Kaveri Seed’s Shares Rally 26% In Two Days After Q4 Results
Kaveri Seed clocked the highest revenue and profit in the fourth quarter of any fiscal.
Shares of Kaveri Seed Co. Ltd. rallied more than 26% in two days, aided by improved earnings and positive business outlook.
The hybrid seed producer’s revenue grew 16% year-on-year to Rs 52 crore in the three months ended March, according to the company’s earnings statement on May 30. Its net profit stood at Rs 9.35 crore compared with a loss of Rs 11.4 crore a year ago. That’s the highest revenue and profit clocked in the fourth quarter of any fiscal.
For the full year as well, the company’s revenue, operating profit and sales jumped to the highest in six years.
Kaveri Seed’s full-year performance:
- Revenue up 15% year-on-year to Rs 883 crore—the highest since 2014-15.
- Ebitda up 16% over last year to Rs 239.5 crore—the highest since 2014-15.
- Net sales up 17% year-on-year to Rs 251 crore—the highest since 2014-15.
The company’s performance was largely aided by higher growth in its cotton seeds and hybrid rice.
Revenue from cotton seeds—that form 51% of the company’s top line—rose 13% at Rs 450 crore in the financial year ended March 2020. Volumes from this segment jumped 17%. The contribution of new products to total volumes rose from 14.85% to 23.11%, the statement said.
Revenue from hybrid paddy increased 66% to Rs 85 crore in 2019-20. That was aided by 60% volume growth. This, according to the company, was led by the launch of new Hybrid Paddy KPH 468. The contribution of new products to volumes rose from 26% to 51%.
Covid-19 Impact
“Covid-19 has not had a negative impact on the company since the company is in the agri sector and in essential services,” Mithun Chand, executive director at Kaveri Seed. “There was a minor challenge in supply chain and labour, which was sorted out with the government’s support to ensure uninterrupted supply of essential commodities. The company has managed to overcome these problems and operations are running smoothly.”
Business Outlook
The company expects to see healthy growth in cotton and non-cotton segments.
“Commodity prices are expected to be stable with a normal monsoon forecast translating to good farmer sentiment for coming year for all crops. Normal monsoon forecast will ensure normal sowing area for key crops,” Chand said.
“We expect 10–15% volume growth in the cotton seed segment and 20–25% volume growth in the non-cotton segment. The combined overall growth is expected to be 15–20% in FY21.”
Analysts View
Of the nine analysts tracking the stock, seven have a “buy” rating, while the remaining suggests a “hold”. The 12-month Bloomberg consensus target price of Rs 619 apiece inplies an upside of 23% from the current market price.
