JK AGRIGENETICS - TREASURE HUNT

JK AGRIGENETICS  is a member of JK group companies

established in Hyderabad in 1989. Earlier it was

part of JK Tyre and Industries and later de-merged

into a separate company.This 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. Products are selling under the

brand name 'JK SEEDS'.Company is collaborating

with various national and international

agricultural universities for bringing latest

technology in seed development.In 1999

company set up a Bio tech lab of international

standards at Hyderabad with 15 scientists .

Its Hyderabad plant having a capacity to process

100 ton seeds per day. Company is selling seeds of Cotton,Bajra,Maize,Jowar,Paddy ,Sunflower,

Castor,Mustard,Wheat,Redgram and Soyabean.It also

producing seeds of vegetables like Tomato,Bhendi,

Chilli,Bottle Gourd,Water Melon,Radish,Cabbage,

Sweet Corn,Cucumber and Coriander.Company has

recently started production from Phase 2 of its

new seed processing plant in March 2010.

Due to adverse climatic conditions company's sales

badly affected in last year and company posted

huge loss.It is expected to perform better ahead.

THE REAL ATTRACTION

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In 2006 ,company planned to de-merge  into two

- Seed division and Investment division . When we dig deep

into the investment division it is amazing to see the

value in it.This division holding shares of JK Lakshmi

Cement(Total current Market value Rs.45 - Crore),JK Paper

(Rs.38 Crore) ,JK Tyre( Rs.99 Cr.) ,Umang Dairies (Rs.3 Cr),

Bengal Assam Company ( Rs.13 Cr).Other than this it also

holding shares in unlisted companies like Fenner India,

Udaipur Cement,Florance Alumina ..Etc. All together its

investment portfolio worth over Rs.200 Cr in current

market price. Remember, its total shares issued are

only 3,506,510 and when we divide its investment

portfolio for these share ,what should be the value

of each share of JK Agri.(Approx.Rs.570/- each) Anyway

company's plan was to de-merge it in a manner so as

a share holder will get 60 shares of seed company and

40 shares of Investment company. Company's proposal was

earlier rejected by Court due to complaints by some

share holders, and company now filed an appeal to the

division bench .This petition is expected to come for

hearing in this month itself . It is expected that Company

is planning to de-list the investment company after

de-merger . I believes If such a reverse book building

happens ,one can recover entire investment (at current

rate) by just surrendering the shares of investment

company alone and keep the shares of seed company

cost free. In nut shell at CMP of Rs 170/- you are

getting a company from JK group operating in a high

potential Agri sector plus part of 200 Crore investment

at a market capitalization of just 59 Crore.

KAVERI SEED COMPANY -Future Perfect.

KAVERI SEED COMPANY – is one of the very few pure

listed  Indian  companies from hybrid seed sector.

Others from this sector are JK Agrigenetics ,Rallis,and

Advanta . Apart from these  other listed firms are

affiliates of foreign players like,Monsanto, Bayer

..etc. Kaveri Seed is a well managed Secunderabad

based firm promoted by Mr.GV Bhaskar Rao in 1976.

Company has grown a lot after that and now it is one

of the largest hybrid seed producer from South

India .Its product portfolio include seeds of

Corn, Cotton, Sorghum, Pearl Millet ,rice ,sunflower

and a wide variety of vegetables.Company also producing

various types of micro nutrients, plant hormones ,

bio-stimulants for different crops.Kavari also

producing organic plant protector under the brand

name ‘FIRE’. Other than this, company has a lot of

organic products to enhance yield from crops.

Recently Kaveri started operations in its  state

of an art facility for cob drying, seed processing

and cold storage which established in its owned 

farmland of 29 Acres in Medak district of Andhra

Pradesh. It added Red gram, onion, mustard and wheat

to is portfolio recently . This pure Indian player has

a very energetic R & D wing and introducing new

verities which can give good result even in bad

conditions like draught. Now in southern states of India

like Tamilnadu,Andhra and Karnataka ,precision farming is

gaining momentum and it is experienced as a great success.

This method requires hybrid seeds and scientific methods

of farming which is expected to bring big business to Kaveri.

                        In the financial front ,Company

is growing steadily and posted a turnover of Rs. 169 Cr

and a net profit of Rs.29 Cr in last financial year.

