Stock Note 04 Aug 2017

RETAIL RESEARCH
Kaveri Seeds Company Ltd
Industry CMP Recommendation Add on dips to Sequential Targets Time Horizon
Agriculture Products - Seeds Rs. 694 Buy at CMP and add on declines Rs. 622-628 Rs.771-867 2-3 quarters

HDFC Scrip Code KAVSEEEQNR Kaveri Seeds Company Ltd (KSCL) is one of the leading seed manufacturers in India. It has vast experience in seed production of
major agricultural crops backed by a very strong in-house R&D program for crops maize, cotton, sun flower, bajra, sorghum,
BSE Code 532899 rice and several vegetable crops. With over 600 acres of farm land owned by the company and 65000 acre for seed production
NSE Code KSCL across different agro- climate centers and dedicated team of researchers, the company is conscious of the changing needs of
farmers and consumers to design and develop productive hybrids that excel in market. It is consistently building a robust
Bloomberg KSCL IN
portfolio of field crops and vegetables to help enhance farm yield. It is also engaging more with farmers and educating them
CMP Aug 03 2017 Rs. 694 about its products and handholding those to implement agricultural best practices. It is also extending its brand presence
Equity Capital (Rs cr) 13.8 across India through aggressive marketing and branding initiatives.
Face Value (Rs) 2.0 Investment Rationale:
Equity Share O/S(crs) 6.91 Cultivation of Cotton has increased in kharif 2017 supported by better monsoon and farmers shifting from pulses and soya
bean to cotton,
Market Cap (Rs.crs) 4792.4 Diverse Product portfolio addressing crop rotation & reducing dependence on traditional crops,
Book Value (Rs) 146.8 Aggressive focus on R& D helps product development and sustainability in farm practices,
Avg. 52 Wk Volumes 78462 Investment in Biotechnology is accelerating the breeding program of cotton and rice,
Focus on new products could help to garner revenue going forward.
52 Week High 706.2
52 Week Low 325.2 Concerns:
Atmospheric / weather changes:
Inventories write off could impact profitability,
Shareholding Pattern % ( June 30), 17) Poor Monsoon and unsupportive commodity prices,
Promoters 54.4 Regulatory diktats from the central and state governments in respect of distribution, prices, royalties etc
Changes in Taxation law,
Institutions 28.1
View and Valuation:
Non Institutions 17.5
KSCLs diversified products portfolio, superior R&D capabilities, pan India distribution network, efficient supply chain and strong
Total 100.0 relations with farmers are key rationale for long term earning visibility. Increase in cotton cultivation in kharif 2017 could bring in
enhanced revenues and margins for KSCL. The recent completion of Buyback could result in increased return ratios, by reducing
Fundamental Research Analyst the equity base resulting in long term increase in shareholder value. Even after the recent buyback entailing an outgo of
Abdul Karim Rs.200cr and paying healthy dividends year after year, KSCL could end up with cash per share of Rs.94 in FY19E.
abdul.karim@hdfcsec.com Governments sharper focus on the seeds industry and the introduction of new hybrid seeds for Cotton, Rice and Maize by KSCL
would drive revenues for the company. Further, KSCL plans to increase its market share in Cotton Seeds by penetrating the
markets of Andhra Pradesh and Maharashtra and widening its overall presence in North India, Gujarat and Rajasthan.

