Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kaveri Seed Co Ltd (BOM:532899, Financial) reported significant growth in maize and rice volumes, with maize volumes increasing by 97% and revenues by 80%, and hybrid rice volumes increasing by 10% and revenues by 17%.
- The company successfully introduced new products, with the contribution of new products in Bajra increasing from 67.67% to 75.79% and in maize from 40% to 52%.
- Export business sales saw a substantial increase of 451.73% compared to the same quarter last year.
- The company is optimistic about future growth in maize and rice due to increased sowing areas and favorable market conditions.
- Kaveri Seed Co Ltd (BOM:532899) has a diversified portfolio, which helps mitigate risks associated with individual crop performance.
Negative Points
- Cotton volumes and revenues experienced a significant decline, with volumes down by 35% and revenues by 27%.
- The company faced production constraints due to pest infestations and unfavorable weather conditions, impacting the availability of popular hybrids.
- The cost of production has increased, and the company was unable to pass on these costs to farmers due to government price controls, particularly in the cotton segment.
- The company's earnings are highly seasonal, with the first quarter being the most significant, which can lead to revenue fluctuations throughout the year.
- Despite the overall growth, the company anticipates only a 5% to 7% increase in profitability for the year, falling short of the previously guided 15% to 20% growth.
Q & A Highlights
Highlights of Kaveri Seed Co Ltd (BOM:532899) Q1 FY25 Earnings Call
Q: Last quarter you had guided for a 45% volume fall in cotton, but volumes have fallen by 35%. What caused this fall and what is your guidance for the year?
A: The cotton acreage was down by 10% across the country, with a steeper fall in Northern India. Additionally, there were production issues and a surplus supply in the market. We are not expecting significant cotton sales in the upcoming quarters. β Chennameneni Chand, Whole-Time Director
Q: What are the revenue growth targets for the next few years?
A: We anticipate a growth of 10% in terms of the top line and 15% to 20% in the bottom line over the next 5 to 10 years. Despite challenges in cotton, we have managed to grow in other segments like maize and rice. β Chennameneni Chand, Whole-Time Director
Q: How will the new BT cotton variety approval impact Kaveri Seed?
A: We are optimistic about the approval and are well-positioned to benefit from it. This could lead to a significant increase in market share and growth in the cotton segment. β Chennameneni Chand, Whole-Time Director
Q: Can you provide an outlook on the demand for your products over the medium term?
A: We see good growth in maize, rice, and vegetables. The maize area is increasing due to government initiatives for ethanol projects, and hybrid rice adoption is rising. Cotton acreage is expected to stabilize and grow in the medium term. β Chennameneni Chand, Whole-Time Director
Q: What is the expected CAPEX for FY25?
A: We plan to spend INR 40 crore to INR 50 crore annually on CAPEX, focusing on increasing volumes in other crops and investing in R&D. β Chennameneni Chand, Whole-Time Director
Q: How do you see the export market evolving for Kaveri Seed?
A: We are targeting African and Southeast Asian countries and expect exports to grow faster than our normal growth. Currently, exports are 4% to 5% of our total revenue, and we aim to increase this to 10% in the next three years. β Chennameneni Chand, Whole-Time Director
Q: What are the R&D spends expected for FY25?
A: R&D expenditure will increase by 15% from last year, with a focus on developing new hybrids and improving existing ones. β Chennameneni Chand, Whole-Time Director
Q: How do you plan to manage the seasonality in your business?
A: While the first quarter will remain the major quarter due to monsoon-driven agriculture, we expect the percentage of revenue from the first quarter to decrease over time as we diversify our crop portfolio. β Chennameneni Chand, Whole-Time Director
Q: What is the impact of new government-released seed varieties on Kaveri Seed?
A: We rely on our in-house R&D and are confident in our pipeline hybrids. The new government-released seeds will not significantly impact our business. β Chennameneni Chand, Whole-Time Director
Q: How do you see the pricing dynamics in the seed industry?
A: Farmers are willing to pay a premium for high-quality seeds that offer better yields. We price our products competitively, considering the performance of our hybrids and the prevailing market conditions. β Chennameneni Chand, Whole-Time Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
