It is the listed Subsidiary of Monsanto Company US. Global
sales of the parent company was 65000 crores in 2011.
Company is into agricultural and vegetable seeds (maize,
cotton, oilseeds- soyabeans, canola and vegetables.) , plant biotechnology
traits and crop protection chemicals. (Roundup is the largest selling
Company is present in india since six decades, and has 2
seed breeding stations, 1 seed processing facility, 1 quality assurance
laboratory and 1 chemistry plant.
DEKALB â MAIZE HYBRID
The next phase of hybridization is likely to be in maize in
India. The consumption for maize is rising due to increasing uses of maize and
higher demand from poultry industry. The average maize productivity in India is
only 0.85 MT per acre while same is over 4 MT per acre in US and Spain. Brazil
is over 1.5 MT per acre. Hence India drastically needs to increase its maize
yields to meed increasing demands. India is 6 th largest producer and 5th
largest consumer globally of maize.
Monsanto with its well established brand in maize âDEKALB is
well placed to capitalize on the
upcoming boom in maize hybrids.
Indian farmers traditionally employ labour to remove crop
hurting herbs and weeds. But due to NREGA and other rural facing schemes there
has been very high opportunities outside agriculture and hence farmers find it
difficult and expensive to employ labour. This has made farmers opt for
Monsantoâs glyphosate based herbicide Roundup is worldâs
largest selling single molecule in agri chem market and largest selling
glyphosate herbicide brand globally. The demand for this is increasing in India
due to labor problems and expenses. Round up being one of the most effective
weed management systems is well placed to capitalize on this increasing demand.
Earlier there was tough competition from Chinese imports but these have largely
stabilized and hence the margin erosion seen earlier is on the mend.
Equity is 17.26 crores with 1.726 cr shares of Rs 10 each
outstanding. Market cap is 1099 crores.
As on March 13, company is debt free and has current
investments of 250 crores and cash and eq of 20 crores.
Promoters hold 72.14 % equity.
Stock price has corrected from above 700 levels to current
levels of 635 due to the stock going ex dividend by Rs 50. (this was a special dividend declared by the
company.) Regular dividend is Rs 12
which is slated to be paid in july.
The main two themes of increasing demand for maize hybrids
and herbicides are likely to play out in
the next few years. Monsanto is well placed to capitalize on that emerging
Company is a debt
free company, with very little MF or FI/FII holding and high promoter holding.
Parent is a global leader in hybrids and agrochem business.
If the company can show good growth based on the above
themes, there could be good returns in this stock with limited downside.
Poor monsoon can play spoilsport for the company.
The parent has other subsidiaries in India which might
reduce the focus on the company.
DISC: Hold monsanto in my portfolio. I think the increased shift to maize hybrids can be interesting for the company.
We are using Roundup in our farm and found to be very effective. It is a very known brand for removing weeds. Increase in labour prices and shortage of the labours is making farmers increase the usage of the same. We were using it once in the whole season earlier, but now we use it twice or thrice.
Yes Monsanto is very interestingly placed. Trust YOU to be quick on the Take - gotta learn this from you:)
Some things to establish, though
a) Maize Seed availability (to absorb demand) - this is not a given, because not even Monsanto would have planned 2x or 3x last years demand. Would they carry 50%+ inventory…even that would be a nice spurt
Take the overall GM- debate with a pinch of salt. There are good arguments on both sides. once you hear a Monsanto or a Du-Pont scientist defend, which I have, you will have enough food for thought…
Also, consider this
a) BT- Cotton is the only genetically modified crop allowed in India. And it is not a “Food” crop
b) Corn Hybrids and all other field crop Hybrids are not BT or genetically modified varieties. The only varieties registered and allowed in india for sale currently are Hybrid Seeds - crossed from male & female species with desired traits from Germaplasm bank of Seed Companies
I am taking the liberty of taking every one away from the subject. Was watching videos on NATURAL FARMING yesterday. I thought i will share some with you. Since you have a farm it can be of great help to you. It shows how herbicides/pesticides, fertilizers are so harmful. Nature has all the cures. One has to respect nature:
EPS for fy 13 was Rs 39 per share. I think company can grow atleast 20% looking at the fancy for corn hybrids this season. Effectively we can expect EPS of 46-47 for fy 14. What PE this one gets is anybody’s guess bcos of it being an MNC. I expect PE of around 18-20 which should provide targets in the vicinity of 900 odd if things go well. Good part is that most of the sales accrues in June qtr so we should be able to know how things will go pretty soon around mid august when june numbers are out.
For me this is an opportunistic bet with low downsides… And if this maize hybrid story gets stronger we can take it ahead from there
I saw the link but I think its more to do with local culture and customs. India has just started experiencing initial progress in acceptance of corn hybrids. So needs to be seen how the story progresses.
The main reason to latch on to this story was the info from kaveri thread that this year there is bound to be great growth in corn hybrids and Monsanto being strong in it, I stumbled on to it. Financials etc seem to be in very good shape with an excellent balance sheet.
No research report from big brokerages, negligible FII/DII holding should be good signs. Bajaj allianz and UTI Children’s fund has 3.74 and 1.8% holding respectively.
