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Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
KAVERI SEED COMPANY LTDResult Update (PARENT BASIS): Q1 FY18
CMP: 532.45 OCT 11th, 2017
Overweight ISIN:INE455I01029
Index DetailsSYNOPSIS
Kaveri Seed Company Ltd. is one of the fastest-growing and premier seed companies in the country.
Revenue for the quarter registered 19.55% growth atRs. 5905.59 mn as compared to Rs. 4939.74 mn,when compared with the prior year period.
During the quarter, EBIDTA is Rs. 2111.65 mn asagainst Rs. 1636.98 mn in the corresponding periodof the previous year.
During Q1 FY18, Profit before tax increased at Rs.2046.23 mn as compared to Rs. 1558.84 mn in Q1FY17.
During Q1 FY18, net profit stood at Rs. 2023.77 mnas against Rs. 1543.69 mn in the correspondingquarter of previous year, up by 31.10%.
EPS of the company stood at Rs. 29.31 during thequarter, as against Rs. 22.35 per share over previousyear period.
2 new cotton hybrids launched and 2 new cottonhybrids under demonstrations with farmers.
3 new hybrids launched in maize for kharif season.
2 new hybrids in maize to be launched in rabiseason.
Net Sales and PAT of the company are expected togrow at a CAGR of 5% and 13% over 2016 to2019E, respectively.
Stock DataSector Other Agriculture ProductsBSE Code 532899Face Value 2.0052wk. High / Low (Rs.) 708.10/358.40Volume (2wk. Avg.) 34000Market Cap (Rs. in mn.) 36768.33
Annual Estimated Results(A*: Actual / E*: Estimated)Years(Rs. In mn) FY17A FY18E FY19ENet Sales 6698.91 7502.78 8328.08EBITDA 1722.26 2642.68 2920.50Net Profit 784.71 2264.95 2503.28EPS 11.36 32.80 36.25P/E 46.86 16.23 14.69
Shareholding Pattern (%)
As on June 2017 As on Mar 2017
Promoter 54.43 54.43
Public 45.57 45.57
Others -- --
1 Year Comparative Graph
KAVERI SEED COMPANY LTD S&P BSE SENSEX
PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. In mn. (Rs.) Ratio Ratio (%)
Kaveri Seed Company Ltd 532.45 36768.33 18.32 29.07 3.59 150.00
Agro tech Foods Ltd 523.90 12767.10 12.03 43.55 3.55 20.00
Gujarat Ambuja Exports Ltd 161.95 18570.40 10.96 14.78 2.18 40.00
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q1 FY18,
(Rs. In millions) June-17 June-16 % Change
Revenue 5905.59 4939.74 19.55%
Net Profit 2023.77 1543.69 31.10%
EPS 29.31 22.35 31.10%
EBIDTA 2111.65 1636.98 29.00%
Revenue for the 1st quarter registered at Rs. 5905.59 million as against Rs. 4939.74 million, up by 19.55% when compared
with the prior year period. EBIDTA is Rs. 2111.65 million as against Rs. 1636.98 million in the corresponding period of
the previous year. The company’s net profit registered a growth of 31.10% at 2023.77 million as compared to Rs. 1543.69
million in the corresponding quarter ending of previous year. Reported earnings per share of the company stood at Rs.
29.31 as compared to Rs. 22.35 per share over previous year period.
Break up of Expenditure
Break up ofExpenditure
Value in Rs. Million
Q1 FY18 Q1 FY17 %Change
Cost of Materialsconsumed 514.83 573.36 -10%
Employee BenefitExpenses 118.08 107.48 10%
Depreciation andAmortizationExpenses
63.02 77.99 -19%
Other Expenditure 647.31 504.39 28%
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
Q1 FY18 OPERATIONAL HIGHLIGHTS:
Segment Revenue:
Cotton:
Cotton Kaveri volumes grew by 27% in Q1 FY 18.
