J.K. AGRIGENETICS LTD.(JKAGRI)

Transcription

1 J.K. AGRIGENETICS LTD.(JKAGRI) Date : 27 th September, 2012 Stock Performance Details Background Current Price : Rs ** Face Value : Rs. 10 per share 52 wk High / Low : Rs / Rs Total Traded Volumes : 393 shares** Market Cap : Rs. 110 crore** Sector : Agriculture - Seeds EPS (FY2011) : Rs per share ## P/E (TTM) : 9.42 (x)^ P/BV (TTM) : 1.63 (x)^ Financial Year End : 1 st October 30 th September BSE Scrip Name : JKAGRI BSE Scrip Code : **as on27 th September, 2012; ^ as on June 2012; ## as per September 2011 year ending data Particulars Promoter & Promoter Group Holding Shareholding Details June 2012 Total Institutional Holdings (FIIs & DIIs) Shareholding Nos. (%) 14,47, , Public Holdings 20,57, Total 35,06, JK Agri Genetics Ltd.(JKAGRI), an erstwhile division of JK Tyre & Industries Ltd., was established in 1989 with its headquarters at Hyderabad, Andhra Pradesh and is a part of JK group. The Company is engaged in research and development, production, processing and marketing of hybrid seeds of Sorghum, Pearl Millet, Maize, Cotton, Rice, Sunflower, Tomato, Okra and Hot Pepper. JK Agri Genetics has Research and Development capability in terms of germplasm pool, infrastructure facilities, testing farm, and team of dedicated breeding and biotech scientists. The Company also partners with academic institutions and other strategic partners for the increase of its knowledge base. The Seeds are processed in the state-of-theart plant near Hyderabad. The plants have an installed processing capacity of 100 tonnes per day. The Company created awareness about the benefits of using hybrid seeds by conducting educational programs and awareness amongst farmers. Strategy Focus The Company has launched BT Cotton hybrids with stacked gene technology and this is expected to be a major revenue driver for the Company. It has also launched virus tolerant hybrids in Tomato and Bhendi along with hybrids of Bt. Cotton, Maize and Bajra. The company focuses on developing a wholesaler network to reach untapped markets. JKAgri conducts various farmer contact program for promoting brand awareness and generating demand forjk Seeds. Further, to enhance its market position the company intends to widen its collaborative network with national and international institutions as well as global agri-tech companies so as to source latest technologies to develop newer seed varieties. An Initiative of the BSE Investors Protection Fund 1

2 Financial Snapshot Particulars Standalone Financials (Rs. in Million) Income Statement FY11 FY10 Net Sales / Income from Operations 1, ,138.8 Expenses Cost of material consumed Change in Inventories Employee Benefit Expenses Administrative & Other Expenses EBIDTA Depreciation & Amortization Finance Costs / Interest Expense Other Income Profit After Tax (PAT) Key Ratios Income Statement EBIDTA Margin (%) PAT Margins (%) Balance Sheet Networth 1, Non Current Liabilities / Loan Funds Non Current Assets / Fixed Assets Inventories Debtors Key Ratios Balance Sheet Debt : Equity (x) Book Value (BV) (in Rs.) Return on Capital Employed (ROCE) (%) Return on Equity (ROE) (%) Debtors Turnover Ratio (x) Inventory Turnover Ratio (x) Valuation Ratios P/E (x) P/BV (x) EV / EBDITA (x) Source : Capitaline.com; as on year ended 30 th September, 2011 From the Research Desk of LKW s Gurukshetra.com On a y-o-y basis, JKAgri reported a marginal increase in bottomline from Rs million in FY2010 to Rs million in FY2011. This is despite an increase in revenues from Rs.1,138.3 million in FY2011 to Rs. 1,203.6 million in FY An increase in the selling, general & administration costs (SG&A) as a percentage of sales from 20.2% to 22.3% that was a key component leading to a fall in bottomline. Further, the increase in sales by 8% was due to focus on crops like cotton, paddy, bajra, maize and vegetables. Operating Profit stood at Rs.51.2 million with margins of 4.2% as compared to an EBIDTA of Rs million and margins of 5.1% in FY2010. For the period under review, the debt on the books of the company increased as a percentage of total capital and stood at Rs million in FY2011 as against Rs million in FY2010. An Initiative of the BSE Investors Protection Fund 2

3 Although there was an increase on a y-o-y basis, it is relatively higher than the peers in the industry like Kaveri Seeds and Nath Seeds. As regards the Working capital Efficiency ratios, the Debtors turnover ratio has slipped only marginally on a y-o-y basis from 3.29(x) in FY2010 to 2.99(x) in FY2011. Notably, the inventory turnover ratio too has declined from 3.50(x) in FY2012 to 3.17(x) for year ended September, For Q3 FY12 ended June 2012, the Company reported Net Sales at Rs million, a jump of 27.17%, from Rs million for the same period last year. For the same period, EBITDA stood at Rs million, a jump of 2.31% as total expenses rose by 39.52%. Margins took a hit of 664 basis points at 27.32% on a year on year basis. Net Profits were flat at Rs million. Margins dipped by 499 basis points at 18.28%. Performance on the Bourses Stock Performance % J.K.Agri Genetics BSE Small Cap Peer Comparison The below table provides a snapshot of the company s financial performance during FY2012 as compared to some of its peers engaged in the production and selling of Hybrid Seeds operating in the Agriculture Sector. Standalone Financials (Rs. in Million) Particulars JK Agri Kaveri Nath Genetics ## Seeds Seeds Net Sales 1,231 3, EBIDTA PAT EBIDTA Margins (%) PAT Margins (%) P/E (x)^ P/BV (x)^ Debt : Equity (x) NR EV / EBITDA (x)^ Source : Capitaline Database, ^TTM as on June 2012; ## year ended on 30 th September, 2011; NR = Not Reported An Initiative of the BSE Investors Protection Fund 3

