Kaveri Seed - A Major Beneficiary Of Cotton Price Rise: ICICI Securities
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ICICI Securities Report
Crude oil prices are up 26% YoY and this will likely lead to higher prices of nylon, a major competing commodity to cotton.
We note cotton prices (wholesale price index) have also increased to 114 in February 2021 from 92 in October 2020.
Higher cotton prices will boost cotton sowing. Kaveri Seed Company Ltd. generates ~50% of its revenues from cotton seeds, hence is likely to be a major beneficiary of cotton price rise.
Higher revenues of cotton seeds is also margin accretive.
We remain positive on the company given the success of its non-cotton seeds and market share gains in cotton seeds in Gujarat and Haryana among other states.
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