POSITIONAL CALL
KAVERI SEED LIMITED
RUDRA SHARES & STOCK BROKERS LTD
13 JULY 2020
LEAD RATIONALE
Stock Data CMP (`)
573
TARGET (`)
640
Upside
12%
M.Cap (` in cr)
3455.19
Equity ( ` in cr)
12.06
52 wk H/L `
635/274
Face Value `
2
NSE Code
KSCL
BSE Code
532899
Valuation Data RONW(%)
27.11
P/E
13.70
P/BV
3.60
EV/EBIDTA
11.95
Financial Data EV (`in Cr)
3452.93
B/V (`in Cr)
158.98
NW (`in Cr)
958.67
EPS (FY20)
41.82
Index Detail Sensex
36693.69
Nifty
10802.70
KSCL’s business has minimally been impacted by pandemic since the company is in agri sector and is considered as essential services. Also, its robust infrastructure facilitated continued production. Besides, there were some minor challenge in supply chain which was ironed out by Government’s support to ensure uninterrupted supply of essential commodities.
Better quality product is the only way to earn farmer’s loyalty, which enables the company to gain market share compared to its other rivals. On a positive Note - Company has diversified its portfolio towards higher margin and faster growing non-cotton business (target to take its share to 60% of overall revenues) which is currently less penetrated, could drive an expansion in margins over a period of time. Moreover, management expects combined overall revenue growth to be 15-20 % in coming years, underpinned by around 10-12% growth in its mainstay cotton hybrid seeds business and about 20-25% growth in non -cotton seeds business revenues.
With optimistic guidance from management side for company's healthy growth across segments along with prospects of normal monsoon in FY21, food grain output to be surge, steady crop (Kharif) realizations, increase in market share and government supported schemes are likely to provide required impetus for sales growth in FY21, which adds credence to value the stock .
www.rudrashares.com
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