4 About the Industry Outlook Scanty rains in cotton-growing regions of Gujarat, Maharashtra and Tamil Nadu have lowered the growth prospects of the Hybrid Seed Industry off late. The National Seed Association of India (NSAI) is expecting only a single digit growth between 5-7% against its previous estimate of 20% early this year. India's hybrid seed industry, which is pegged at Rs 11,000 crore, grew nearly 15% last year. And cotton seed contributes up to 30% to the total industry. Cotton farmers have decided to grow sesame, sorghum and other crops that require relatively less water. Gujarat, along with Maharashtra, contributes more than 80 per cent of the total cotton produced in the country. As per the department of agriculture, cotton has been sown in around 9.72 million hectares till end of July 2012, which is about 3,22,000 hectares less than last year. In Gujarat, area under cotton has been around 6,00,000 hectares less than last year. India, the world s second-largest grain grower, produced million quintals of seeds in , compared with the requirement of million quintals, according to official data. Seed, being a biological entity has to be grown and cannot be manufactured. It is not just the starting point in agriculture but also the key determinant of the final output quality and quantity. Hence seeds form the most crucial aspect of agricultural productivity. The fortunes of the seed industry are influenced and closely linked to the growth and development of the overall agricultural sector. With a steady increase in the population, the land available for cultivation is shrinking. There is a need for higher yields to feed a growing population. High yields generally can be assured by saving loss of crop from the losses caused by weeds, pests and insects. Higher yields can also be driven by better quality of seeds. This is a positive side for the long-term prospects of the crop protection and seed industry. In addition, current Government policies encourage the growth of the Seed industry as well as food processing industry and exports of agro-based products. The use of hybrid seeds is still very low in India and farmers still prefer to save and use their residual crop as seed for the next season. However, increasing awareness about high yielding and good quality hybrid seeds is attracting farmers to switch from farm saved varieties to hybrid seeds. With India being the second most populous country in the world with a high population growth rate, the demand for foodgrains is expected to rise continuously. With 17% of the world s population and 2.4% of the land mass, farmers will need to significantly enhance their productivity in the use of limited land and water resources. This makes a strong case for investment in technology which improves agricultural yield, farm productivity, fortifies protection mechanism for plants and is sustainable. The farmer s acceptance of modern technologies of farming and availability of hybrid seeds in several regions should drive growth in the seed industry. However, the management s ability ton efficiently manage its debt and working capital merits watching. In addition, a weak monsoon could dampen the sales of seed companies like JK Agri given that a weak monsoon entails less finance with the farmers to purchase hybvrid seeds. Disclaimer All information contained in the document has been obtained by LKW s Gurukshetra.com from sources believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and LKW s Gurukshetra.com in particular makes no representation or warranty express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements of opinion, and LKW s Gurukshetra.com shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our company and should not be construed as any indication of our recommendation to buy, sell or invest in the company under coverage. An Initiative of the BSE Investors Protection Fund 4

5 Financial Graphs 1,300 Net Income from Operations Rs. in Million 1,200 1,100 1,139 1,231 1,000 FY 2010 FY 2011 EBIDTA & EBIDTA Margins Rs. in Million % 45 FY 2010 FY EBIDTA EBIDTA Margins PAT & PAT Margins Rs. in Million FY 2010 FY % PAT PAT Margins An Initiative of the BSE Investors Protection Fund 5

6 Disclosure Each member of the team involved in the preparation of this report, hereby affirms that there exists no conflict of interest. The report has been sponsored and published as part of Initiative of BSE s Investors Protection Fund About Us LOTUS KNOWLWEALTH (LKW), commenced business in 1990 and is currently engaged in providing WEALTH ADVISORY, CORPORATE ADVISORY and ECONOMIC & FINANCIAL RESEARCH & CONTENT services. LKW s ECONOMIC & FINANCIAL RESEARCH & CONTENT division currently generates Reports on Economic & Industry Trends, Global & Indian Equity Markets, Fundamental Analysis of IPOs, Companies & Industries, Management Meeting Reports, Balance Sheet & Financial Analysis Reports and an Economic Political and Sentiment Barometer. LKW also conducts Capital Market related Training Programs and has cutting edge expertise in Mutual Fund Analysis and specializes in Grading of Mutual Fund Schemes and IPOs. GURUKSHETRA.com is an online initiative of LKW that focuses on Personal Finance while theipoguru.com is India s Premier Primary Market (IPO) Portal. Contact Us LOTUS KNOWLWEALTH Pvt. Ltd. Regd.Office : B Wing, , Fairlink Centre, Off Andheri Link Road, Andheri (W), Mumbai consulting@lotusknowlwealth.com Tel : Website : An Initiative of the BSE Investors Protection Fund 6