4 KSCL share price target reports by brokerages below. See what is analyst's view on KSCL share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
Despite the miss in 2QFY20, we largely maintain our earnings estimates for FY20/21, given that ~75% of revenues are derived in the first quarter of a financial year. We value the company at 16x FY21E EPS and arrive at a target price of INR607. Maintain Buy.
At CMP of INR 462, the stock is trading at valuation of 12XFY20E and 11XFY21E earnings. We are valuing the company 14XFY21E EPS to maintain our target price of INR 578, maintaining BUY rating.Risks: Kaveri has high concentration risk and derives ~60% of its revenue from cotton seeds and lint. Most seed companies including Kaveri report their earnings as agricultural income; hence they don’t pay corporate tax. Anychange in tax law could adversely affect the company’s profitability and the return ratio.
Management guidance for cotton volumes in FY20 was robust at 7.2m packets (our estimate: 6.9m). We, nevertheless, cut our FY21 cotton volume estimate by 3% (keeping it same as that of FY20) due to lower visibility, which translates into an 8% earnings cut for FY21. The downside to our estimate is the non-renewal of KSCL’s license by the Andhra Pradesh government (got suspended recently for a year), which can impact FY20 revenue by 6-7%. Given this uncertainty, which might restrict the company from taking advantage of a likely positive cotton season in FY20, we cut our multiple from 17x to 15x (~10% discount to its three-year average multiple). We, however, find comfort from the company’s reducing dependency on cotton business, with non-cotton share likely to rise up to 55% in FY21. Our TP of INR582 implies a 24% upside on FY21E EPS. Maintain Buy.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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