Gained cotton seed market share in Gujarat, Maharastra.
Maize:
Maize volumes dropped by 18% in Q1 FY 18.
Market dropped in key Kaveri states of Telangana and Karnataka.
Government business volumes dropped compared to last year.
Hybrid Rice:
Introduction of new hybrid helped for the company in Q1 FY 18.
Contribution of new product went up from 1% to 16% of volume.
Selection Rice:
Volume growth of more than 40% on back of Kharif 16 production and additional plant capacity
Bajra:
New product contribution has gone up from 6% to 17% of volume.
New Initiatives in Q1 FY 18:
2 new cotton hybrids launched and 2 new cotton hybrids under demonstrations with farmers.
3 new hybrids launched in maize for kharif season.
2 new hybrids in maize to be launched in rabi season.
2 new maize hybrids under demonstration.
4 new hybrids in pearl millet in kharif season under demonstration.
1 new hybrid launched in hybrid rice and 4 new products launched in selection rice.
1 new hybrid in hybrid rice and 2 new products in selection rice under demonstration.
Future Outlook:
Hybrid Rice volumes expected to go up in Q2.
Kharif Cotton seed production crop looking in good condition.
Rabi seed production would be challenging if rainfall deficit continues in South.
Rabi Maize acreage and export volumes looks positive.
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
COMPANY PROFILE
Kaveri Seed Company Ltd. is one of the fastest-growing and premier seed companies in the country. Kaveri Seed was
started in 1976, after Sri G. V. Bhaskar Rao, an agriculture graduate, ventured into the seed business. Today, it has grown
to be India’s largest seed company. The Company is backed by a strong research and development base for developing
quality hybrids in key Indian crops. It has a huge network of over 15,000 distributors and dealers spread across the
country with a strong product line of hybrids. Kaveri has a comprehensive portfolio of high yield hybrid and varietal
seeds. The Company’s presence in a broad spectrum of crops helps to meet different requirements of farmers, which has
earned it a tremendous goodwill.
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as of March 31, 2016 -2019E
FY16A FY17A FY18E FY19EASSETS1) Non-Current Assets
a) Property, plant and equipment 1944.10 1936.55 2033.38 2175.72b) Capital Work in Progress 195.10 273.72 342.15 420.84c) Other Intangible Assets 3.82 4.03 4.19 4.31d) Intangible Assets under Development 0.00 12.94 16.18 19.73e) Financial Assets
i) Investments 227.20 321.78 402.22 498.75f) Deferred Tax Assets (net) 1.55 3.24 4.05 4.86g) Other Non-Current Assets 33.83 26.29 30.23 33.26Sub - Total Non- Current assets 2405.61 2616.05 2871.77 3198.43
2) Current Assetsa) Inventories 4974.91 4399.72 4751.70 5179.35b) Biological Assets 167.42 555.68 639.03 728.50c) Financial assets
i) Investments 5056.65 6544.73 7722.78 9190.11ii) Trade Receivables 631.06 698.27 761.11 822.00
iii) Cash and Cash equivalents 67.82 169.23 211.54 260.19iv) Other Bank balances 1.37 1.25 1.35 1.44v) Loans 74.00 0.00 0.00 0.00
d) Current Tax Assets 0.00 39.76 41.75 43.42e) Other Current Assets 166.07 145.69 157.34 168.35Sub - Total current assets 11139.29 12554.33 14286.60 16393.37
