11 OCT 2013
NOT RATED
MONSANTO INDIA
CHEMICALS & FERTILIZERS
CMP
Potential Upside
Relative to Sector
: Rs 664
:: N.A
MARKET DATA
No. of Shares
Free Float
Market Cap
52-week High / Low
Avg. Daily vol. (6mth)
Bloomberg Code
Promoters Holding
FII / DII
Key takeaways:
:
:
:
:
:
:
:
:
17.2 mn
28%
Rs 11.4 bn
Rs 746 / Rs 560
4,058 shares
MCHM IN Equity
72%
0.1% / 2%
Resource crunch: (a) A large part of agricultural land is lost out to industrialization and housing, (b) labor costs are
rising at ~15% CAGR over past 5 years, (b) depletion of ground water, and (d) soil quality continues to deteriorate
(16 nutrients decide agriculture and India is deficient in more than half)
Rising income and prosperity will result in food demand doubling over the next decade there is a change in
consumer behavior and shift in dietary pattern (rising income level will drive higher consumption of dairy products,
edible oils, vegetable/ fruits, meat/ fish/ poultry/ eggs)
Hence mechanization and new technologies are a must: Opportunities for companies like Monsanto which are in
innovative seed research, crop protection, nutrition and mechanization
Key drivers
FY10
FY11
FY12*
FY13
4,102
3,364
3,738
4,424
541
540
483
678
(10.5)
40.4
EPS (Rs.)
62.7
62.6
28.1
39.1
P/E (x)
27.2
30.8
24.0
17.0
RoE (%)
16.1
14.9
13.2
17.1
RoCE (%)
17.6
17.2
15.7
18.4
EV/EBITDA (x)
20.5
26.8
16.2
11.2
DPS
17.5
20
20
22
(%)
Revenue growth
91 22 4325 1146
FY13
-18
11
18
-11
40
Price performance
140
120
Sensex
Monsanto India
100
80
60
Oct-12
kashyap.pujara@axiscap.in
FY12
PAT growth
FY11
Jan-13
Apr-13
Jul-13
Oct-13
91 22 4325 1105
01
11 OCT 2013
Visit Note
MONSANTO INDIA
CHEMICALAS & FERTILISERS
Seeds and biotech sector: Hybrid seed market (where Monsanto has strong
presence) is set to double to Rs 140 bn in next 7-10 years. Technology and
research are critical for improving seeds. Monsanto, a global leader, has
access to germplasm
About Monsanto
Monsanto in India since 60 years: The parent company, based out of US, is
present in over 500 global locations with 21,500 employees. The group company
generated total revenue of USD 13.5 bn with ~75% of that from seeds and
genomics for crops (corn, soybean, cotton and vegetables) and the remainder from
herbicides for agricultural productivity. In India, the Monsanto group operates
through 3 entities i.e. (1) the listed entity Monsanto India Ltd (MIL) which is
primarily involved in Maize seeds and Herbicides; (2) 50:50 JV between Mahyco
and Monsanto Holdings Pvt. Ltd known as Mahyco Monsanto Biotech (MMB)
which is sub-licensed to distribute BT cotton technology in India; and (3) Monsanto
Holding. MIL is present in nearly all areas of crop in India (expect soya).
Company has built significant infrastructure in India: Seven R&D Seed Breeding
Stations in Abohar, Aurangabad, Bangalore, Dharwad, Ghaziabad, Kallakal,
Sonepat. Corn Seed Drying & Processing Plant in Hyderabad. State-of-the-art QA
Seed Testing Laboratory and AgroChem facility, Silvassa. Seed breeding is done
on 300 acres of farm land and seed production on 40,000 acres with the help of
21,000 growers and rural laborers.
02
11 OCT 2013
Visit Note
MONSANTO INDIA
CHEMICALAS & FERTILISERS
Besides corn (60% penetration) and cotton (which have adopted BT seeds), yields
for other crops have remained stagnant over past 2 decades. To develop a seed
like BT cotton, over USD 150 mn is required with at least 8-10 years of R&D. Given
the level of investment, Monsanto has introduced global products in India.
Exhibit 1: Except for cotton and corn, yields of most other crops in India have remained flat
Cotton
210
Corn
Rice
Wheat
Pulses
Soy
Sugarcane
(Index yield)
180
150
120
90
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
60
Source: Company
Exhibit 2: Resources like labor continue to be constrained with cost increase over the past
few years, necessitating better use of technology
Last 5 Year
CAGR ~15%+
Source: Company
03
11 OCT 2013
Visit Note
MONSANTO INDIA
CHEMICALAS & FERTILISERS
Source: Company
Exhibit 4: Higher yield for corn by use of better seeds and technology
Source: Company
04
11 OCT 2013
Visit Note
MONSANTO INDIA
CHEMICALAS & FERTILISERS
Exhibit 5: Advancement in agri-biotech leapfrogging Americas agriculture; India may emulate in future
Conservation tillage,
better soil, less f uel,
better protection, better
yield
Ef f icient use of
f ertilizer, less is lef t in
the soil to f orm
greenhouse gases or
to run of f into
waterways.
Direct yield
increase by
boosting intrinsic
capability
Higher Yielding
Nitrogen Utilization
Drought Tolerance
Herbicide Tolerance
Insect Protection
Commercialized
Middle of decade
End of decade
and Beyond
Source: Company
05
11 OCT 2013
Visit Note
MONSANTO INDIA
CHEMICALAS & FERTILISERS
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