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Kaveris cotton seed volumes should rebound strongly in FY18-FY19 (due to higher acreage and higher cotton prices), its
growing footprint outside AP and Telangana could also help de-risk its business and bring new growth triggers, and its
improving operating leverage, should drive a sharp growth in PAT over the next two years.
We feel investors could buy the stock at the CMP and add on dips to Rs. 622-628 band (~19.5x FY19E EPS) for sequential targets
of Rs 771 (24x FY19E EPS) and Rs 867 (27x FY19E EPS). At the CMP of Rs 695 the stock trades at 21.6x FY19E EPS.
Financial Summary:
Particulars (Rs cr) Q4FY17 Q4FY16 YoY-% Q3FY17 QoQ-% FY16 FY17 FY18E FY19E
Net Sales 40.3 41.1 -1.9% 67.9 -40.6% 744.89 704.99 820.66 898.20
EBITDA -86.4 -6.5 -1239.5% 3.4 -2648.7% 185.91 139.55 205.99 220.51
APAT -29.2 -10.4 -179.9% 3.5 -921.7% 166.28 137.07 198.63 211.89
Diluted EPS (Rs) -12.6 -1.5 -736.4% 0.5 -2576.5% 24.08 19.85 30.05 32.06
P/E (x) 28.8 35.0 23.1 21.6
EV/EBITDA (x) 25.7 34.2 22.2 20.7
RoE (%) 17.9% 13.5% 22.1% 20.5%
(Source: Company, HDFC sec)
Company Profile:
Kaveri Seeds Company Ltd (KSCL) is one of the leading seed manufacturers in India. It has vast experience in seed production
of major agricultural crops backed by a very strong in-house R&D program for crops maize, cotton, sun flower, bajra,
sorghum, rice and several vegetable crops. With over 600 acres of farm land owned by the company and 65000 acre for seed
production across different agro- climate centres and dedicated team of researchers, the company is conscious of the
changing needs of farmers and consumers to design and develop productive hybrids that excel in market.
The Company is mainly into the business of production, processing and marketing of high quality hybrid seeds for Different
crops like corn, sunflower, cotton, paddy, grain sorghum, etc. and has recently forayed into micronutrientsandbioproducts.
The company produces non-hybrid seeds, primarily for paddy.The Company is a leading provider of crop solutions to the
farmer by supplying high yielding hybrid seeds and cropmanagement namely micro nutrients, bioproducts etc. The Company
is engaged in research and development in theareas of superior breeding programs and biotechnology tools that will enable
them to develop highly effective anddifferentiated hybrid seeds, micronutrients and bioproducts.
Kaveri is amongst the top three seeds companies in the cotton segment, and top five in the maize, paddy and pearl millet
segments. KSCL was incorporated in the year 1986 and company is one of the fastest growing seed companies in India with a
large network of 15000+ distributors and dealers across pan India. As on 30th June 2017, Company has 775+ employees.
Company has seven State-of-the-art seed technology, processing and storage plants.
Kaveri Microteck Pvt Ltd. is a 100% subsidiary of KSCL and it is a business division of division engaged in micronutrient
mixtures and bio-pesticides. Kexveg is a 100% subsidiary of KSCL and is involved in selling premium vegetables in theoverseas
markets. KSCL has already invested Rs.6.6 crore in Kexveg. Going forward, the company expects to investRs9 crore in this
subsidiary. This investment can help KSCL to increase its vegetable seeds portfolio.

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Product Overview:

(Source: Company, HDFC sec)

Cotton:
KSCL is one of the leading cotton seed producers in India, with a significant market share. Company has multi-geography
presence for cotton seed production.Over the year, company has achieved good market response with key cotton hybrid seed
Jaadoo. Demand of ATM has been good in many states and the feedback for its new introduction 3x1 has been very good
from farmers. In spite of tough growing conditions, Jaadoos performance has been par excellence; it has tested few new
hybrids in farmer field and could be launchedin the near future.
Maize:
Company has consistent focuson increasing the productivity of maize hybrids and stabilizing yields against adverse situations
like drought or heat, among others. Company has partnered with CIMMYT Asia to support a project on Heat Tolerant Maize
for Asia (HTMA). Company has recently launched a new hybrid Godfather to address the high margin single-cross market.
Rice:
Farmers have been moving away from farm saved seeds and demand for selection rice has been growing rapidly. KSCL has
been able to increase volume in selection rice over the past 2 years. Company is strengthening its footprint in rice market to
address the growing market of hybrid rice and selection rice.
Others:
KSCL has strong portfolio of other field crops, like bajra, sunflower, mustard, sorghum, pulses, and wheat. In India, bajra
occupies the highest crop area after rice and wheat and forms an important segment in hybrid seed industry. Mustard and
wheat areother important Rabi crops of India; company could leverage its presence and channel of distributions to participate
in these crops.

