KRBL LTD: RICE COOKED WELL !!!

Scrip Code: 530813 / KRBL

CMP:  Rs. 377.25; Market Cap: Rs. 8,880.08 Cr; 52 Week High/Low: Rs. 388.80 / Rs. 174.00.

Total Shares: 23,53,89,892 shares; Promoters : 13,84,39,916 shares – 58.81 %; Total Public holding : 9,69,49,976 shares – 41.19 %; Book Value: Rs. 68.98; Face Value: Rs. 1.00; EPS: Rs. 15.19; Dividend: 190.00 %; P/E: 24.8 times; Ind. P/E: 25.71; EV/EBITDA: 17.57.

Total Debt: Rs. 1,160.45 Cr; Enterprise Value: Rs. 10,022.66 Cr.

KRBL LTD: The Company was founded in 1988 as a partnership firm, but incorporated as company on March 30, 1993 as Khushi Ram Behari Lal Ltd in Delhi. KRBL is a 120 year heritage and an in existence since 1889, KRBL Ltd. is India’s first integrated rice company with a comprehensive product chain. KRBL have experience of three generations in perfecting the Basmati grain. KRBL stands at top slot of the Indian Rice Industry, unmatched and unparalleled in every aspect. The company came with an IPO in 1995. The company has not declared any bonus shares yet. The company announced splits in its face value of shares from Rs. 10 to Re. 1 on December 17, 2009. KRBL Limited is an India-based basmati rice processing company. The Company is engaged in seed development, contact farming, procurement of paddy, storage, processing, packaging, branding and marketing of basmati rice. The Company's operating segments include Agri, which includes agricultural commodities, such as rice, Furfural, seed, bran and bran oil, among others, and Energy, which includes power generation from wind turbine, husk based power plant and solar power plant. KRBL manufactures agricultural products such as rice bran oil, furfural and de-oiled cakes. The husk is utilized to extract furfural and the bran used to produce around 50 tons of rice bran. It has a total bran oil capacity of 42 MTPD (metric tons per day) and furfural of 10 MTPD. The company’s milling and packing units are located in Ghaziabad (Uttar Pradesh), Dhuri (Punjab), Alipur (Delhi), Gandhidam (Kandla) and Dhulia (Maharashtra). Its integrated unit at Dhuri is one of the largest in the world with capacity of 150 MTPH (metric ton per hour). The company’s total milling capacity has increased to 198 MTPH in 2007. The company markets its products in India and overseas markets including the United States and the Middle East. In India, its products are marketed under the brand names: Royal, Zaffrani, Doon, Train, Al Wissam, Qiada, Al Bustan, Al Mithali, Indian Farm, Sun Flower, India Gate, Lion, India Gate, Nur Jahan, Aarati, Necklace, Bemisal, Shubh Mangal and Lotus, India Gate Classic, India Gate Super, India Gate White Organic, India Gate Golden and Doon Premium. It has its procurement network for basmati rice that spreads across Punjab, Haryana, Uttranchal and Uttar Pradesh. KRBL is also engaged in wind turbine and husk-based power plant power generation business. The company has 10.5 MW power capacity using rice husk as fuel and a 3.5 MW power plant in Ghaziabad. It has a 12.5 MW windmill in Dhulia, Maharashtra with a power purchase agreement with Maharashtra State Electricity Board (MSEB). The company is ISO 9002, Hazard Analysis and Critical Control Points (HACCP), KOSHER (approved by the Jewish dietary laws), and FDA (Food and Drug Administration) certified. The Company has two manufacturing units and one processing unit with a total capacity of 195 metric tons per hour. The Company’s Dhuri Plant in Punjab is the largest, fully integrated rice milling plant in the world with a capacity of 150 metric tons per hour and its Ghaziabad plant has existing capacity of 45 metric tons per hour. The Company has a wholly owned subsidiary, KRBL DMCC in Dubai. The Company's geographical segments include Sales within India and Sales outside India, including Middle East and Other than Middle East. It exports its products to Saudi Arabia, the United Arab Emirates, Iraq, Kuwait and Qatar. KRBL also engaged in trading of commodities. It operates in two business segments: agri and energy. The agri segment includes agri commodity, such as rice, pulses, seed, wheat, bran and bran oil. The energy segment includes power generation from wind turbine and husk-based power plants. The company is compared with Chaman Lal Setia Co Ltd, Kohinoor Foods Ltd, Lakshmi Energy & Foods, REI Agro Ltd, LT Foods Ltd, Usher Agro Ltd, Ajanta Soya Ltd, Navdurga Rice Mill and Globally with Riviana Foods Inc of USA, American Rice Inc of USA, Famers Rice Cooperative of USA, Ricetec Inc of USA, Riceland Foods Inc of USA, Farmers Rice Milling Company Inc of USA, Specialty Rice Inc of USA, MARS Incorporated of USA, Asia Golden Rice Co. Ltd of Thailand, Cargill of USA, Archer Daniels Midland of USA, Bunge of USA, Louis Dreyfus of France, Nakornton Rice Co Ltd Thailand, PAK Rice Village of Pakistan, Sunrise Foodstuff Joint Stock Company of Vietnam, AEDI’ S.R.L. of Italy, Tade BEVAR S.A. of Brazil, Sichuan Deyi Green Foods Group Co. Ltd of China.   