This has been a sleepy kind of company with very lumpy growths shown in the past and hence the probably apathy for it. Recently there was a brief spurt due to special dividend of Rs 50 combined with good fy 13 figures. Post ex dividend stock has corrected from levels of 710 to current levels of 635 which is a correction of Rs 75 against a dividend of Rs 50. This reinforces my belief that one needs to buy stocks ex dividend when u get a much better deal. (I think the example holds good for accelya also)
Only anecdote - I did my summers with this company during my MBA in 2000. Apart from the GM debate and the seeds business which routinely makes news, I would like to add that i was very surprised to learn tht it was the “baap” of rice and wheat and pulses pesticides in north india - almost like Xerox. One would have heard of Canon ka xerox machine? rice herbicide (name slips my mind) is similar. I was on survey in haryana and farmers used to ask for Rallis ka XXX (XXX being name of monsanto’s rice pesticide) or Nagarjuna ka XXX. It would also not be an understatement to liken Monsanto as the agri equivalent of HUL in north india. Discl - no interest in the stock.
You mentioned that the demand from Poultry industry will be a trigger going ahead.Every year,in many areas,cases of Bird flu are reported.In most cases,farmers don’t like to report it,for fear of poor compensation.This can lead it to take epidemic proportions.Moreover,the awareness for avoiding it(,i.e.,preventive measures) is pretty low among our farmers.So,can Bird Flu be a counted as a negative? Or it won’t affect Maize consumption of the industry? What do you foresee?
I would attempt to temper the bullishness a wee bit I understand that Monsanto is being spoken as a short term bet (and maybe it’ll turn out that way or maybe even a multibagger), but I think a bit of history reading would lead us down a good path.
Please read this equity desk thread on Monsanto India (thread active from 2006 till about 2009 and a couple of spurts in 2011). Similar arguments were quoted (back in 2006-2009 period) - increasing corn usage, bio-fuel, poultry farm etc. And yet the price has not gone anywhere for the past 7 years (apart from the dividends - which I am sure is not the sole reason to invest in a Monsanto - and there have always been special dividends on this stock from time to time).
Bird flu does come and go off and on… But of late maize is finding more and more uses and hence more focus on maize cultivation. Poultry feed is only one of the demand drivers.
For me monsanto remains a short term bet with a view on june qtr results. If that comes good there could be a good short term upside. Read the TED thread and agree that those who thought of it as a multibagger/compounder have been in for a big disappointment. I personally dont have too high hopes from this one but if it provides me good returns in a short timeframe i would be happy.
Monsanto reminds me of a few parallels to Peter Lynch theory
None or very few research reports
High promoter holding
Excellent balance sheet
Low FII/DII holding
Add to that high div payout and the recent frenzy for maize hybrids
All the above seem to make a nice combo.
Key remains to find out/guess how much growth monsanto can show in such a promising scenario – what kind of inventory they had to meet the increased demand.
At the retail investor level and even at the institutional level there seems to be underownership for Monsanto since it has been a company which has disappointed in terms of consistent growth… That probably is reflected by the price levels currently which are almost similar to those before the fy 13 results. Company showed sales growth 370 to 440 cr and net profit growth from 50 to 67 cr (a 30% growth in net profits). during fy 13.
Now if for fy 14 also it can show 25-30% growth it is likely to be re rated sooner rather than later. I think company can easily achieve an EPS for fy 14 of around 50 bcos of the favorable headwinds. What kind of actual numbers it achieves and the kind of PE it accords is anybody’s guess.
Maize is Indiaâs third-largest cereal crop after rice and directly contributesRs. 15,500 crores to Indiaâs agricultural GDP. India is the 6th largestproducer and 5th largest consumer of maize in the world.
Maize is the worldâs largest cereal crop. Itis not only the third-largest cereal cropin India after rice and wheat, but also thefastest growing. In India, the area undermaize is relatively stable at approximately8 million hectares. Within this area,however, there is a shift from the lowyieldingOpen Pollinated Varietal (OPV)seeds to high-yielding hybrids.
Across the world, Maize is cultivatedmainly for feed, food and industrial use.Around one-fourth of the maize grainharvest is consumed as food. A largerpart, nearly 50%, gets used as animalfeed, mostly poultry feed. This demand isgrowing rather rapidly due to the poultryindustryâs fast growth. The rest is usedfor producing starch and other industrialproducts. The cropâs biomass (leavesand stalks) is used as nutritious fodderfor cattle.
The demand for maize grain in India ison the rise due to population growth,and changing food habits. A greaterrequirement for poultry and processedfood is driving the demand for maizestarch.
Average maize productivity in India isonly 0.8 MT per acre while the same isover 4 MT per acre in US and Spain.Brazil is over 1.5 MT per acre. India needsto increase growth rate of maize to meetincreasing demands.
In India,farmers currently**choose to plant****hybrid seeds (currently non-biotech)**on 45% of maize acres, thus choosing topurchase fresh seed each year for theiryield and socio-economic benefits.
**Sale for corn seeds for F.Y. 2011-12 (Rs. 267.36 crore)**has stayed at almost the same level as the lastfinancial year (Rs. 269.34 crore). In spite of a lean Kharif season, a bumper Rabi season boosted the corn performance
an interesting technical observation is that monsanto stock has been range trading between 500 and 1000 since early 2006. this is a period of 7.5 years of a tight range. if the performance this year is good as well, the stock could target the upper end of the range around 1000. consistent growth could also lead to a breakout on the upside, which could mean huge upsides over the long term. till the range is broken, the stock may continue to provide some trading oppurtunties.