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Vegetables:
KSCL is emphasizing on tomato, chillies and okra. Besides, its research efforts on brinjal, gourds, watermelon are still in
progress. Company is planning to have a dedicated team to focus on Vegetables sales and marketing activities.
KSCL made a major breakthrough in plant breedingwith the creation of genetic variation and thedevelopment and commercial
release of promising hybrids like Jaadoo and ATM in cotton, KMH 25K45,Kaveri 50, Ekka in maize.

What went wrong for KSCL in FY15/FY16?

Cotton prices and hence acreage of cotton fell resulting in sales and margin drop. Monsoon was not good affecting acreage
generallyaffectingdemand for seeds. Telangana farmer situation was not good resulting in possibility of poor recoveries and
hence KSCL opted for selectivecash and carry impacting sales. Its PAT fell 45% in FY16. Some auditors/brokers raised concerns
about the genuineness of investment lying on its books. All this led to its stock price falling from Rs.1077 in Mar 2015 to
Rs.300 in Jan 2016. KSCL has cooperated in giving necessary details/proof and has largely satisfied most people on the issue of
investments.

Industry Overview:
The Agriculture sector commands the largest share of the countrys total land area at about 48% (or 156 million hectares)
compared to USAs 18% (or 158 million hectares) and Chinas 15% (or 106 million hectares). While India has more arable land
than China, its production is only half that of China The Indian Seed Industry is the 6th largest in the world in value terms
accounting for about 4.5% of global industry preceded by the US (27%), China (22%), France (6%), Brazil (6%) and Canada
(4.8%). The organized Indian seed industry has been in existence since 30+ years; however the last decade has witnessed
exponential and transformational growth.
Going forward, the industry is expected to grow significantly, owing to improved seed replacement rate (SRR) and increasing
adoption of high-yielding hybrid seeds. The Government of Indias favorable policy environment, aimed at supporting the
usage of seeds through the National Seeds Plan and bolstering agricultural productivity through the National Food Security
Mission (NFSM) also augur well for the industry. Multiple forecasts advocate that the Indian seed industry will grow twice the
average for the rest of the world for the years to come.
Farmers are moving towards branded seed instead of using seed saved from the previous harvestand upgrading to better
quality seeds to improve their yieldleading to growth in the seed industry. Further, the advent of genetically modified (GM)
cotton changed the landscapeof the Indian seed industry. As per ICRA, the Indian SeedIndustry is the sixth largest in the world
in value terms accounting for about 4.5% of global industry preceded by theUS (27%), China (22%), France (6%), Brazil (6%)
and Canada (4.8%).
Key Growth Factors:
Cotton Seed:
High market penetration of hybrids,
Growth - a function of market share gains,
High Density Planting and Mechanical Harvesting,

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Pricing subject to GOIs Price Control Order,

KSCL is market leader, Company developed hybrids with only the pest control trait sourced under license.
Paddy:
Paddy is the largest crop under cultivation in India and is the staple food for large population,
Hybrid penetration at less than 10%,
Farmers used saved seed; however branded and hybrids gaining increased acceptance,
Market for both selection variety rice and hybrid rice growing rapidly,
Corn (Maize)
India is the world's 6th largest producer and 5th largest consumer of maize,
Maize acreage has grown in India over years as it is highly adaptable to different season,requires less water, easy to grow
with good commodity price,
Demand for Maize in India in expected to continue to grow due to demand from feed industry(accounting for ~50% of
domestic maize demand) and export opportunity (seen a strong 24%CAGR in FY2005-14),
Vegetables
Hybrid vegetable seed is one of the fastest-growing segments in India estimated to be around Rs 2,000 crore,
India is the second-largest producer of vegetables in the world, after China,
Buyback offer:
Kaveri Seed had initiated a buy back over 29.62 lakh shares at Rs 675 a share. The company will spend Rs. 200 crore(35% of
current cash balance) in buying back about 4.29 per cent of the total paid-up capital of the company from the market. As of
last fiscal, the company had reserves of Rs 893 crore. Buy Back offer opened on July 10, 2017 and closed on July 21, 2017.
The promoters hold 54.7 per cent stake in the company, while the remaining is held by the public. The promoters and
promoter group companies have also expressed interest in participating in the buyback offer.

