[ Comment too short ]
varun you can see the details in bulk deals in moneycontrol. Mithun is one of the wholetime director of kaveri seeds.
Everybody has a buy rating on Kaveri. Reasons being common : Increase in realisation from Rice & Maize and margin improvement in cotton.
http://www.thehindubusinessline.com/money-wise/stock-insight/kaveri-seeds-buy/article6094929.ece
This could be very good news and give some surprises
"The area may increase by 3.4% to 12 million hectares (29.65 million acres) in the planting season that started in May, according to the median of five estimates from growers, exporters and industry groups compiled by_Bloomberg_. "
IndiaNivesh research has come out with a report on Kaveri with channel checks. According to them, due to lack of irrigation and delayed monsoon re-seeding could be seen,
Please find below the complete text of the report:
Following are the key takeaways:
Positive Demand Outlookâ
Despite delayed monsoon and expected El-Nino effect, the producer and dealers of
BT-Cotton seeds sounded positive on overall demand outlook. As per our checks,
we learned that cotton crop tends to do well in low as well as in high rainfall. Whereas
crops like Maize, Guar, Soybean, and Rice are impacted in an unfavourable climatic
condition. Given the below average rainfall for the first fortnight of the month and
considering our checks, we are of the view that farmers might shift to cotton (relative
to Soybean & other in the current kharif season). This also corroborates
managementâs view in the recent quarter conference call where cotton acreage is
likely to go up by 4-5% in FY15. This acreage growth would be at Maharashtra,
Andhra Pradesh, Gujarat and Kerala, which again happen to be the key markets for
Kaveri.
Re-seeding to be seenâ
During our channel-checks, we learnt that sowing of cotton crop is already done in
major parts of Maharashtra, Andhra Pradesh, Gujarat and Kerala. However, due to
lack of proper irrigation facilities and delayed monsoon in some regions re-seeding
could be seen. This could boost the volumes of seed companies operating in these
regions. Also our checks indicate that demand for re-seeding could largely emerge
from Andhra Pradesh and Gujarat.
Seed companies least impactedâby El-Nino
Despite delayed monsoon, sowing is already done in major part of Maharashtra,
Andhra Pradesh, Gujarat and Kerala. High seed demand and re-seeding trends
indicate strong uptick in Q1FY15 volume. Prices of cotton have also remained firm,
which implies increase in cotton acreages, which would translate to higher demand
for better quality seeds, implying strong volumes for seed companies like Kaveri.
Valuations & Conclusions
In our coverage Kaveri would emerge as the biggest beneficiary from the on-going
on-ground developments. Kaveri is a one of the leading hybrid category BT-Cotton
seed manufacturer (56% of FY14 revenue). The company is expected to report 23%
revenue CAGR (FY14A-16E) on back of strong market positioning, high entry barriers
and continues new product launch. At CMP of Rs.663, the stock is trading at P/E
multiple of 17.2x FY15E and 14.1x FY16E based on Bloomberg consensus earnings.
We maintain BUY with target price of Rs.754, based on 16x FY16 EPS.
http://in.reuters.com/article/2014/07/02/india-cotton-exports-idINKBN0F71JB20140702
India is becoming the cotton producing factory of the world n cashing on to burgeoning demand all over the world besides China. This year production to rise nicely.Cotton acreage to increase thanks to rising exports n rise in MSPs.Kaveri seeds mentioned in the article.Future bright for seeds cos as opportunity size keeps growing.
Reports confirm Donald and team Hyderabadâs view that the risks of El Nio, monsoons, GM crops are not relevant to cottonâŚ
In fact, due to the tough conditions, farmers are resorting to high yielding variety seedsâŚwhich should augur well for Kaveri, given its high performing productsâŚalso doesnât seem like there has been a switch to other cropsâŚ
Reports from Cotton Advisory Board (mentioned in Business Standard, Hindu) suggest the following -
)- average cotton yield has increased 9 percent to 565.36 kg per hectare
)- cotton area has reduced from 11.98 million hectare to 11.73 million hectare
)- Gujarat, Central and North India cotton area has reduced by 0.5 million hectare, so possibly Maharashtra and Andhra Pradesh must be higher
)- cotton production is expected to be higher at 39 million bales vs 36.5 million bales last year
Donald, Hyderabad team - any further updates from the ground on the Andhra Pradesh and Maharashtra sales after the peak season in June.
The international cotton prices are falling. It may not directly affect the sale of seeds. But, if the farmers do not get adequate returns due to poor crop yields (bad monsoon) and low prices, the company could face problems in collecting payments against their sales.
Motilal Oswal gives a price target of 930 for Kaveri.
Motilal Oswal in their report are extremely bullish on Kaveri Seed based on their channel checks...
I would like to understand from seniors if there is any margin of safety left in taking a short term bet in Kaveri before Q1 results which are expected to be good based on Donald and Team's on the ground checks and it is expected the government will make significant pro agri budget announcements...
