Kaveri Seeds zooms on healthy performance

The stock of Kaveri Seeds gained almost 9 per cent in trade on Wednesday.

Despite reporting a 2 per cent fall in net profit, the company's relatively better performance vis-a-vis its peers cheered the market. While Monsanto India saw its operating profit margin decline during the December quarter, Kaveri managed to expand its operating profit margin by 10.9 percentage points to 39.8 per cent.

The absence of low-margin cotton lint sales in the December quarter helped Kaveri improve its operating profit margin, albeit with a 31 per cent fall in revenues. The company also managed to contain the fall in maize seed sales at less than 10 per cent, even as maize acreage across states such as Bihar, Andhra Pradesh and parts of Karnataka fell 20 per cent. In a challenging quarter, the company reported seed sales of Rs 83 crore, barely a crore less than in the same period last year.

In the current calendar year, the management expects cotton acreage to increase on two counts. Farmers are likely to grow more cotton, due to weakness in maize and soya prices. Two, even as soya and maize saw significant drop in yields due to delayed monsoon and erratic rainfall, cotton yields have improved.

This should result in higher cotton acreage this year. Kaveri, with its flagship cotton seed brands Jackpot and Jaadoo, is well placed to ride the growth in the hybrid cotton segment. These two brands account for almost a third of the company’s total sales. In addition to cotton, higher penetration of rice hybrids, should also augur well for the company. Hybrid seeds account for barely 5 per cent of the total area under rice cultivation currently, implying immense potential for growth.

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