Investment Rationale:

KRBL LTD is India’s preferred Basmati Rice Company with a legacy spanning 120 years; KRBL is a global rice entity with a multi-brand presence both in domestic as well as in the overseas markets. A leading integrated industry player, the Company’s business philosophy is aligned to the heart of India with its quality rice, led by its flagship brand India Gate, made in the country’s heartland. The world’s largest Basmati Rice exports to 73 countries, KRBL’s business spans the value chain of rice, from the seed to the grain, across agro processing and marketing. Its rice milling capacity of 195 MT/hour, the largest in the world, lends it a distinctive edge, ranking it at the top of the industry. State-of-the-art storage and warehousing capacities, innovative marketing approach, expanding distribution network and strong R&D capabilities are the pillars of KRBL’s growth trajectory. The Company maintains robust and deep-rooted relations with farmers through a well-structured contact farming network, which has given the Company foundational strength. Backed by a strong brand equity and dealer network KRBL has an extensive geographical presence in the Middle East region, with Saudi Arabia, UAE, Kuwait, Bahrain, Iran, Iraq and Qatar among the key buyers of its Basmati rice. Over the years, the Company has also developed other popular rice brands, such as Nurjahan, Telephone, Train, Unity, Bawabat Al-hind, to meet the needs of different categories of consumers across regions. India is one of the major rice producing, consuming and exporting countries in the world. India continues to be the world’s largest rice exporter for the fourth consecutive year. India exports 30.1 % of total rice exports of the world around $6.4 billion followed by Thailand which exports 21.4 % of total rice export of the world of worth $4.5 billion. On third position it is USA who exports 9.7 % of total rice export of the world worth $2.1 billion. Pakistan exports rice worth $1.9 billion which has 9.1 % share in total rice exports of the world, Vietnam exports worth $1.6 billion with 7.5 % of total rice exports of the world. India has a significant competitive edge in rice exports due to combination of external factors, domestic market dynamics, high yielding and better paddy quality, low cost of paddy production and efficient execution of contracted business both from east and west coast ports of India. India’s rice industry has seen a transformation in the last decade, with growth of branded business in the domestic market and a strong impetus to export. This is reflected in the growth rates of leading Indian rice companies, with CAGRs ranging between 20 % and 30 % in value terms over the last four years. India is also the world’s largest exporter of Basmatic Rice to the global market with major destinations being Saudi Arabia, Iran, United Arab Emirates, Iraq and Kuwait. India is also the largest player in export of Non-Basmati Rice. Key markets in the non-basmati segment are Benin, Bangladesh, Senegal, South Africa, Liberia and Côte d’Ivoire. Indian rice industry has developed a strong position in exports, reaching 25 % of market share of global trade. The Government of India rolled out various policies in its Union Budget 2016-17 that aims to double rural income by 2022 and address critical factors hindering agricultural productivity in the country. These policies laid emphasis on water resources, soil fertility, input use and enhancing farmers’ access to markets. The “Pradhan Mantri Sinchai Yojana” schemes would fast track existing irrigation