Investment Rationale:
Cultivation of Cotton increased supported by better monsoon and farmers shifting from pulses and soya bean to cotton:
According to Ministry of agriculture, Cotton production/planting in India has increased to 111.56lac hectares compared to
same period previous year at 92.33 lac hectares, as on July 27, 2017. Cotton cultivation has progressed to 91 percent of the
total normal area at 122.46 lakh hectares showing signs of positivity in planting. Cotton production has increased due to (a)
Comparatively better monsoon than past 3 years (b) Farmers are shifting away from pulses and soya bean to cotton as prices
of pulses and soya bean ruled below minimum support price (MSP) while cotton was one of the few crops that gave good
returns to farmers, and (c) farmers income from vegetables was badly impacted previous year due to demonetization,
therefore farmers are shifting to cotton production in FY17-18.

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Cotton planting progress as on July 27, 2017 Cotton Seed Volume Break up - (FY17)

(Source: Agriculture Ministry of India, Company, HDFC sec) (Source: Company, HDFC sec)

Cotton seed contributes 65% of KSCLs revenue. Maharashtra, Telangana, and Andhra Pradesh are key acreage areas,
contributing~ 89% of Sales. The industry has played down deficient rainfall in parts of cotton growing areas of Maharashtra,
Telangana and Karnataka, claiming it will not have major impact on the production estimates. Higher cultivation of cotton
could help to generate more demand of seeds. KSCL is one of the leading cotton seed producers in the areas that have seen
an increase in cotton cultivation and hence could benefit from this trend.

Diverse Product portfolio addressing crop rotation & reducing dependence on traditional market:
KSCL has focused consistently on building robust portfolio of field crops and vegetables to help enhancefarm yield since its
inception. Company is also engaging more with farmers and educating them about its productsand handholding to
implement agricultural best practices. Hybrid vegetable seed is one of the fastest-growing segments in India estimated to be
around Rs. 2,000 crore. For vegetables, Company has built an exclusive sales team of more than 20 dedicated employees,
launched new products, and built a focused distribution network and evaluating in-licensing opportunities.
Company plans to expand its presence in other states rather than key markets like Andhra Pradesh, Telangana, and
Karnataka. Lower acreages of Maize in Bihar and coastal Andhra Pradesh was compensated by higher acreage in Telangana,
Maharashtra and Gujarat, leading to growth in the maize seed sales in FY17.

Maintaining strong relationships with farmers as well as Channel partners:

KSCL has over three decades of rich experience in application of the science of genetics and principles of plant breeding in the
evolution of crop hybrids, quality seed production, conditioning and processing and in building extensive distribution network

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with strong farmer relationship. Over 15,000 direct and indirect distributors across the country and around 350 highly
motivated marketing professionals drive market penetration. Company is expanding its marketing and distribution network
across agricultural belts. This expansion could significantly enhance business opportunities in future in untapped and growing
markets. Company is engaged with farmers through multiple engagement programs like brand awareness, agronomic
information to increase their productivity and profitability.
Market share by Crop (%)
Particulars FY11 FY12 FY13 FY14 FY15 FY16 FY17
Cotton 2% 4% 10% 16% 18% 14% 14%
Maize 9% 10% 12% 12% 10% 10% 11%
Hybrid Rice 2% 4% 6% 6% 4% 5% 4%
Pearl Millet 12% 10% 9%
(Source: Company, HDFC sec)
Aggressive focus on R& D helps for product development and sustainability in farm practices:
KSCL has continued investing in Research and Development activities to augment research facilities, farm infrastructure
development. On product developments, company is successful in developing several market competitive hybrids. Hybrid
technology offers considerable opportunity for increasing productivity of field crops and vegetables. It is an appropriate
technology for sustainable agriculture and thus, deserves to be promoted on a large-scale.
Cotton (Jaadoo& Jackpot) Jaadoo and Jackpot are Bt cotton hybrids with stacked genes, cry 1Ac & cry2Ab that help combat
the bollworm pest,
Sunflower (Sunkranti& Champ) - Champ and Sunkranti have built in resistance to SNV and DM,
Bajara (Boss 65): The bajra hybrid Boss 65 is high yielder with attractive grain and drought enduring,
Rice ( AK56 & KPH 9090)
Sorghum ( Colonel )
Several of pipeline maize hybrids (25K60, KMH 3669and KMH 2700) excelled in performance in All India Coordinated trials
The company has extended cropped area and diversified crops by adding newer ones for agri-seed business. Red gram, onion,
mustard and wheat are the additions to the crop cafeteria of the company. Furthermore, the company has successfully
launched several new hybrids of sunflower, cotton and bajra in the market. The product portfolio is also expanded for maize,
rice and vegetable crops inclusive of both-hybrids and OPVs (Open-pollinated variety).

