Broker's call: Kaveri Seeds (Buy)

| Updated on November 18, 2020 Published on November 18, 2020

Chola Securities

Kaveri Seeds (Buy)

Target: ₹600

CMP: ₹508

In Q2-FY21, the company’s revenue increased by 7.7 per cent y-o-y to ₹80 crore on account of growth in hybrid rice, selection rice, maize and vegetable seed segments. Cotton seed volumes declined one per cent on account of challenges faced by the industry as illegal cotton seeds were sold in the market.

EBITDA increased 16 per cent y-o-y to ₹13 crore. Adj. PAT stood at ₹21.20 crore (up about 206 per cent y-o-y), due to higher other income and tax benefit.

In H2-FY21, majority of revenue would come from maize, according to its management. While maize acreages should decline due to lower prices, KSCL’s presence in other seeds is believed to offset the impact.

We remain optimistic about long-term earnings growth prospects of the company, given its leadership position, R&D focus, healthy product pipeline, presence across crop categories and strong distribution network.

The company remains committed to increasing contribution of non-cotton category segment from 40 per cent currently to 60 per cent and has plans to launch over 50 products in rapidly growing vegetable segment. In addition, the Government supports schemes such as ‘Rythu Bandhu’, market share gains and good moisture levels in soil are likely to support sales growth for FY21.

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Published on November 18, 2020
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