Multidisciplinary analysis on Kaveri seeds:-
lollapalooza effects:-
All Bad things happening at the same time.
1.Monsanto incident of paying 66 cr if only 2015 is considered and more than 100 cr if royalty is revised and paid from 2010.
2. Bad monsoon in 2016.(~40- 50%)
3. China crash caused further fall.(~17%)
Maths:-
What is the probability if all this incidence can happen in the same time again and built so much pessimism in the stock:-
Very low.
Q:-If we look the business prospects for next 5 years, will all this problems will be ironed out?
Yes.
Monsanto problem:- It has cash reserve of ~3 billion so it can solve the problem even in worst case.
Monsoon:- It was bad this year can be good next year not sure of this but with reversion of mean it is quite possible it can be good in coming years.
China crash:- Not possible again to happen with above incidences.
Control systems:-
What are the forces/ variables which are working together which can help the stock price to rise?
1. Cultural dominance:- GMO crops has been adopted rapidly in all advanced nations and it will be as well be adopted in India. The portfolio of corn/rice/maize etc of kaveri seeds can help it grow it further. The government has started to work on second green revolution and implement policies to do the same.There were certain news which were in that direction.
2.Surfer Wave Theory:- GMO crops under cultivation has increased by 100 times starting from 1996. kaveri seeds are riding the surf with good business economics and fundamentals.It is quite possible it can create wealth for investor who surf rides early on that.
3.There are many macroeconomics principles or force which help the company to use their product as we can see it in advanced nations like America where I believe if not wrong 96% crops under cultivation are GMO. They have definitely building their moat of crops along way with surf and maintain their earnings.Just as a side node value investor Kahn also invested in Monsanto in 2000 time frame some time.
4.Companies expansion to North India. New portfolio of crops like rice is making less dependence on cotton.
Moat in the company which is not destroyed currently :-
1.Economics of scale.
2.Habit with farmers.
3.On supply side is Portfolio of crops.
Big Risk:-
1.Promoters Focus shifting to other initiatives and if they destroy above mentioned moat.
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