R&D Infrastructure:
Dedicated research farms of 700 acres (own & leased) land under varying agro-climatic conditions located in and around
Hyderabad.
Multi-location breeding and trial stations over 70 centres across India.
R&D program witnessed progress with increase in multi-location trials and more number of notifications.
Company received notifications of 2 hybrids in rice, 1 hybrid in maize, 1 hybrid in pearl millet and 1 hybrid in sunflower.
Apart from tie-up with Monsanto for pest technology for BT cotton, it has developed all the technology on its own.

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State-of-the-art biotech quality check and seed technology laboratory enable crucial quality processes:
Gene bank maintains approximately 6,500 germplasm accession in field and vegetable seeds. It facilitates genetic
enhancement and multidisciplinary crop improvement research programmes. Vegetables business could grow significantly on
the back of increased investment in R&D, supply chain and S&M.
Investment in Biotechnology is accelerating the breeding program of cotton and rice:
Companys investment in Biotechnology has started paying off in term of accelerating the breeding programs of cotton and
rice. Companys focus and thrust of R&D biotech program is divided into two areas.
(i)Crop biotechnology (ii) Bio pesticides and Bio fertilizers
The on- going Biotech program involves (i)Introgression of BT gene (Bollgard incorporation in to parental lines of cotton (ii)
stacking two BT genes (Bollgard II) in to parental lines of cotton and develop BT cotton hybrids. The marker based DNA
technology is helping in fast track development of lines through back cross breeding. Through the conjunct use of
biotechnology and hybrid technology is the way forward for evolution of new generation Kaveri hybrids.
Better than average Monsoon shower could help to generate more demand in current fiscal:
With the El Nino phenomenon being ruled out this year, India is expected to get a normal monsoon as per Indian
Meteorological Department forecasts and analyses done by global weather agencies. The US Climate Prediction Center (CPC)
has ruled out the possibility of abnormal warming of waters in the Pacific Ocean (called the El Nino effect) happening before
August or September. Therefore, rainfall is expected to be 96% of the long period average (LPA). The nation receives 70% of
its rainfall from the South-West Monsoon that extends from June to September. Agricultural growth is expected to be 3-4%,
while overall GDP growth is likely to be 7% which augurs well for the agri-business industry. There were two continuous years
of drought before getting normal monsoon in 2016.
As on July 29, 2017 the cumulative countrywide rainfall still remains normal. Southwest Monsoon was vigorous over South
Rajasthan and Sub-Himalayan West Bengal. While active Monsoon was observed over Gujarat, West Madhya Pradesh, Assam,
Himachal Pradesh, Uttarakhand, Coastal parts of Telangana, Coastal Tamil Nadu along with West Coast.
As on July 28, the cumulative countrywide rainfall continues to stand at 4%. As far as the regional distribution is concerned,
Northwest India is surplus by 17% Central India continues to stand at 13% whereas, South, East and Northeast India are rain
deficient by 16% and 6%, respectively.
Focus on new products could help to garner revenue going forward:
KSL has added 8 new products in the portfolio and 3 new products launched in Maize, 3 in Bajra and 2 in Rice. Company has
increased number of demonstration of pre commercial products for promotions. Apart from this, company has introduced
sales productivity tool. For vegetables, company has built an exclusive sales team of more than 20 dedicated employees.
Company has also launched new products, built a focused distribution network and are evaluating in-licensing opportunities.