This is a risky proposition, but the thesis is - one time jump in share due to excellent expected Q1 performance + pro agri budget announcements + ongoing bull run + hunt for quality stocks (10.5% FII holding) and of course the well dissected and agreed future potential. Is it even worth considering for the risk takers?
I do agree that this bet could yield no results in the short term but it does seem that the future of Kaveri provides adequate downside protection to someone looking to hold the stock for another 2-3 years (When rice and corn start driving growth, and possibly higher margins).
I am summarizing the key findings of the Motilal Oswal report below and would appreciate your views -
1. Despite a 2 week delay monsoon in AP, farmers are likely to purchase high yielding variety seeds of cotton, benefiting Kaveri
2. Delay in monsoon has resulted in farmers shifting from soya to cotton and corn, as these are sturdier crops and require less water
3. Jadoo sales increased by 20 - 25% (75% of cotton sales last year?)
4. ATM brand seeds out of stock in Maharashtra and North India! (ATM last year 10 - 15% of cotton sales (630 cr) = 63 - 90 cr; this year expected 100% growth = 125 - 180 cr)
5. Corn acreages expected to increase in FY15 with share of single cross increasing from 50% to 60%, driving higher margins. Revenue CAGR growth of 34% expected from FY14 - 17
6. I have made some approximations based on my understanding of the business below. Exact revenue numbers for each brand is not known, so I have made gross approximations -
| FY14 | FY15 | Growth (%) | |
|---|---|---|---|
| Jadoo (~75% of cotton) | 475 | 565 | 20% |
| ATM (12.5% of cotton) | 80 | 160 | 100% |
| Other cotton | 75 | 95 | 25% |
| Total Cotton sales | 630 | 825 | 31% |
| Maize | 175 | 235 | 35% |
| Others | 206 | 255 | 25% |
| Total sales | 1011 | 1315 | 31% |
| Net profit % | 20.7% | 21% | higher margin maize contribution Could it be 22%? |
| Net profit | 209 | 275 | 33% |
| EPS | 30 | 40 | 33% |
| Fair price PE band | 20x - 25x?? |
So assuming that the fair price PE band is 20 - 25x and the expected EPS could be higher than 40, is there a possibility that the price could go up to 1000 from here?
Is it possible to play for a 25% gain based on Q1 results, and if the results do not pan out as expected, then possibly hold on to the stock for 2-3 years given its high growth potential...
Would love to hear the advice of seniors here..Thank you very much!
Disclosure : I hold Kaveri from lower levels, and remain bullish
Monsanto will start selling cotton hybrid seeds in India under its global brand âDeltapineâ from the current kharif season.
Any feedback on long term impact of this on Kaveri ?
Huge block deals on NSE of 32 lac shares @819.
As per Insider Trading disclosure, G Vanaja Devi (Wholetime Director) sold 31.62 lac shares @ 836.15 yesterday, reducing her stake from 16.17% to 11.57%.
Growth Fund of America bought 32.07 lac shares yesterday @836.1.
Growth Fund of America entering with substantial 5% stake in Kaveri is a big positive IMHO seeing their pedigree n track record.
Itâs one of the biggest n well performing MF in USA with a portfolio comprising of Google, Amazon, Oracle, Homedepot , EOG, Phillip Morris, Nike, Comcast , united Health n others.
Such a top notch MF like GFA , Oppenheimer, IDFC, entering into Kaveri reaffirms our positive view on Kaveri interms of still small market cap vs huge opportunity size, enduring moat in form of Germplasm developed over years, ethical promoter with excellent execution track record, good brand with far reaching distribution , excellent product like Jadoo earlier now ATM capturing market share in virgin markets like Gujarat , North India .
All in all an excellent stock asking to a great compounding machine for next few years a fast grower in small growing industry of cotton seeds n other fast growing segments like Paddy n Maize.
âAll in all an excellent stock asking to a great compounding machine for next few yearsâŚâ
If the future of this company is so bright, then why did the whole-time Director sell 5% of her stake to a USA mutual fund?
hi ⌠any further updates from Donald or Team Hyderabad on channel checks.
Thanks in advance .
Promoter selling is least important.He has invested his entire life saving in the co he is entitled to selling for any need.Remember Page ind how many investors lost there selling early unnecessarily getting worried by promoter selling over last few years.
Channel checks are perhaps not the best mechanism in current situation. Better check is the rain-check or rather sowing-check:) âŚas there can be prospects of significant sales returns. Also not sure how the company will account for Sales âŚeverything in Q1 or some sales deferred to Q2, to take care of above.
AP & Telengana: only 50% sowing done til now. Farmer is still waiting in Coastal & Telengana
Maharashtra: Vidharbha - very less sowing till now but heavy rains witnessed today; Marathwada - 90% of sowing is complete; Khandesh - waiting for update
Things should get clearer in next 2 weeks.
http://www.businessweek.com/news/2014-07-15/crop-planting-in-india-accelerates-as-monsoon-revives
Seems worst is over in nick of time,