projects and bring an additional 10.9 million hectares of farmland under irrigation. Agriculture credit and storage capacity would be enhanced and a pilot programme for direct payments to farmers to assist them in fertilisers purchase would be implemented. According to the U.S. Department of Agriculture (USDA) Foreign Agriculture Services (FAS) report, that if the weather conditions remains normal then the rice production is forecasted to be at 105 million tonnes harvested from 44 million hectares as against with 103.5 million tonnes harvested from 43.46 million hectares in 2015-16. With the rice becoming staple diet for more and more people across the world and shift in preference for branded quality rice, the demand for Basmati Rice has been quite strong and will continue to remain so, on the back of rising income. In overseas markets, the only competition has been there from Pakistan as it is the only country other than India which grows basmati rice and exports the same. But, with superior quality and higher production, India continues to enjoy majority export market share. The demand for branded Basmati Rice has grown at CAGR of 20 % in past five years, driven by growth in domestic and exports market. India continues to be the largest exporter of basmati rice to the global markets with Saudi Arabia, UAE, Iran, Iraq and Kuwait being leading export destinations. Middle East remains leading export destination where premium basmati rice is widely consumed. As per report from US Department of Agriculture, global rice consumption has risen from 445 million MT in 2010-11 to 483 million MT in 2015-16 wherein export from India rose from 90mn MT to 97mn MT during the said period. During the same period, Indian basmati rice exports grew from 2.3mn MT to 3.8mn MT at CAGR of 13.4 % while domestic consumption grew from 1.2mn MT to 2.0mn MT at CAGR of 13.6 %. While Basmati Rice is consumed across the globe, West Asian countries account for 75 % of Indian Basmati rice exports in 2015-16. Within West Asia, Iran and Saudi Arabia are the two largest buyers accounting over 50 % of basmati rice exports from India. Data suggests that during 2011, unbranded basmati rice consumed was to 86 % as against 14 % branded rice; this has changed to non-branded rice at 74 % against 26 % branded rice during 2016. India accounts for 20 % of global rice consumption and 80 % of global basmati exports. Iran is the largest market for Indian basmati rice, with easing of sanctions by the UN, India did lose some market share but there was no impact on KRBL. Iran has been the fastest growing buyer for Indian basmati in the past three years. KRBL, with the largest and most modern milling capacities and R&D capability of Basmati Rice, is well placed to tap growth opportunity. The company enjoys more than 30 % market share in organized domestic market and 25 % share in export market. Over the years, the company has developed rice brands to meet the requirements of different categories of consumers. India Gate happens to be its flagship brand with two variants namely, Classic and Super having average realization of Rs. 72/kg higher than industry export realization of Rs. 54/kg. KRBL’s operating margin is likely to improve further as the company has procured low cost paddy and has strong inventory build-up. With brand recall, better processing setup and plants, well integrated and along with the Central government’s initiatives such as the ‘Rashtriya Krishi Vikas Yojana’ will help companies likes KRBL and the company can perform better coming future.   

Outlook and Valuation: 

