Stunning results no doubt…Topline growth of 40%. However, it would not be prudent to extrapolate the bottomline growth of 3.3x as it looks like there was significant inventory adjustment this quarter. In the P&L account, the expense under Inventory adustments has declined 66%. Will need further clarity on this during the management concall. Nevertheless, great set of numbers. Congratulations to the team who spotted this early. Looks like lot of juice left here.
as per concall, advances are less this year as expected, they have around 115 lakhs packets of inventory. they are expecting 20% sales growth across all veraities. positive surprise is margin improvement due to better product mix and economy of scale. growth for cotton comes from increase in acreage (due to higher cotton price) and increase in market share.
overall they are confident of 20% growth in next 3 years
Hi Bala, looks like the Concall is done…Was there any clarification on how could the cost of raw material decline 50% inspite of a 40% increase in topline…and also was there any offlading of excess inventory as chages in Inventories have declined 66%. The above factors resulted in a 3.3x increase in PAT.
Also, just off the topic, are you from Hyderabad boss? If so, would love to meet sometime. Can we arrange a Hyderabad valuepcikers meet and celebrate the sucess of kaveri Seeds? Although I have not earned a single paisa from this scrip.
Hi Bala, looks like the Concall is done…Was there any clarification on how could the cost of raw material decline 50% inspite of a 40% increase in topline…and also was there any offlading of excess inventory as chages in Inventories have declined 66%. The above factors resulted in a 3.3x increase in PAT.
Also, just off the topic, are you from Hyderabad boss? If so, would love to meet sometime. Can we arrange a Hyderabad valuepcikers meet and celebrate the sucess of kaveri Seeds? Although I have not earned a single paisa from this scrip.
yes, i am from hyderabad, kaveri is my highest holding (37% till 2 months back, 27% till last month, 22% yesterday and 15% today). even though i am hyderabad, i didnt participate much in the research work done by donald, om, tirumal, dr gs ramakrishna, vinod ms. however i built conviction after discussing with the team.
we regularly meet. especially whenever someonefrom bangalore/other places visits hyderabad. some of usalso go to agm meetings and compamy Q&A.
i read your introduction, will be happy to meet you. send me email with your contacts to bala081090_navya at yahoo.com
the concall transcript is there in researchbytes.com, you can get all the details.
there is a lint sales of 35 cr (this normally comes in Q4, but it came early this time, so Q4 sales will be less) , there is an increase in maize acreage which resulted in higher profits.
the key takeways for meare margin expansion and 20% growth in next 3 years.
I remember a discussion between Hitesh and Donald that around 1600 (pre split) was a fair price for Kaveri. Thats 320 post split. The stock hit 530 today. The sentiment for agri companies seems very very positive right now. Any opinion on current valuations?
**It is richly valued. The agri sector is highly dependent on monsoon which remains erratic. So one need to look at that also for assigning PE to Kaveri. **
It can go upto 20PE in extreme euphoria but gradual profit booking is advisable. I do not say exit completely.
At present valuation, I would rather hold cash. I do not hold a stock purely because I do not find any other stock to put money into.
Discl: I hold Kaveri from 330 levels and added gradually and recently have booked profits but still hold some.
I think the 20-25% estimate is a conservative one (in a bad monsoon year I guess). Looking at the 5 year RoE and sales and profit CAGR, I think 17 may not be that high. But then what is high and where should one start booking profits would be interesting to know. Personally, I plan to hold. One more reason for me to hold is also to avoid the short term capital gains tax to 15% and also find a better long term opportunity at cheaper valuations.
1). never exit completely (lesson learnt from page) with a view to catch lower. book some profits subject to rule 2
2). review current market price with next year expected eps. based on this take a call for partial profit booking
fy14 eps would be around 32, mgmt is saying 20% sales growth and some margin expansion. i am assuming 25% profit growth, so eps would be 40. at cmp of 540, its trading at 13.5
13.5 is not very high but at the same time not much margin of safety. i booked some profits
I think management has always been very conservative in its expectations. We can expect higher PAT growth given the fact that Maize’s proportion in the total sales should go up for FY15 and maize has much higher margins compared to cotton. Also, as per the latest con call, the next growth trigger in the cotton seeds would be entry into Maharashtra, MP and Gujarat. So with even 20 - 25% growth in sales, the PAT growth would be much higher.
management has not just been conservative. They in fact lie to make sure they appear over-conservative. Last concall they said they do not have maize inventory so it is impossible to repeat last years maize success. - that was a lie - How can u make sales if you dont have inventory?
Nonetheless, am waiting for correction and cash to add up more.
big positives from this concall:
1). margins in cotton should improve going forward. Also cotton acreage is expected to go up by 5 to 10% in FY15.
2). FY16 has fair chance of price increase in cotton. that should take care fo 25%+ growth in that year too.
3). maize market to increase by around 40-50% in the coming few years. also prices to remain firm.
Selling a stock going up makes sense when you have some better story to invest or suppose you follow rule that each stock in your portfolio will occupy this much percentage so you keep booking profits.
The most important thing one need to hold a stock is Conviction.
The most important for the stock price is Earnings. Sooner or later stock price will reflect the earnings.
(It is better to book some profits and buy something to your family members)
Kaveri does not seem over-valued by any yardstick. This is again a business to ride for many years - unless there is any adverse development in the business - as you might have now seen from most of ValuePickr Portfolio picks.
At the moment it is business as usual. In each of its segments, Kaveri is emerging stronger. It should only do better in the next year. And the blockbuster 1Qr is not even 4 months away!!
Everyone has to first do complete homework (just read up the entire thread, stock story and multiple management Q&As) and at the same time develop a sense of what is a fair PE band for the kind of quality business it is, and what is the potential PE band if the business keeps performing and goes on to the next level. And the discipline to complete ones homework and sit tight! Please wait for the latest ValuePickr Scorecard coming soon - which will try to introduce these things in a more formal way:)
Anyone with very high allocations (over 20% in my book) should ofcourse book partial profits along the way. I have been booking partial profits all along the latest ride from 2000+ (pre-split) and even very recently. But hey for the rest, I am going to HOLD ON very tight - till we see anything adverse on the horizon.
Time for next round of on-the-ground survey and Management Q&A, coming soon.
Addressing a press meet here on Tuesday, Chamarasa Mali Patil, KRRSâState president, said that owing to poor quality Bt cotton seeds supplied by two companies – Mahyco Monsanto Biotech (India) Limited and Kaveri Seed Company Ltd. He also demanded Chief Minister Siddaramaiah to drop Agriculture Minister Krishna Byre Gowda from the cabinet, as he was not aware of the problems faced by the farmers.
Although I have not earned a single paisa from this scrip.