EPS for FY 2010 is Rs.21.20/-. Backed by good monsoon

compared with last year ,Kaveri is expected to post even

better result in this year. Its business is seasonal

and 90% income generated in first qtr.Company has an

equity base of Rs.13.7 Cr and out of this 63% is held

by promoters and 26 % by big investors including mutual

funds .Even from a low floating stock, promoters are

again buying from open market. In nutshell, with a clean

and dedicated management and excellent R & D Wing Kaveri

Seed  is a company to reap the benefits which is expected

to emerge in Farming sector ,going forward.This one stop

company for hybrid seed ,organic fertilizer and organic

pesticide  is quoting around Rs.272/-

PUNJAB CHEMICALS AND CROP PROTECTION-Patience will Pay Off

Punjab Chemicals and crop protection is a member
of Shroff group headed by Shalil S Shroff.
Company has operations through various divisions
like Agro Chemicals, Pharmaceuticals, Industrial
Chemicals ..etc .In agrochem sector, company making
various types of Herbicides, Pesticides and
Fungicides.PCPL’s 75% income coming from
agrochemicals 10% from Pharmaceuticals,10% from
industrial chemicals and rest from international
trading. Company has also presence in bio
pesticides and seed Inoculants.Company has four
international subsidiaries SD Agchem (Europe) NV,
AgriChem B.V Netherland,SINTESIS QUIMICA S.A.I.C
Argentina,and Source Dynamic LLC. All these acquired
companies are not very small ones .Company’s products
are also exported to 60 countries worldwide. PCPL is
the words largest producer of oxalic acid and
derivatives used in agrochemical industry and
exporting it to clients like Syngenta and Dow
Chemicals.Company’s last year was a disaster due
to various reasons like bad performance of
subsidiaries abroad due to recession, one of the
worst monsoon season in India and most importantly
a fire at its Herbicides unit in Mohali ,Punjab.
But now most of the problems are solved and company
is expected to post encouraging performance going
forward. As an indication of this ,promoters are in  a buying spree
from open market in recent times.
At CMP of Rs.135/- it is a good BUY for real investors.

AGRICULTURE / FARMING - THE NEXT BIG ' THEME ' IN INDIA ?

Different ‘themes’ catching up in any stock market time to time,

and company’s from such sectors giving many fold returns in

short period. In India ,earlier it was IT, then Real Estate

(based on land bank stories), again Power, Education,

Bio technology …etc. A common feature in all these times are

,lot of companies changing their name to add such hot ‘tags ‘ along

with their name to lure retail investors in order to rig the  price

easily  and then offload their own shares to public at higher rate

and make money. Most of these chameleon companies may not

have any relation with such new ‘themes’ other than its names .

So even if that theme really works ,price of  such name changed

companies will not  sustain at higher level when people realize

the facts. What I mean is  , don’t buy a stock  only because

of its name but do  some basic  home work to ensure that the

particular company have at least some operations in such high

potential ‘theme’ sectors.                

          Considering the thrust of government ,changing lifestyle

and disposable income level - ‘Agriculture’,  to more specific

‘Farming’ is considered as the next big theme in India.

All allied businesses of farming are expected to get re-rated

in future which include Micro Irrigation , Seeds,

Agrochemicals, Bio fertilizer, Pesticides, Micro nutrients etc.

(Since the prices of most of the fertilizers other than Bio

fertilizers are  under govt control in India  , this sector may

not out perform) .In the first leg , till farming developed in   a

corporate level and production of such agri products improve

substantially  ,companies processing these agri products

without proper backward integration may face stiff margin

pressure. In order to avoid such a contraction  in

margins , food processing companies should go for

farming and produce - what they need.

              Unfortunately most of our listed players with ‘AGRO’
tag are merely processors of agri products after procuring the
same from farmers. So when we look into investment
opportunities in agri related company’s  ,we should clearly
distinguish  whether the company is in farming and  related
sector or only in agri processing sector. If it is in agri
processing sector only , it may enjoy a valuation which is
available for food processing sector now and not get a
premium as in the case of  farming may get in future. Needless to
say ,JAIN IRRIGATION is the undisputed beneficiary 
( by all means ) of improved activity in farming related sectors
 and it is difficult to imagine another company in near future in
its place due to its top class management , aggressive and
 inorganic growth plans , and integrated status. We have
already discussed some other companies like Aries agro ,
Rungta Irrigation ..etc in past  and expected to bring few
more companies to your attention in coming weeks.
So before catching anything with ‘AGRO’ tag –Think twice                        

SUKHJIT STARCH AND CHEMICALS - BUY

Sukhjit starch and chemicals is one of the largest

manufacturer of starch and starch derivatives in 

India. Company has four units one each in Punjab,

Andhhra Pradesh,West Bengal and Himachal. 

Company’s products are widely used in industries

like Confectionery, Bakery ,Preserved food,

Baby foods,Ice creams..etc. All of these

industries are closely related with direct

consumer spending. Company is a preferred

supplier of well known firms like Wrigley

India Ltd., Dabur India Ltd., Perfetti

India Ltd.,Godrej,  Parle, and  Cadbury.

Citing the vast scope in consumer industries,

company is now planning to start another

Greenfield plant near the existing site at

West Bengal with a capital outlay of Rs.50 Cr.

Entire amount for the expansion will be funded

through term loans and internal accruals.

For the last financial year company posted a

turnover of Rs.259 Cr and a net profit of

Rs.15 Cr with an EPS of Rs.20/-. Sukhjit also

declared a dividend of 60% for its Rs.10/-

FV shares.It is expected to perform even

better in coming years. Open market purchase of

shares by promoters are also a positive factor.

A decent medium to long term BUY at current level

of Rs.169/- which is at a price earning multiple

of 8.5. Keep an eye on maize prices which is the

raw material of the company and prone to

wild fluctuations  due to monsoon effect.