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KSCLs attempts to professionalize and institutionalize its business by inducting senior professionals across its key functions
and beefing up its internal systems and processes could result in value creation over the medium term.
Over the last few quarters, KSCL has employed COO, CFO supply chain head, R&D head and marketing head for its various
divisions from outside. This will bring greater professionalism and result in better performance for the company going ahead.

Risk and Concerns:

Atmospheric/weather changes:
Changing climate conditions such as continuous dry spell, high temperature, erratic rainfall, excess rainfall may drastically
impact commercial seed production of the Company. Changing rainfall patterns makes farmers to move from one crop to
another to suit the growing conditions.
Inventories write off could impact profitability:
KSCL has written off around 66.6 crore in FY17 compared to Rs. 43.1 crore in FY16. Inventory write-off could be in the range of
4-5% on sales volumes for every year, but in a bad year it could go up to 10%. In normal course, company writes off inventory
because of unsold old seeds. However, company follows first in and first out policy (FIFO)for inventory issue.
Poor Monsoon and unsupportive commodity prices:
Consecutive weak monsoon and unsupportive commodity price has impacted Kharif and Rabi seasons in the past two years.
Resultantly, farm income fell which led to farmer trading down and curtailing investments which led to lower than expected
revenue growth for seed companies.
Regulatory risks from the Central/State Governments on issues of distribution, prices, royalties etc.:
The Central Govt has authority to decide on prices of seeds, while state Govts can approve or disapprove suppliers of seeds
(especially hybrid).
Change in taxation law:
KSCL derives ~65% of its revenue from cotton seeds. Most seed companies including Kaveri report their earnings as
agricultural income; hence they dont pay corporate tax. Any change in tax law could adversely affect the companys
profitability and the return ratio.
Overdependence on Cotton seeds:
Currently cotton seeds contribute 65% of total revenues for the company. Currently two products, ATM and Jadoo, contribute
50-70% of the companys cotton sales, but withnew product launches, the contribution should come down goingahead.
KSCL is aware of this and has reiterated its strategy to increase its focus on noncottonseeds and highlighted that the company
is in process ofdeveloping a vegetable seeds portfolio, which should startcontributing to the financials within 1-2 years.
Managementhighlighted that the company plans to introduce three new productsfor rice, two for maize, and one for cotton
in FY18.
Pink bollworms have begun to develop resistance to Bt cotton, and if this problem intensifies in the next few years, there
could be adecrease in acreages of Bt cotton, hurting KSCLs sales.

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Dependence on two states AP and Telangana:

These two states account for 53.7% of revenues for KSCL. Any untoward regulatory or weather development in these two
states could impact the prospects for KSCL. The company is taking steps to expand its geographical presence and reduce its
dependence on these two states.
Seasonality: Almost 70-75% of sales by KSCL happens in Q1 of any year.

Q4FY17 results review:

In Q4 FY17, KSCL reported 2% (YoY) Standalone Revenues growth at Rs. 40.30 crore led by lower contribution from a cotton
perspective in Q4, which is normal in nature. Profitability has been impacted by inventory write offs and an exceptional item.
EBITDA and PAT declined by 214% and 72.4% on YoY basis. The exceptional item was Rs 59.23 crore paid to Monsanto for
royalty issue. The legal case has now been settled amicably and Rs 59.23 crore represents a full settlement of any outstanding
payment in this regard for FY16. This will ensure access to technology from the MNC giant in future for KSCL.In FY17, the
company has launched eight new products including three in maize, three in bajra and two in rice.
View and Valuation:
KSCLs diversified products portfolio, superior R&D capabilities, pan India distribution network, efficient supply chain and strong
relations with farmers are key rationale for long term earning visibility. Increase in cotton cultivation in kharif 2017 could bring in
enhanced revenues and margins for KSCL. The recent completion of Buyback could result in increased return ratios, by reducing
the equity base resulting in long term increase in shareholder value. Even after the recent buyback entailing an outgo of Rs.200
cr and paying healthy dividends year after year, KSCL could end up with a cash per share of Rs.94 in FY19E.
Governments sharper focus on the seeds industry and the introduction of new hybrid seeds for Cotton, Rice and Maize by KSCL
would drive revenues for the company. Further, KSCL plans to increase its market share in Cotton Seeds by penetrating the
markets of Andhra Pradesh and Maharashtra and widening its overall presence in North India, Gujarat and Rajasthan.