KRBL Ltd (KRBL) history dates backs to the year 1889 in Faisalabad, Pakistan where the company was found, but was incorporated in 1993 in Delhi, KRBL is the world’s largest Basmati rice exporting company with multi-brand presence both in domestic as well as overseas markets. Over the years, the company has developed rice brands such as India Gate, Nur Jahan, Telephone, Train, Unity and Bawabat Al-hind to meet the requirements of different categories of consumers. Being an integrated player, the company also deals in value added by-products like Bran Oil and De-oiled Cakes. It has got Energy business vertical as well, wherein it uses rice husks for captive power plant. Its energy portfolio comprises of Bio-Mass, Solar and Wind energy. KRBL has strong presence in export markets with 51 % market share of Basmati Rice market of USA, dominant presence in Middle East and expanding its export base to Africa and Europe. The KRBL is ISO 9002, HACCP (Hazard Analysis and Critical Control Points), KOSHER (approved by Jewish Dietary Law) and FDA (Food and Drug Administration) certified. The company KRBL follows backward integration through partnership with farmers wherein the company encourages contract farming, makes available with high yielding seeds and provides intensive training on crop cultivation. Thus, the company is fully integrated across supply chain which enables it to focus on quality of produce and which ultimately helps improve realization for KRBL, which is around Rs. 72 per kg, much above average industry realization of Rs. 53 per kg. Basmati rice contributes to 97.5 % of total agri business revenue. KRBL came out with the strategy of contract farming in Punjab, Haryana and Uttar Pradesh wherein the company provides high yielding seeds including PUSA 1509 seeds and intensive training on crop cultivation which has been of great help in augmenting and procuring better quality paddy along with enhancing its market share for seed business. The strategy has worked in favour of farmers as well with acreage under cultivation has increased substantially from 60,000 acres in 2005 to 240,000 acres in FY15. Backed by strategic marketing initiatives, the company has come up with 6,90,000 outlets spread across towns and cities in the country. It has strong tie-ups with several domestic retail chains including Food Bazaar, Spencers, D-Mart Reliance Retail, Vishal Mega Mart, More, Walmart, Easy Day, Reliance Cash & Carry, Metro Cash & Carry and in local E-commerce to steer growth for KRBL. In order to capitalize on opportunity in renewable energy, the company has set up Solar Power Plants and Wind Power Plants at different parts of the country. Solar Power plant of 15 MW is situated in Madhya Pradesh whereas Wind power plants of capacity 87.05 MW are situated in different parts of the country including Maharashtra (33.50MW), Rajasthan (11.85 MW), Tamil Nadu (8.10MW), Karnataka (11.10MW), Andhra Pradesh (10.50MW) and Madhya Pradesh (12.00 MW). Wind Mills of 20.1 MW will be commissioned in Maharashtra shortly. Thus, energy segment is showing signs of greater traction thereby ensuring diversified earnings for the company. Also company has set up a Furfuryl Alcohol plant in Bhasaur, Dhuri dist. Sangrur (Punjab), at a total cost of Rs. 7 Cr. The commercial production of this Furfuryl Alcohol is expected to start shortly. On financial side the consolidated revenue for the 2nd quarter stood at Rs. 732.98 Cr from Rs. 918.76 Cr, when compared with the prior year period. During the 2nd quarter, net profit increased by 13.78 % to Rs. 98.41 Cr from Rs. 86.49 Cr in the corresponding quarter ending of previous year. During the quarter, EBIDTA stood at Rs. 153.06 Cr as against Rs. 140.18 Cr in the corresponding period of the previous year. During the quarter, PBT stood at Rs. 124.91 Cr as against Rs. 116.91 Cr in the corresponding period of the previous year. EPS of the company stood at Rs. 4.18 in Q2 FY17 against Rs. 3.67 in Q2 FY16. For 6 month period of FY17, net profit of KRBL stood at Rs. 178.82 Cr as compared to Rs. 166.65 Cr for the 6 month period of previous financial year. In H1 FY17, Net sales stood at Rs. 1533.32 Cr as against to Rs. 1941.71 Cr in H1 FY16. Operating Profit & PAT of the company are expected to grow at a CAGR of 11 % and 14 % over 2015 to 2018E, respectively. KRBL’s Current ratio points to soundness of health of the company in terms of its ability to meet its short term financial obligation. Growth trend is likely to remain up on the back of constant rise in demand, about 29.5 % likely fall in sowing of basmati seeds which may result into fall in production and corresponding rise in price, growing Basmati rice consumption demand in Middle East, Persian Gulf, Africa, US and Europe. KRBL, with the help of its subsidiaries and with the highest rice milling capacities, is well placed to capitalize on growing demand. Amidst growing demand of basmati rice as staple diet-domestically as well as globally, KRBL with the credibility of being the largest player in domestic and export markets and with highest milling capacities is well placed to boost its revenue growth. KRBL enjoys great brand recall, on the back of quality basmati rice and years of experience at industry place which result into its products attracting premium price. Given the backdrop of rising demand for branded basmati rice globally and domestically with wide network of distribution, KRBL is better placed to capitalize on opportunities. At the current market price of Rs. 377.25, the stock is trading at a PE of 22.78 x FY17E and 20.31 x FY18E respectively. The company can post Earnings per share (EPS) of Rs. 16.56 in FY17E and Rs. 18.57 in FY18E. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.

