Kaveri Seed Company Ltd. share price target

While Oct-Dec is a seasonally weak quarter, Kaveri has reported strong performance with revenue and EBITDA growth of 14.2% and 79% led by 117.1% growth in sales of hybrid rice seeds YoY. Cotton seeds also reported healthy growth of 6.2% YoY.

Highlights from Q2FY23: (1) Non-cotton portfolio i.e. hybrid rice seeds, maize seeds, and vegetable seeds reported -94.7%, 10%, and 358% YoY revenue growth in Q2FY23, respectively, (2) Cotton business reported revenue steep decline of 34.2% in Q2FY23 largely due to volume decline of 38%.

Kaveri reported revenue growth of 3.6% YoY. EBITDA and adj. PAT were at –Rs109mn and –Rs118mn during the quarter. As Mar quarter is the leanest quarter for farming in India, Kaveri reports limited revenues in Q4. Lower staff cost and other expenses as a % of sales resulted in lower losses YoY. Lower effective tax rate further reduced the pressure on PAT margin.

Segment wise performance: Cotton seed volumes fell 26% YoY to 5.2m packets in 9MFY22, leading to a 24% decline in revenue to 3.3bn. KSCL gained cotton seed market share in Gujarat, Maharashtra and Haryana, while it lost share in Andhra Pradesh and Telangana. Volume contribution from new products in Maize segment rose to 25.5% from 9.5%. Maize seed volumes dropped by 24% to 7,649MT and revenue declined by 13% to 1.6bn in 9MFY22. Hybrid rice volumes increased 22% after introduction of its new products such as KPH471, KPH473, and KRH7299 leading to 32% revenue growth to 1.7bn. Selection rice volumes rose 7% 9MFY22 to 14,641mt while revenue grew by 21% to 1.2m....

Segment wise performance: Cotton seed volumes fell 27% YoY to 5.2m packets in 1HFY22, leading to a 25% decline in revenue to 3.3bn. KSCL gained cotton seed market share in Gujarat and Haryana, while it lost share in Andhra Pradesh, Telangana, Maharashtra, and Karnataka. Volume contribution from new products fell to 20.4% from 35.2%. Maize seed volumes dropped by 31% to 5,880MT and revenue declined by 19% YoY to 1.2bn in 1HFY22. Hybrid rice volumes increased 28.9% to 6,603mt, leading to 44.4% revenue growth to 1.6bn. Selection rice volumes fell 0.3% to 12,287mt while revenue grew by 15.6% to 910m. Vegetable seed revenue grew 17% YoY to 227m, driven by 3.5x...

KSCL's reported a weak operating performance in 2QFY22, despite a 10% surge in revenue on account of higher input cost and other expenses. EBITDA/PAT was below our estimate. Factoring in its 2QFY22 performance, we decrease our FY22E/FY23E earnings estimate by 8%/7% due to higher RM prices. We value the stock at 12x FY23E EPS to arrive at our TP of INR630. We maintain our Buy rating....

In 1QFY22, KSCL's standalone revenue declined by 8.8% YoY to 6.8bn; on the back of lower volumes in Cotton and Maize segments. Maize segment volumes declined by 18.3% YoY while revenue decreased by 7.8% YoY. Cotton segment volumes and revenue were lower on a YOY basis by ~28%, as area under cultivation has decreased in all major cotton...

Kaveri Seeds (KSCL)'s 1QFY22 revenue fell 12% on account of de-growth in the Cotton and Maize, offset by growth in the Hybrid Rice and Vegetables segments. Cotton seed sales volumes were impacted by lower cotton acreage and the use of herbicide-tolerant Bt (HTBt) seeds, which further impacted branded seed sales. Also, the pandemic affected the supply chain, resulting in the lower absorption of cotton hybrids by dealers and distributors and the consequent unavailability for the farmer. Operating performance was further impacted by write-offs over...

Revenue increased 11% in FY21 on account of growth in Hybrid Rice, Maize and Vegetable Seed segments, whereas Cotton Seed volumes fell 2%. Performance was below our estimates in 4QFY21. However, we increase our FY22E/FY23E earnings estimate by 6%/10%, owing to: a) increasing sales estimates in the non-Cotton segment, particularly Paddy, b) increasing realizations in Cotton, and c) higher other income on higher cash. We value...

Background: Kaveri Seed Company is the largest producer of hybrid cotton seeds in India with a market share of ~15%. Kaveri Seeds has access to 60,000 acres under seed production, with farms in Karnataka, Andhra Pradesh and across the country. The company has a pan-India presence with a strong distribution network of ~15,000 distributors (direct & in-direct) and retailers across 15 key states in India (up from 11,000 - 4 years ago). Kaveri has 26 warehouses at strategic location...

Background: Kaveri Seed Company is the largest producer of hybrid cotton seeds in India with a market share of ~15%. Kaveri Seeds has access to 60,000 acres under seed production, with farms in Karnataka, Andhra Pradesh and across the country. The company has a pan-India presence with a strong distribution network of ~15,000 distributors (direct & in-direct) and retailers across 15 key states in India (up from 11,000 - 4 years ago). Kaveri has 26 warehouses at strategic location...

Kaveri Seed's (KSCL) 1HFY21 revenue increased 13% on account of growth in hybrid rice, selection rice, maize and vegetable seed segments. Cotton seed volumes declined 1% on account of challenges faced by the industry as illegal cotton seeds were sold in the market. Performance was above estimates. We maintain our FY21/22E estimates as...

Background: Kaveri Seed Company is the largest producer of hybrid cotton seeds in India with a market share of ~15%. Kaveri Seeds has access to 60,000 acres under seed production, with farms in Karnataka, Andhra Pradesh and across the country. The company has a pan-India presence with a strong distribution network of ~15,000 distributors (direct & in-direct) and retailers across 15 key states in India (up from 11,000 - 4 years ago). Kaveri has 26 warehouses at strategic...

15 August 2020 Kaveri Seeds (KSCL) 1QFY21 revenue increased on account of growth in hybrid rice, selection rice and vegetable seed segments. Cotton seed volumes grew 5% despite challenges faced by the industry as illegal cotton seeds were sold in the market. EBITDA growth was higher than revenue growth due to (a) non-payment of royalty fees (of INR140m), and (b) savings on travel costs. This was partially offset by contraction in gross margin. Revenue and EBITDA were in line. Factoring in the same, we have increased our PAT estimates by 15% for FY21 and maintained FY22E estimates. Maintain KSCLs 1QFY21 revenue (standalone) was up 14% YoY to INR7,485m (v/s est. EBITDA was up 20% YoY to INR2,793m (v/s est. EBITDA margin expanded 170bp YoY to 37.3%, mainly due to savings on royalty payment. However, it was partially offset by lower gross margin, which contracted 220bp YoY to 44.

KSCL's business has minimally been impacted by pandemic since the company is in agri sector and is considered as essential services. Also, its robust infrastructure facilitated continued production. Besides, there were some minor challenge in supply chain which was ironed out by Government's support to ensure uninterrupted supply of essential commodities. Better quality product is the only way to earn farmer's...