Kaveris cotton seed volumes should rebound strongly in FY18-FY19 (due to higher acreage and higher cotton prices), its growing
footprint outside AP and Telangana could also help derisk its business and bring new growth triggers, and its improving
operating leverage, should drive a sharp growth in PAT over the next two years.

We feel investors could buy the stock at the CMP and add on dips to Rs. 622-628 band (~19.5x FY19E EPS) for sequential targets
of Rs 771 (24x FY19E EPS) and Rs 867 (27x FY19E EPS). At the CMP of Rs 695 the stock trades at 21.6x FY19E EPS.

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Quarterly Financials:
Particulars, Rs in cr Q4FY17 Q4FY16 YoY-% Q3FY17 QoQ-% FY17 FY16 YoY-%
Net Sales 40.3 41.1 -1.9% 67.9 -40.6% 669.9 716.5 -6.5%
Raw Material Consumed 82.0 74.3 10.4% 138.1 -40.6% 378.4 363.5 4.1%
Stock Adjustment -37.8 -53.8 29.7% -100.6 -62.4% 19.1 22.0 -13.3%
Employee Expenses 6.4 9.9 -35.2% 7.4 -13.7% 32.5 31.2 3.9%
Other Expenses 76.1 17.1 343.7% 19.5 290.0% 161.3 109.0 48.0%
Total Expenses 126.7 47.5 166.5% 64.5 96.6% 591.3 525.7 12.5%
EBITDA -86.4 -6.5 -1239.5% 3.4 -2648.7% 78.6 190.8 -58.8%
Depreciation 6.6 7.0 5.6% 6.9 -4.8% 28.5 25.0 14.1%
EBIT -93.0 -13.4 -593.7% -3.5 -2556.0% 50.1 165.9 -69.8%
Other Income 1.8 4.2 58.3% 10.1 -82.5% 34.4 11.7 194.4%
Interest 0.0 0.0 0.0% 0.0 0.0% 0.1 0.2 -29.4%
PBT -91.2 -9.2 -891.6% 6.6 -1490.7% 84.4 177.4 -52.4%
Tax -4.0 1.2 431.1% 3.0 -234.2% 5.9 5.1 16.1%
PAT Reported -87.2 -10.4 -736.8% 3.5 -2556.1% 78.5 172.3 -54.5%
EOI -58.0 0.0 - 0.0 - -58.0 0.0 -
PAT Adjusted -29.2 -10.4 -179.9% 3.5 -921.7% 136.5 172.3 -20.8%
EPS (Adj) (Unit Curr.) -12.6 -1.5 -736.4% 0.5 -2576.5% 11.4 24.9 -54.5%
(Source: Company, HDFC sec)

Segment wise revenue: Segment wise Volume

Rs in Cr FY15 FY16 FY17
Mn Packets FY15 FY16 FY17
Cotton Seed 684 422 358
Cotton Seed 8.6 5.6 5.4
Hybrid Rice Seed 29 32 28
Hybrid Rice Seed 1.5 1.7 1.6
Maize Seed 140 138 161
Maize Seed 10.1 9.2 10.9
Others 153 158
Total 745 705