KEY FINANCIALS	FY15	FY16	FY17E	FY18E
SALES (₹ Crs)	3,159.69	3,428.13	3,085.31	3,239.58
NET PROFIT (₹ Cr)	321.73	337.06	389.90	437.17
EPS (₹)	13.67	14.32	16.56	18.57
PE (x)	21.72	20.73	17.92	15.98
P/BV (x)	5.27	4.30	3.54	2.94
EV/EBITDA (x)	15.50	14.89	12.16	10.74
ROE (%)	24.29	20.76	19.73	18.41
ROCE (%)	22.43	21.75	26.03	27.28

As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % on every purchase. (Why Strict stop loss of 8 % ?) -  Click Here

*As the author of this blog I disclose that I do not hold  KRBL LTD in my any of the portfolios.

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Disclaimer: 

This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible. 

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I confirm that I shall not deal or trade in securities mentioned in this article within thirty days before and five days after the publication of this article. I also confirm that I will not deal or trade directly or indirectly in securities mentioned in this article in a manner contrary to the ideas put forth in the article. I have not received any financial compensation for writing this article. 

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MONSANTO INDIA LTD : ACCUMULATE AT EVERY DIPS !!!

Scrip Code: 524084 / MONSANTO

CMP:  Rs. 1807.95; Buy at current levels.

Short Term Target: Rs. 1900.00; Medium to Long Term Target: Rs. 1988.00; STOP LOSS – Rs. 1662.85; Market Cap: Rs. 3,121.01 Cr; 52 Week High/Low: Rs. 2115.40 / Rs. 581.10.00.

Total Shares: 1,72,62,748 shares; Promoters : 1,24,54,044 shares –72.14 %; Total Public holding : 48,08,704 shares –27.86 %; Book Value: Rs. 236.01; Face Value: Rs. 10.00; EPS: Rs. 75.58; Dividend: 220.00 %; P/E: 23.87 times; Ind. P/E: 11.49; EV/EBITDA: 19.68.

Total Debt: ZERO Cr; Enterprise Value: Rs. 3,108.37 Cr.

MONSANTO INDIA LTD: Monsanto India Limited was founded in 1949 and is based in Mumbai, India. Monsanto India Limited operates as a subsidiary of USA based Monsanto Co. The company was previously known as Monsanto Chemicals of India Limited and later changed its name to Monsanto India Ltd in year 2000. The company came out with an IPO on February 1989 offering 3,40,500 equity shares of Rs. 10 each for Rs. 18 per share. The object of offer for sale was to reduce the equity holding in the company to 40 % or less. Monsanto India Limited engages in the production and sale of chemicals and hybrid seeds. The company operates through 100 year old brand which offers hybrid maize seeds under the Dekalb brand name acquired from Cargill in 1998; and glyphosate herbicide under the Roundup brand name. The company is also a manufacturer of Agricultural Chemicals. The Company’s segments include Seeds and Traits and Crop Protection. The Seeds and Traits segment consists of the Monsanto’s global seeds and traits business, and genetic technology platforms, including breeding, biotechnology and genomics. Monsanto India’s Dekalb is a hybrid maize seed. Dekalb has a diverse portfolio, which includes Dekalb 900M Gold, DKC 9081, Dekalb Pinnacle, Dekalb Super 900M, Dekalb Supreme, Dekalb I-lishell, Dekalb Double, Dekalb Prabal and DKC 9072. Roundup (a glyphosate-based product) is an herbicide, and the flagship brand of its Crop Protection Chemicals business. It has pioneered the chemical weed control concept in the country and is the market leader in the Rice herbicides which are marketed under the brand name MACHETE. It also markets LASSO a board spectrum herbicide and AVEDEX a herbicide used to protect wheat corp. In India, the Monsanto group operates through 3 entities i.e. (1) the listed entity Monsanto India Ltd (MIL) which is primarily involved in Maize seeds and Herbicides; (2) 50:50 JV between Mahyco and Monsanto Holdings Pvt. Ltd known as Mahyco Monsanto Biotech (MMB) which is sub-licensed to distribute Bio-Techonological cotton technology in India; and (3) Monsanto Holding. MIL’s team comprises of over 375 employees, a majority of whom are from rural backgrounds. In India the company is spread across Mumbai, Chandigarh, Eluru, Hubli, Kolkata, Coimbatore, Siliguri, Silvassa. The company’s R&D, Quality and Manufacturing Sites are: - Corn Seed Research Breeding stations at Udaipur, Bangalore and Jalandhar; A Biotechnology Research Centre at Bangalore; A Seed Processing Facility at Hyderabad; A Quality Assurance Laboratory at Hyderabad; A Chemistry Plant in Silvassa. MONSANTO INDIA Ltd is locally compared with Advanta Ltd, Camson Bio-Technologies ltd, Dhanuka Agritech Ltd, Kaveri Seeds Co Ltd, Sabero Organics Gujarat Ltd, Excel Industries Ltd, Punjab Chemicals and Crop Protection ltd, Rallis India Ltd, Insecticides India Ltd, Bayer CropScience India ltd, UPL Ltd, Bharat Rasayan Ltd, Meghmani Organics ltd and Globally compared with Monsanto Co of USA, Du Pont (E.I.) De Nemours (DD) of Delaware, FMC Corporation of Pennsylvania, Sumitomo Chemical Co Ltd of Japan, Syngenta AG of Switzerland, Vilmorin & Cie of Paris, Bayer Aktiengesellschaft of Germany, KWS SAAT AG of Germany, Sakata Seed Corporation of Japan, Yukiguni Maitake Co Ltd of Japan, Akikawa Foods & Farms Co Ltd of Japan, Hob Co Ltd of Japan, Hokuto Corporation of Japan, Kaneko Seeds Co ltd of Japan.

