Friends, thanks a lot for your fantastic feedback and encouragement on our new efforts at Screener.
Last two months have been fabulous for the markets. We mentioned in our post on 1st, Aug, 2012 that the appointment of Mr. Chidambaram as finance minister may bring a major change in the sentiments of the markets; in these two months the sentiments have totally changed with many stocks trading at their all time high now. This is one reason why veterans advice that one shouldn’t try to time the markets, rather just stick to the high quality stocks.
The current run up has majorly been limited to the large caps and high quality ideas, but going forward, if the markets remain stable, there might be a lot of improvement in the broader mid cap space where many companies are still trading at low valuations. However over a longer term, one should be careful and not get stuck in poor companies.
In our last post, we had mentioned some new ideas. Here are details on them:
Kaveri Seeds: Kaveri is one of the largest hybrid seeds company. Hybrid seeds is a very promising business area in India, as the better agriculture and improving the current yields is the need of the hour. This area has entry barriers and long term competitive advantages as it takes years of research to build a high quality seed and develop a brand value.
The Q1 results were fantastic – Revenues grew 100% from 241 Cr in Jun, 2011 to 480 Cr in Jun, 2012. Similarly the net profit grew 114% from 47 Cr in Jun, 2011 to 101 Cr in Jun, 2012.
Similarly the long term growth has been fantastic – the company has grown from a turnover of just 23 Cr in 2003 to 372 Cr in 2012 at a CAGR of 36%!
The company gets almost 50-60% of turnover from BT cotton. As per industry estimates, Kaveri is expected to have doubled its market share from about 5% in 2012 to 10% in 2013. The company has two major brands Jaadoo and Jackpot, and a steady growth is expected going forward. The second major area is the Corn Hybrid. The company has a good brand here and has been doing well consistently.
Going forward the company seems to be very optimistic on the hybrid seeds for the paddy. As per industry data, hardly 5% of paddy in India is by way of hybrid seeds as of now. This is expected to double out over next few years. Kaveri is also very optimistic on this area in its annual report.