-------- Forwarded Message --------
Subject: Kaveri Seeds:The Great Downfall Saga-----Should We Enter Now ?
Date: Wed, 30 Sep 2015 06:53:21 +0530
From: Asis Ghosh <asis...@gmail.com>
Reply-To: asis...@gmail.com
*CMP: 426**
**
**Buy: 426-413**
**
**TGT: 446-487 (1-6M)**
**
**TGT: 487-513-668-**725**(12-24M)**
**
**TSL<395**
**
**
*
*Note: Consecutive closing below 395 for any reason, KSCL may dip
towards 345-300 zone, where it can be again **accumulated for investment
purpose (depending on the news flow).*
KSCL has dropped by almost 60% from its all time high of around 1075 in
the span of six months.
*Primary reasons of its super fall might be:*
Although the company was expected to to report double digit growth in
revenue, in Q2FY16, KSCL actually delivered 20% drop in revenue and 5%
fall in net profit. The revenue fall was very disappointing as the
company did not take part in active marketing in high credit markets of
Maharashtra (MH) fearing bad debts amid a very sad state of farmers
there. MH govt also reduced the prices of cotton seeds and consequently
KSCL withdrew itself from the MH market albeit temporarily.
Also, unattractive cotton prices, deficit monsoon in cotton growing
areas and resultant shift in acreages reduced the demand of the cotton
seeds and its volume fall by almost 26%.
Thus agrarian crisis and resultant pressure on the Govt to alleviate the
suffering of the farmers are leading to more state interference and free
market mechanism of the agri seed business, including cotton seeds also.
The overall shabby situation in agriculture, specially in TNG/MH region
along with competition from smaller seed companies is leading to
inventory pile ups .The Govt's price intervention is also adding wounds
and creating an uncertainty over the overall agri seed business outlook.
*There is also some royalty payments issue with Monsanto (technical
know-how partner). As par reports, for every bag of cotton seeds KSCL
sold (around 900-930), it has to pay royalty @120 to Monsanto. But KSCL
is paying Monsanto @20 only as par directive from Telangana(TGN) Govt.
TGN also issued a directive not to increase cotton seed prices because
of weak monsoon. A case in this regard is pending in TGN HC and any
adverse ruling from there could cost the KSCL around Rs.64 cr for which
the company had not done any provisioning in its books of accounts so
far (Q2FY16). This is a significant risk as that could cost the company
around 15% estimated EPS (FY:16/17).*
All the above issues had led to earnings downgrade by analysts and the
scrip reacted so much !! But having said this, the scrip might be
discounted to a great extent for the above set of negative news, going
be the price action for the last six months.
*Looking ahead:*
KSCL is taking various proactive steps for better business in other agri
products, having excellent demand potential with better margin reducing
dependence on cotton seeds.
The Monsanto case will ultimately be decided in the highest judiciary
(SC) and there will be ample time. Also as the State Govt and farmer's
issue is involved here, the Govt might consider some subsidy in this
royalty issue here to ensure proper supply along with required quality.
With softening of bank interest rate, we may see overall expected
economic growth, better infrastructure which may be also helpful for
our rural economy and agri sector in the coming days.
Global commodity prices is perhaps bottoming out and we may see better
commodity prices including agri commodity in the days ahead.
Thus, investment in KSCL may not be a bed idea at this stage.
*As par BG**metrics:*
*Current median valuation may be around:**500*
*Projected fair valu**ations might be around:550-600-700 (FY:16-18)*
SCRIP EPS(TTM) BV(Act) P/E(AVG) LV SV MV
200-DEMA 10-DEMA
KSCL 42.26 109.88 10 553.07 432.09 492.58 723.82 441.79
KSCL 51.5 158.25 10 610.55 476.99 543.77 723.82 441.79
KSCL 61.7 221.55 10 668.28 522.10 595.19 723.82 441.79
KSCL 84.25 310.15 10 780.91 610.09 695.50 723.82 441.7
*Technical Charts:*
<http://1.bp.blogspot.com/-2oO11gkDY5E/Vgs4Dwgp2qI/AAAAAAAAEIE/t2JhxQghmmw/s1600/KSCL-28-09-2015.png>
<http://2.bp.blogspot.com/-VXCpcLti6Ck/Vgs4FtjWQ_I/AAAAAAAAEIM/4A5_AMFpH-8/s1600/KSCL-FIBB-28-09-2015.png>
<http://4.bp.blogspot.com/-AIM518XwmhI/Vgs4JaXY4AI/AAAAAAAAEIU/ty6W0HZqPBw/s1600/KSCL-WK-28-09-2015.png>
<http://3.bp.blogspot.com/-pWkZbz7M8x0/Vgs4Kxl3UsI/AAAAAAAAEIc/r2rT09sMcuQ/s1600/KSCL-PATTERN-28-09-2015.png>
<http://3.bp.blogspot.com/-9jptHwnrYxw/Vgs4MflTZII/AAAAAAAAEIk/lqbEgfydpeM/s1600/KSCL-TL-28-09-2015.png>
**
--
Thanks & Regards,
Asis Ghosh
(asisghosh.blogspot.in)
NCFM-TA Certified
--
Kindly email stock reports at
STOCKRESEARCHER@googlegroups.com
For sharing knowledge
-- NIFTYVIEWS.COM NOW A FREE OPEN SOURCE WEBSITE.
http://www.niftyviews.com/
Disclaimer :-
"The opinions expressed by the members on this board are based on
their individual experience and perceptions and to share information
with other members with the best of intentions to help fellow members
in investment decisions as equity investment is a risky venture.The administrator of
www.Niftyviews.com just provide a platform for the authors to express their opinion
and take no guarantee for the genuineness of the same."ANY member of this forum
doesnt prepare or publish any research report; or ii. provide research report; or
iii. make 'buy/sell/hold' recommendation; or iv. give price target;
---
You received this message because you are subscribed to the Google Groups "Niftyviews.com" group.
To unsubscribe from this group and stop receiving emails from it, send an email
to stockresearcher+unsubscr...@googlegroups.com.
For more options, visit https://groups.google.com/d/optout.