Investment Rationale:

Monsanto India is India’s largest selling hybrid maize seed brand company with 25 % market share. It operates through 100 year old brand called Dekalb acquired from Cargill in 1998. Over the last 2 years it has aggressively launched 7 to 8 hybrids seeds and is leading to regain of market share from players like Pioneer and DuPont which has market share of around 20 to 23 % each. Monsanto India currently derives 40 % of its revenues from products launched in last 2 years. This has not only helped Monsanto to gained market share in FY14, but also helped to reduce the age profile of its portfolio from 10 years in 2009 to 8 years in 2013. Monsanto has a very strong Rabi portfolio as compared to Kharif. The management plans to aggressively roll out newer hybrid products for Kharif, which was under the development since last 3 to 4 years and now driving margins. Over the last few years, operational efficiencies and consolidation measures has helped to reduced seed write off to less 7 % of revenues from average of 20 % for the last 3 years and reduction of sales returns by 15 % which in turn are driving growth. It is expected that the top-line to grow at 25 % CAGR and PAT at 30 % CAGR over FY14-16E. It is believed that the investment done in FY09-FY12 will start paying off for Monsanto India in terms of new product launches and market share gain. There is a huge potential and Scalability opportunity it has to offer over the long term from GM Food and RR Flex. Weeds are plants which can cause yield losses up to almost 60 % of the crop potential. Labour shortage, rising wages due to NREGA implementation and rising urbanization trends have accelerating demand for herbicides. Herbicides market in India is a very highly underpenetrated with its share in agro-chemicals standing at just 20 % as against global standards of 48 %. Glyphosate is a leading safest herbicide and accounts for 30 % of global herbicide sales and 70 % of Indian herbicide sales. Monsanto has around 60 % market share in the global US$ 540 Cr glyphosate industry and around 25 % market share in the Indian Rs. 800 Cr glyphosate industry selling products under the 'Roundup' brand. Monsanto enjoys a premium positioning in the market place with its glyphosate selling price at Rs. 340 per litre and competitors around Rs. 310-320 per litre. In FY14 cost for glyphosate has gone by 30 to 35 % leading to price increases of around 15 to 20 % to protect margins and drive growth.  In India, all companies can start the field trials for Genetically Modified food crops, once its approved by all bodies, thereby providing significant opportunities of newer growth avenues. Monsanto, Syngenta, Pioneer, Dow has been working on field trials across various crops prior to monotorium imposed by government and hence are much ahead of other competitors. MIL has been working on Roundup Ready® and Yieldgard® in- the-seed technologies to offer maize farmer's choice of superior insect protection, with convenient, flexible and effective weed management, to optimize maize yields. Currently Monsanto GM corn is currently at BRL2 stage and management has guided that it will take at-least 3 -4 years for commercial launch to happen. The initial research and trials suggest that Monsanto GM corn can increase yields by 20-40 %. This will lead to substantial re rating for the stock post its commercial launch. Monsanto's current technology of BT is likely to be replaced by RR Flex (BG 2 RR). RR flex has gone through RCGM and is awaiting final approval from GEAC. RR-Flex has trait of herbicide tolerance thereby negating chances of damage to crop due to usage of herbicide and also reducing labour cost. Monsanto India has 7 R&D Seed Breeding Stations, Corn Seed Drying & Processing Plant in Hyderabad, State-of-the-art QA Seed Testing Laboratory and AgroChem facility at Silvassa. It also has more than 300 acreages of farmer land available for breeding and around 40, 000 acres for seed production. It engages 21,000+ growers for seeds production.

