1 June 2021
4QFY21 Results Update | Sector: Agri
Kaveri Seed
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
KSCL IN
63
43.4 / 0.6
816 / 409
13/29/21
235
CMP: INR720
TP: INR830 (+15%)
Buy
Higher than expected operating loss on higher fixed cost in 4Q
However, increased volume drives annual performance
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
the stock at 13x FY23E EPS to arrive at our TP of INR830. Maintain Buy.
Financials & Valuations (INR b)
Y/E Mar
2021 2022E 2023E
Sales
10.4
11.6 12.6
EBITDA
3.0
3.3
3.6
PAT
3.1
3.4
3.8
EBITDA (%)
28.8
28.8 29.0
EPS (INR)
51.6
56.5 63.2
EPS Gr. (%)
19.7
9.5 11.9
BV/Sh. (INR)
206
256 310
Ratios
Net D/E
(0.5)
(0.5) (0.6)
RoE (%)
28.3
24.4 22.3
RoCE (%)
30.0
27.6 25.2
Payout (%)
8.8
12.1 14.4
Valuations
P/E (x)
14.0
12.7 11.4
EV/EBITDA (x)
15.2
13.6 12.4
Div Yield (%)
0.6
0.8
1.1
FCF Yield (%)
5.1
5.5
7.6
Maize and paddy drive overall performance
*Consol
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
55.5
55.5
55.5
8.5
12.2
10.7
19.8
14.1
21.0
16.2
18.1
12.7
Revenue (standalone) stood at INR551m (est. INR567m) in 4QFY21, up 6%
YoY. Operating loss increased to INR124m (est. loss of INR91m) in 4QFY21
v/s a loss of INR117m in 4QFY20. Gross margin stood at 56.7% in 4QFY21 v/s
42.8% last year. As a percentage of sales, employee cost/other expenses
increased to 34%/45.2% in 4QFY21 v/s 26.8%/38.7% in 4QFY20. It reported a
net loss of INR143m (est. loss of INR49m) in 4QFY21 v/s a net profit of
INR94m in 4QFY20.
Cotton seed volumes declined marginally by ~2% to 7.09m packets in FY21
due to lower sales in Andhra Pradesh and Telangana, leading to a revenue
drop of 2.2% to INR4,404m. Contribution from new products rose to 25.2%
of volumes from 23.8%.
Hybrid paddy reported 56% revenue growth (to INR1,325m) in FY21 on 48%
volume growth. Introduction of new hybrids – 7299, 471, and 473 – aided
strong volume growth. Volume contribution from new hybrids rose to 68%
from 51%.
Revenue from maize seeds grew ~18% (to INR2,032m) in FY21 due to better
product-mix and stable contribution from new products.
Consolidated revenue/EBITDA/adjusted PAT grew 11%/18%/20% in FY21.
KSCL generated a CFO of INR2.5b (up 31% YoY) in FY21 on the back of higher
payables and lower receivables. This was offset by higher inventory.
Guidance:
Overall growth is expected to be in the 10-15% range, majorly
driven by the non-Cotton segment, which is expected to record 15-20%
growth in FY22, supported by growth in volumes and realizations.
The Cotton segment is expected to grow at 5-7% in FY22 as acreages are
expected to remain stable. Realization is expected to rise by 4-5% in FY22.
Market share:
Other than Telangana and Andhra Pradesh, KSCL gained
market share in the Cotton segment across all states. The company
managed to gain 0.5% market share, taking its overall share to 17%. Market
share in rice increased to 10% as the company managed to gain share in
FY21, whereas the same in maize is currently close to 10-11%. The size of
the domestic maize market is currently pegged at 85,000-95,000MT.
Highlights from the management interaction
Sumant Kumar - Research Analyst
(Sumant.Kumar@MotilalOswal.com)
Research Analyst: Darshit Shah
(Darshit.Shah@motilaloswal.com) /
Yusuf Inamdar
(yusuf.inamdar@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.