MONSANTO INDIA
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 herbicide)
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.
TRIGGERS:
1. 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.
2. ROUNDUP --HERBICIDE
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 herbicide sprays.
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.
FINANCIALS
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.
|
YEAR |
2010 |
2011 |
2012 |
2013 |
|
SALES |
410 |
363 |
373 |
442 |
|
NP |
53 |
43 |
50 |
67 |
|
EPS |
31 |
25 |
29 |
39 |
INVESTMENT THEME:
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 opportunity.
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.
CONCERNS:
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.
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.
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