Outlook and Valuation:

Monsanto India Limited is a subsidiary of Monsanto Company, USA and is the only publicly listed Monsanto entity outside USA. With a presence of more than six decades in India, Monsanto India is committed to help the Indian farmer produce more while conserving sustainably and be successful. Monsanto focuses on Maize under the brand name Dekalb, India’s largest selling hybrid maize seed brand and agricultural productivity products and India’s largest selling glyphosate herbicide. The company tries to boost crop productivity through its advance research in maize cultivation, access to a wide library of global maize germplasm, breeding technology and techniques, new high yielding hybrids seed, best in class manufacturing facilities extensive agronomic activities and on farm technology development. Monsanto India restructured its business in order to focus on seeds business in 2008. Post consolidation, the company had branded seed products, paddy hybrids and herbicides covering wide range of market segments. This consolidation also resulted in promoters share increasing in listed Monsanto India from 40 % to 72 %. Today, Monsanto had made Dekalb corn seeds and Roundup herbicide as its core business in India, in addition to the biotech traits business. Monsanto India is a now a market leader with 25 % market share with its 100 year old branded product Dekalb® which is also the India’s largest selling hybrid maize seed brand and the market share of other players like Pioneer has 22 % and DuPont having 23 %, Kaveri has market share of 14 % and Nuziveedu at 10 %. Monsanto currently has 17 to 18 hybrids and sells across in 18 major states of India. Around 90 % of the Corn is produced in 6 to 7 States namely TN, AP, Maharashtra, Gujarat, MP, UP, Rajasthan, Bihar for Rabi. Monsanto India started launching its own product line from FY08 onwards under the DeKalb brand. The revenues from herbicide business of Monsanto India now stand at 35 % which is expected to be 65 % for FY14. It is expected that the company’s topline can grow at 25 % CAGR and PAT at 30 % CAGR over FY14-16E. And the investments done in FY09-FY12 will start paying off for Monsanto India in terms of new product launches and market share gain. The company also a huge potential and scalability opportunity & it has many more to offer over the long term from GM food and RR Flex. At the current market price of Rs. 1807.95, the stock is currently trading at 17.28x FY15E and 13.45x FY16E EPS respectively. The company can post Earnings per share (EPS) of Rs. 104.60 in FY15E and Rs. 134.40 in FY16E. One can buy MONSANTO INDIA LIMITED with a target price of Rs. 1988.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 1900.00

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	442.40	581.90	741.10	910.80
NET PROFIT (₹ Cr)	67.30	137.90	180.60	231.90
EPS (₹)	39.00	79.90	104.60	134.40
PE (x)	41.00	20.00	15.30	11.90
P/BV (x)	6.80	5.50	4.30	3.30
EV/EBITDA (x)	37.10	16.80	12.40	9.10
ROE (%)	17.00	30.40	31.70	31.70
ROCE (%)	19.10	33.80	35.30	35.30

I would buy MONSANTO INDIA LTD for Medium to Long term for target of Rs. 1988.00 and for the shorter term the target would be Rs. 1900.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 1662.85 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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