Hi Jhon Azhar,
I follow Mangalam Seeds, and to be frank, there are some concerning signs alongside positive developments. It feels like management could be more transparent.
Firstly, their financial reporting changed. Previously, production expenses and stock purchases were separate. Combining them this year makes it hard to analyze margin changes.
Secondly, recent results might be outliers. Seed companies like Kaveri Seeds and Bombay Super typically see stronger sales in June and December quarters, with March and September being weaker. Mangalam Seeds’ 37% margin last year seems unusually high.
Thirdly, margins have dipped in the last two quarters. It seems they might be prioritizing growth over margins, which wouldn’t be a bad strategy in itself. However, unlike competitors experiencing sales growth, Mangalam Seeds’ sales are down year-on-year, suggesting they’re losing market share even with lower margins.
On a positive note, two new additions – Kena Print (subsidiary) and Sharayu Mangalam Seeds (associate) – have significantly boosted consolidated results. These outperform the company’s other four subsidiaries. However, an investment in Sharayu instead of a full acquisition raises some questions.
Overall, Mangalam Seeds seems to be on a growth trajectory, but potentially with lower margins. Management focus might be shifting towards developing Sharayu. Additionally, their reliance on debt for growth is concerning, especially considering potential interest rate hikes and their negative cash flow from operations.
In conclusion, Mangalam Seeds presents a mixed picture. Their performance in the upcoming June quarter, typically strong for the seed industry, will be interesting to watch.
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