Total Assets (1+2) 13544.90 15170.37 17158.37 19591.79EQUITY AND LIABILITIES1) EQUITY
a) Equity Share Capital 138.11 138.11 138.11 138.11b) Other Equity 9224.34 10102.03 12366.98 14870.27
Total Equity 9362.45 10240.14 12505.09 15008.382) Non Current Liabilitiesa) Financial Liabilities
i) Borrowings 16.39 16.39 15.57 15.10b) Provisions 10.34 2.29 1.95 1.75c) Other Non-Current Liabilities 50.85 54.64 56.28 57.41
Sub - Total Non Current liabilities 77.58 73.32 73.79 74.263) Current Liabilities
a) Financial liabilitiesi) Borrowings 0.00 0.00 0.00 0.00
ii) Trade Payables 2120.61 2771.57 2540.18 2501.63iii) Other Financial Liabilities 2.23 2.44 2.64 2.80
b) Provisions 61.07 195.12 224.39 246.83c) Other Current Liabilities 1920.97 1887.78 1812.27 1757.90Sub - Total current liabilities 4104.87 4856.91 4579.48 4509.16
Total Equity and Liabilities (1+2+3) 13544.90 15170.37 17158.37 19591.79
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
Annual Profit & Loss Statement for the period of 2016 to 2019E
Value(Rs.in.mn) FY16A FY17A FY18E FY19E
Description 12m 12m 12m 12mNet Sales 7165.30 6698.91 7502.78 8328.08Other Income 116.68 343.49 429.36 463.71Total Income 7281.98 7042.40 7932.14 8791.80Expenditure -5256.89 -5320.14 -5289.46 -5871.30Operating Profit 2025.09 1722.26 2642.68 2920.50Interest -1.69 -1.23 -6.00 -6.30Gross profit 2023.40 1721.03 2636.68 2914.20Depreciation -249.83 -284.92 -276.37 -292.96Exceptional Items 0.00 -592.38 0.00 0.00Profit Before Tax 1773.57 843.73 2360.31 2621.24Tax -50.78 -59.02 -95.36 -117.96Net Profit 1722.80 784.71 2264.95 2503.28Equity capital 138.11 138.11 138.11 138.11Reserves 9224.34 10102.03 12366.98 14870.27Face value 2.00 2.00 2.00 2.00EPS 24.95 11.36 32.80 36.25
Quarterly Profit & Loss Statement for the period of 31st Dec, 2016 to 30th Sep, 2017E
Value(Rs.in.mn) 31-Dec-16 31-Mar-17 30-Jun-17 30-Sep-17E
Description 3m 3m 3m 3mNet sales 678.52 403.01 5905.59 826.78
Other income 100.97 17.66 42.87 51.45
Total Income 779.49 420.67 5948.46 878.23
Expenditure -644.50 -674.61 -3836.81 -570.07
Operating profit 134.99 -253.94 2111.65 308.16
Interest -0.42 -0.43 -2.41 -1.78
Gross profit 134.57 -254.38 2109.25 306.38
Depreciation -68.93 -65.55 -63.02 -66.17
Exceptional Items 0.00 -592.38 0.00 0.00
Profit Before Tax 65.64 -912.31 2046.23 240.22
Tax -30.12 40.36 -22.46 -24.36
Net Profit 35.52 -871.95 2023.77 215.86
Equity capital 138.11 138.11 138.11 138.11
Face value 2.00 2.00 2.00 2.00
EPS 0.51 -12.63 29.31 3.13
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
Ratio Analysis
Particulars FY16A FY17A FY18E FY19E
EPS (Rs.) 24.95 11.36 32.80 36.25
EBITDA Margin (%) 28.26% 25.71% 35.22% 35.07%
PBT Margin (%) 24.75% 12.60% 31.46% 31.47%
PAT Margin (%) 24.04% 11.71% 30.19% 30.06%
P/E Ratio (x) 21.34 46.86 16.23 14.69
ROE (%) 18.40% 7.66% 18.11% 16.68%
ROCE (%) 24.26% 19.57% 23.31% 21.39%
Debt Equity Ratio 0.00 0.00 0.00 0.00
EV/EBITDA (x) 15.63 17.46 10.92 9.36
Book Value (Rs.) 135.58 148.29 181.09 217.34
P/BV 3.93 3.59 2.94 2.45
Charts
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
OUTLOOK AND CONCLUSION
At the current market price of Rs. 532.45, the stock P/E ratio is at 16.23 x FY18E and 14.69 x FY19E respectively.
