Stock Watchlist – Agriculture

Budget 2016 has set a clear mandate from the government to invest and improve the farming sector. This is definitely a very encouraging move as a citizen of the country as this sector feeds the nation. Shri. Lal Bahadur Shastri had coined the slogan “Jai Jawan, Jai Kisan“. I don’t think we can live peacefully in a country without either of them.

As an investor, I am interested in growing my investment and reaping benefits of the same over a period of time. If I am able to invest into the farming or agriculture sector and yet reap the benefits as a true investor, then it’s absolute sone pe suhaga. Some discussions with friends encouraged me to take up an exercise to identify potential sweet deals in Agriculture and related sector that could make it’s investors wealthy and happy.

The following is a selection of stocks which will be part of my watchlist going forward. I intend to invest them over a period of time and will make my investments public as and when I do that.

Disclaimer: I don’t hold investments in any of the stocks below except Kaveri Seeds.

Tractors – VST Tillers & Tractors Ltd:

  • P/E: 17
  • Div Yld: 1.03%
  • Good OPM: 18%
  • NPM: 12%
  • ROCE: 30
  • Zero Debt
  • 53% Promoter holding
  • Only 3 players – Profit to Sales: 12.5%
  • Much better numbers compared to Escorts whose OPM is 4%, NPM is around 2% with some debt
  • Prompt Tax payment @ 30%
  • Excellent ROE
  • Bangalore headquartered – Pass it’s HQ everyday on my way to work !!!

Agro-Chemicals – Dhanuka Agritech:

  • OPM: 16%
  • NPM: 13%
  • ROCE: 30%
  • RONW: 25%
  • Almost debt free
  • 75% promoter holding
  • 3rd amongst peers

Fertilizers – Coromandel International:

  • P/E: 15
  • Div Yld: 2.58%
  • Promoter Holding: 62%
  • ROCE = RONW: 18%
  • Reducing Debt
  • Good Tax Payouts
  • Profit Growth has been bad last 3 years, but best of the lot in Fertilizers
  • WAIT AND WATCH in this sector as all companies have significant issues with profit growth

Seeds – Kaveri Seed Company:

  • P/E: 15
  • Div Yld: 1.92%
  • NPM/OPM: 27% – Improving YoY
  • ROCE = RONW: ~40%
  • Promoter Stake: 58%
  • Excellent Sales Growth, Profit Growth and ROE
  • NOTE: I am an existing shareholder and hence, my views on this company could be biased

Aquaculture – Avanti Feeds:

  • P/E: 12
  • Div Yld: 1.36%
  • OPM: 10%
  • NPM: 6% – Very low as a business
  • ROCE: 50%
  • RONW: 43%
  • Almost debt free
  • Promoter Stake: 44% – a little low for my liking
  • Amazing numbers in Sales Growth, Profit Growth and ROE
  • Wait and watch – May add in dips

These are my initial 5 stocks of interest. I am yet to look for other interesting areas, but will welcome any further suggestions on specific stocks or areas of interest.

Watch this space for more updates !!!

 

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