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Kaveri Seeds: Should the Buy Back Lure You? - Views on News from Equitymaster
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Kaveri Seeds: Should the Buy Back Lure You?
Apr 19, 2017

Kaveri Seeds announced the results for third quarter of financial year 2016-2017 (3QFY17). The topline de-grew by 2.7% for the third quarter and fell by 6.8% for the first nine months of the fiscal. Profits fell by 70% YoY and 9% YoY respectively in 3QFY17 and 9mFY17. Here is our analysis of the results.

Performance summary
  • Sales dropped by 6.8% in 9mFY17 on the back of lower volumes. While overall cotton seed volumes in India declined by 15% YoY, Kaveri volumes moderated by just 4%. Maize volumes were up 20% YoY. Cotton sowing was below normal and overall acreage decreased by 12 % YoY. The states of Andhra Pradesh and Telangana were worst affected. Increased thrust by some state governments on non - cotton crops vis-a-vis cotton crops impacted cotton acreages in FY17.
  • Operating margins dropped from 29.2% to 26.2% over the past year primarily due to cap on selling price of seeds and higher input costs.
  • The company has proposed buying back of 2.9 m shares representing 4.3% of the company's equity capital. The buyback will be at Rs 675 per share and utilize almost one-third of the company's cash balance.

    Consolidated fainancial snapshot
    (Rs m) 3QFY16 3QFY17 Change 9mFY16 9mFY17 Change
    Total income 698 679 -2.7% 6,754 6,295 -6.8%
    Expenditure 535 645 20.4% 4,782 4,646 -2.8%
    Operating profit (EBDITA) 163 34 -79.1% 1,973 1,650 -16.4%
    Operating profit margin (%) 23.3% 5.0% 29.2% 26.2%
    Other income 24 101 318.7% 74 326 339.1%
    Interest 0 0 33.3% 1 1 -33.3%
    Depreciation 76 69 -8.7% 180 219 21.7%
    Profit before tax 111 66 -40.8% 1,865 1,755 -5.9%
    Tax -7 30 39 99 157.9%
    Profit after tax/(loss) 117 35 -69.8% 1,827 1,656 -9.4%
    Net profit margin (%) 16.8% 5.2% 27.0% 26.3%
    No. of shares (m)# 69.1
    Diluted earnings per share (Rs) 23.0
    P/E ratio (x) * 23.9
    *Based on trailing 12 month earnings
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