2, there is every likelihood of FY12 like Sales of 48-50 Cr (Main growth drivers being not present) in Q2FY14.
Now to argue the other side. Though it might take some doing, it might still be possible:). Its hard to accept that Kaveri will fall back to FY12 Q2-Q4 perfromance or only Rs 7/- addition in EPS for rest of the year - given the increasing traction in Maize, Rice and Bazra for the company. Can Maize Sales grow by 50-60% over FY13? How much more can Rice and Bazra contribute, realistically?
I believe the code to cracking Kaveri performance in rest of FY14, lies in 2 tables as below. I have put in rough figures from whatever notes I had of concalls, etc. Like others to chip and complete/refine this picture
Q1FY13
Q2FY13
Q3FY13
Q4FY13
FY13
#s
Cr
#s
Cr
#s
Cr
#s
Cr
#s
Cr
Cotton
35
325
41
381
Maize
6000
65
-
-
5500
60
-
-
125
Rice
1200
50
Bazra
1550
30
470
64
94
74
702
If we can findout/collate the breakups for respective crops for Q2, Q3 and Q4 above, we may then spend some energies trying to see where rest of FY14 may be headed - based on our understanding and again quizzing at ground level:)
Q1FY14
Q2FY14E
Q3FY14E
Q4FY14E
FY14E
#s
Cr
#s
Cr
#s
Cr
#s
Cr
#s
Cr
Cotton
61
567
67
623
Maize
7850
85
7500
80
15350
165
Rice
40
Bazra
44
736
Hope to find some guys willing to do the hard work - may involve listening to FY13 concalls again/referring to your notes/writing or calling the CS first to complete the FY13 picture -with above break-ups.
Hi Donald,
This may seem crude:
Canāt Maize surprise on the upside? Monsanto was all about the shift to Maize hybrids so why not Kaveri too? Or is Kaveri low on Market share there?
Thanks for asking. If you see the tables properly, you might have noticed that we are factoring in Maize adding another 80 Cr in Q3. Needs to be established though that, that much inventory is already in production/will be ready by mid November (3 months from now).
How much more will Rice and Bazra realistically contribute for the year. 120 Cr? by when and when? As I said, do some legwork - listen to FY13 concalls and help establish base figures.
Apart from cotton, maze, rice and bajra the others contributed 132 Cr for FY13. Others include sunflower, vegetables and other divisions. Due to high cotton seed production last year they also had āLintā revenues (not sure about the spelling) last year which will be very low this year. Due to 40% reduction in production this year the per packet production cost might also be higher due to lower scales.
I would take the āno inventory for maze for Rabiā with a pinch of salt. When they did excellently in Q-3 last year I am sure they would have planned for this year Q-3 too. As Om pointed out if the Maze seed for Rabi and Khariff are different there is no question of Q-1 using up seeds meant for Q-3.
Liked the statement that rice+maze will be contributing more in 3 yrs and that cotton will dominate for one more year in the sales breakup.
Good to focus on 9 months now even though company mentioned 90% sales for the year is over. They have always tried to downplay.
I think it was analystās statement that production cost would be higher due to lower production base. I am sure that Mr Mithun clearly mentioned that the production cost would be lower/same then last year for cotton seeds.
That makes more sense as they have higher buyer power when they need lesser production. Most of the other production expenses should be variable (because of which thereās no margin improvement shown over years inspite of increasing production).
Even if the rest of the quarters were to contribute minute profits, we can assume company will do minimum EPS of around 125 per shareā¦ I assume garnering eps of 7-8 from remaining quarters should not be difficult. Based on that also the company for the full year will have shown close to 30-35% growth for fy 14 which again is a big plus in this kind of environment where growth is scarceā¦
And if the rice and corn hybrid story which seems to be on the cusp of a strong growth phase plays out and Kaveri manages to beat competition, it could be a real interesting bet in the next 2-3 years. Plus here it seems there is a trustworthy management.
Personally I think this management is always a step ahead of competition in terms of anticipating demand and hence maize in the dry season also should see encouraging sales.
Overall I think fy 14 might show eps figures of 130 plus minimum. Based on that downside seems to be limited from current prices.
The KSCL story at Valuepickr is a great example to exhibit the systematic and mothodical way of analyzing a stockās future. The amount of knowledged gathered and shared is simply amazing. I thank all the hard workers, who have done their bit in unfolding this story before us mortals.
One thing which puzzles me is the late reaction of KSCL stock prices to the results. It is well known that Q1 of the company represents 90% of rest of the FY. It implies that the future of the FY14 is already in public domain. If we are anticipating KSCL prices to be at least at the level of 2000+ (with reasonable likelihood), by the end of FY14, why the market is so late to acknoledge that.
We have also seen this trend last year, when the market took almost 2-3 months to travel from 800+ to 1400+ after the results of Q1FY13 were out.
This is a stock, which is expected to exhibit minimum surprises (at least on eps front) in rest of the FY14. Then why market takes so mush time to recognize it. Is there something, which market know and we do not.
My view. Had that been the case, management wouldnāt have been conservative in the earnings conf call. They didnāt give any rosy picture. Due to that, the stock also didnāt move much despite of a great result.
**Debashish Basu appears to be talking about generalities and typical red flags he sees because of his experience.
**
**In general,**I too would have been worried about a co not paying dividend/tax and which is seeing some promoter selling. But we can be sure that Kaveri is actually generating profits for the following three simple reasons:
1). Ground work by team hyderabad (who talked to dealers who actually sell kaveri products).
2). Kaveri pays about 20% royalty to Monsanto. I see this as a built-in deterrent to large scale mis-reporting at least the BT cotton sales.
As you mentioned correctly post q1 fy 13 results also this was the caseā¦ I believe just as it takes a while to digest bad results similarly it takes a while to digest good results.
I think to propel stock prices higher it will need fresh buyers who will always be sceptical buying a stock at near all time highsā¦ Once stock starts its upward journey post āsell on newsā sellers have finished their job, the stock tends to move upā¦ This is the time lag between good results and good stock price appreciationā¦ I think those who know more than most should utilise this opportunity to lap up the stock during this temporary weakness phase.