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Financials
Income Statement
Particulars, Rs in Cr FY16 FY17 FY18E FY19E
Revenue from Operations 744.9 705.0 820.7 898.2
Cost of Material Consumed 375.1 391.2 344.7 382.6
Changes in Inventories 23.1 18.1 24.6 29.2
Employee Benefit Expenses 39.9 39.9 48.4 54.8
Other Expenses 120.9 116.2 197.0 211.1
Total Expenses 559.0 565.4 614.7 677.7
EBITDA 185.9 139.5 206.0 220.5
Depreciation & Amortisation Exp 27.4 30.2 30.4 32.3
EBIT 158.5 109.3 175.5 188.2
Other Income 13.1 34.4 32.0 32.3
Finance Costs 0.2 0.2 0.2 0.2
PAT before Except- Item 171.3 143.5 207.4 220.3
Exceptional Items 0.0 59.2 0.0 0.0
PBT 171.3 84.3 207.4 220.3
Tax 5.5 7.0 9.3 8.8
PAT 165.9 77.3 198.0 211.5
Less: Minority Interest -0.4 -0.5 -0.6 -0.4
Pat adjusted 166.3 137.1 198.6 211.9
Earnings per share 24.1 19.8 30.1 32.1

Balance Sheet
Particulars FY16 FY17 FY18E FY19E
EQUITY AND LIABILITIES
Share Capital 13.8 13.8 13.2 13.2
Reserves & Surplus 913.4 1000.2 884.3 1022.1
Share Holders Funds 927.2 1014.0 897.5 1035.3
Minority Interest -0.2 -0.7 -0.6 -0.5
Long Term Borrowings 1.6 4.6 3.1 4.1
Deferred Tax Liability 0.0 0.1 0.1 0.2
Other Long Term Liabilities 8.5 8.7 9.1 9.6
Non Current Liabilities 10.1 13.4 12.4 13.9

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Trade Payables 216.2 281.6 269.8 283.0

Other Current Liabilities 200.1 197.8 217.5 239.3
Short Term Provisions 7.3 21.5 23.6 26.0
Current Liabilities 423.5 500.9 511.0 548.3
Total 1360.7 1527.6 1420.2 1597.0
ASSETS
Fixed Assets 221.2 234.2 248.8 251.4
Non Current Investments 0.7 2.4 2.7 2.9
Deferred Tax Asset 0.3 0.6 0.7 0.7
Long Term Loans and Advances 0.0 3.8 3.6 3.4
Other Non-Current Assets 3.7 2.9 3.2 3.3
Non-Current Assets 226.0 243.9 258.9 261.8
Current Investments 522.4 710.0 497.0 621.3
Inventories 504.4 447.8 517.1 553.7
Trade Receivables 80.4 85.4 101.2 105.8
Cash & Cash Equivalents 9.5 21.0 24.7 31.9
Other Current Assets 18.0 19.4 21.4 22.5
Current Assets 1134.7 1283.7 1161.4 1335.2
Total 1360.7 1527.6 1420.2 1597.0
(Source: Company, HDFC sec)
Key Ratios:
Particulars FY16 FY17 FY18E FY19E
No of Equity Shares-cr 6.9 6.9 6.6 6.6
Enterprise Value-cr 4784.6 4776.1 4565.3 4559.1

EPS 24.1 19.8 30.1 32.1

Cash EPS (PAT + Depreciation) 28.1 24.2 34.7 37.0
Book Value Per Share(Rs.) 134.3 146.8 135.8 156.6

PE(x) 28.8 35.0 23.1 21.6

P/BV (x) 5.2 4.7 5.1 4.4
Mcap/Sales(x) 6.4 6.8 5.6 5.1
EV/EBITDA 25.7 34.2 22.2 20.7

EBITDAM (%) 25.0% 19.8% 25.1% 24.6%

EBITM (%) 21.3% 15.5% 21.4% 20.9%

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PATM (%) 22.3% 19.4% 24.2% 23.6%

ROCE (%) 18.5% 14.1% 23.0% 21.2%

RONW (%) 17.9% 13.5% 22.1% 20.5%

Current Ratio 2.7 2.6 2.3 2.4

Quick Ratio 1.5 1.7 1.3 1.4

Debt-Equity (x) 0.0 0.0 0.0 0.0

(Source: Company, HDFC sec)
One Year forward P/E One Year Daily Price Chart

(Source: Company, HDFC sec)

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Fundamental Research Analyst: Abdul Karim (abdul.karim@hdfcsec.com)

HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496
5066Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com.
Compliance Officer: Binkle R. Oza Email: complianceofficer@hdfcsec.com Phone: (022) 3045 3600
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