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Shares of Kaveri Seed Company were trading nearly 6% higher in Wednesday’s early deals to ₹610 per share on the BSE after the company informed that its board of directors at a meeting on August 25 will consider a proposal for buyback of the equity shares of the company.
For the quarter ending June (Q1FY22), Kaveri reported revenue and net profit decline of 12.5% and 30.9% year-on-year (YoY), respectively. EBITDA margin declined 820bps YoY due to higher input prices and negative operating leverage. During Q1FY22, the cotton seeds and maize volume declined 28.9% and 18.3% YoY, respectively. However, hybrid rice volumes registered strong growth of 33.1%, YoY.
Cotton business reported revenue decline of 27.5% in Q1FY22 and Kaveri witnessed increase in sales-returns and writeoffs. ICICI Securities in a note said that sales of cotton seeds were affected by likely increase in usage of counterfeit/ illegal seeds and reduction in acreage.
“Kaveri has created strong value (FCF) over the past decade and we remain positive on medium-term growth outlook. We model the company to report revenue and PAT CAGRs of 6.5% and 10.2%, respectively, over FY21-FY23,” it said. The brokerage has maintained its Buy rating on Kaveri Seed stock target price of ₹706 per share. ICICI said that key risks are sharp increase in competitive pressures and steep increase in input prices.
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