In this post we can perform Kaveri Seed Multibagger Analysis in Warren Buffet way. This is the 1 of 3 Multibaggers where the remaining 2 can be purchased from here. Futurecaps is the ONLY advisor in India releasing 3 Agriculture Multibaggers based on the Farmers Act Advatnage.
Kaveri Seed Company
Update: Price went up 10% after the Agriculture Reforms Bill Passed in Lok Sabha Sep 2020 LINK
About Kaveri Seed
Kaveri Seed today is India largest agriculture company specializing in Hybrid Seeds in Key Indian crops. The company has strong Research & Development (recognised by DSIR since 2001) has resulted in high – yield seeds that has made the company the trusted partner for farmers since the last three decades . It has transformed products & processes to deliver the best of science, while enhancing farm productivity.
With more than 1,00,000 production growers on 65,000 acres of land across 12 different agro-climatic zones , the company has diverse portfolio of seeds caters to key crop segments to enable crops for diverse agro – climate and soil conditions.
Warren Buffet, Value & Growth Checklist
Following are the Checklist parameters:
|History of Consistently Increasing Sales, Earnings & Cash Flow||Yes.|
|Durable Competitive Advantage||Moderate|
|Future Growth Drivers / Sector Growth||Moderate. Cyclical Sector.|
|Conservative Debt (long term debt < 3 Net Profit)||Low Debts|
|Debt Equity Ratio, Current Ratio||Low Debt, Current Ratio is 1.5|
|Return on Equity must be Above Average||20%|
|Low CAPEX required to maintain current operations||Moderate|
|Inventory Turnover Ratio, Debtor Days, ROCE||Okay, Debtor days increasing|
|Management is holding / buying the stock||Promoter holding is at 55% & Increasing|
|Market Price < Intrinsic Value||At 70% Discount Intrinsic Value Calculator|
|Stock Price is consolidating (now)||Yes|
|Stock Price is growing in past years along with EPS growth||Yes|
|Consolidated PE, PB Ratio, PEG Ratio||PE 10, PB 4, PEG 0.5|
|Cash Flow Positive, Net Profit % greater than 8%||Cash Flow: +ve Profit: 30%|
|Paying Dividends, Tax||Dividends: Yes Tax: Low %|
|EPS Growth Rate||25% above past 3 years|
|Jump in Trailing Result EPS||Yes|
|Jump in Quarterly Result EPS||Yes|
|Expected Gain in 5 Years||300-500%|
|Price Movement Graph, 52 Week High & Low||Okay|
|Volume Analysis||3 Lakhs (High)|
|Power of Brand||Moderate|
|Corporate Governance, Reputation of Leaders||Okay|
Positive Factors on Kaveri Seed
Here are the positive factors regarding Kaveri Seeds
- Largest Seed Producer of India
- Modern Plant Breeding Techniques implemented for High Yield even in Diverse Climate
- Multi-crop Portfolio
- Biotech Innovation, Competitive R&D & New Products developed every year
- Strong Brand & Close Work with Farmers
- Good Supply Chain, PAN India presence
- 30% Growth y-o-y, 15% increase in Net Profits
- Operating Profit Margin is 30% which is rarely seen
- New Recognitions from CVRC on application
- International Collabrations like HRDC, VRAP, IMIC, HPRC etc.
- Pradhan Mantri Krishi YOjana, Fasal Bima Yojana can boost Indian demand in upcoming years
- Export to Multiple Countries mitigates Risk of local demand
- Low Debt Company
- High ROE, ROCE
- High Discount on Intrinsic Value
- Positioned for SEBI Multicap Mandatory MF Investments
Here are the concern factors regarding Kaveri Seeds
- Cyclical Business – Only June Quarter showing Spike in Revenue & Profits
- Lack of rainfall can abruptly affect farmers & in-turn the company
- Availability of Land for Farming is Alarming
- COVID impacted the operations, transportation etc.
- No Capacity Expansions on Card
- No Online Sales Migration during COVID Times
Based on the above analysis I would like to say that the Kaveri Seeds possess Multibagger Stock properties and one can Invest in 2020. However one should not expect high compounded returns from this stock. It can be considered as Moderate Risk Moderate Returns investment in the range of 300-500% in a 5-year period.
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