Earning per share (EPS) of the company for the earnings for FY18E and FY19E is seen at Rs. 32.80 and Rs. 36.25
respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 5% and 13% over 2016 to 2019E respectively.
On the basis of EV/EBITDA, the stock trades at 10.92 x for FY18E and 9.36 x for FY19E.
Price to Book Value of the stock is expected to be at 2.94 x and 2.45x for FY18E and FY19E respectively.
Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.
INDUSTRY OVERVIEW
The Agriculture sector commands the largest share of the country’s total land area at about 48% (or 156 million hectares)
compared to USA’s 18% (or 158 million hectares) and China’s 15% (or 106 million hectares). While India has more
arable land than China, its production is only half that of China.
The reasons for the lower productivity are low usage of high quality seeds, fertilizers, pesticides, lower farm
mechanization, weak credit facilities, shortage of water and energy.
The organized Indian seed industry has been in existence since 30+ years; however the last decade has witnessed
exponential and transformational growth.
The Indian Seed Industry is the 6th largest in the world in value terms accounting for about 4.5% of global industry
preceded by the US (27%), China (22%), France (6%), Brazil (6%) and Canada (4.8%).
In volume terms consumption has seen a CAGR of 8.4% from FY09 to FY15 to reach 3.5 million tonnes.
Use of branded seed and hybrid seed has been consistently increasing, Seed Replacement Rate (SRR) on the rise.
Cotton Seed:
High market penetration of hybrids.
Growth a function of market share gains, High Density Planting and Mechanical Harvesting.
Pricing subject to GOI’s Price Control Order.
KSCL is market leader.
Company developed hybrids with only the pest control trait sourced under license.
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
Paddy:
Paddy is the largest crop under cultivation in India and is the staple food for large population.
Hybrid penetration at less than 10%.
Farmers used saved seed; however branded and hybrids gaining increased acceptance.
Market for both selection variety rice and hybrid rice growing rapidly.
Corn (Maize):
Maize is the most widely grown crop worldwide.
India is the world's 6th largest producer and 5th largest consumer of maize.
Maize acreage has grown in India over years as it is highly adaptable to different season, requires less water, easy
to grow with good commodity price.
Demand for Maize in India in expected to continue to grow due to demand from feed industry (accounting for
~50% of domestic maize demand) and export opportunity (seen a strong 24% CAGR in FY2005-14).
Vegetables:
Hybrid vegetable seed is one of the fastest-growing segments in India estimated to be around Rs. 2,000 crore.
India is the second-largest producer of vegetables in the world, after China.
Round the year crop, safeguarding from crop shift patterns.
Industry Backdrop:
Cotton:
One of the best year for cotton.
Sowing happened much earlier than last year in Central and South India.
North Cotton market growth was much higher than All India on the back of good crop last year.
Market share of smaller companies in South India went up.
Use of Illegal Herbicide Tolerance was found in few states.
Maize:
Maize hybrid market dropped as compared to last year due to shifting to other crops and less than adequate
rainfall in key state of Karnataka.
Telangana and Karnataka constitute more than 1/3 of organized market in Kharif Hybrid Maize seed sales.
Telangana and Karnataka contributed to nearly 2/3 of KSCL’s Kharif maize sales in FY17.
Farmer down traded in few states due to tough market conditions.
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
Future Outlook:
Rainfall starting to show decline in few states which might impact overall yield.
Cotton:
o Global cotton acreage has gone up. Watchout for commercial prices depending on crop output.
o Watchout for Pink Boll Worm and Whitefly in North.
Tamil Nadu, which is late kharif market, is challenging.
Rabi expected to be good for Mustard, Gram, Wheat and Maize.
Vegetables prices are on an upward swing. Industry expected to see growth for balance of the year.
Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
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Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
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Document code: FOTL_111020172_1 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved
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