Stock Analyst Choice
Making Roundup Gains
US-based Monsanto India is now looking to repeat the success of hybrid corn with its insecticide and herbicide portfolio
13-Jan-2015 •Mohammed Ekramul Haque
Monsanto India is the listed subsidiary of the US based Monsanto Company Inc has been in operations for 40 years in India. The listed entity here in India deals in maize seeds and herbicides. Monsanto is the market leader in the corn market in India with a share of 25 per cent. The company sells its products primarily under the brand name of "Roundup". Here the main growth drivers for Monsanto India in the near future.
Monsanto to be at the forefront of corn hybridization in the county. Though the use of hybrid corn has made much strides in the country largely to the efforts of Monsanto, the share of hybrids is still at 60 per cent. Monsanto with its market leadership of this category stands as one of the primary gainers of further hybridization of corn in the country.
Agrichemical use still low in India. The use of agrichemicals in the country is abysmally low at 0.6 kg per hectare. That is lower even than our neighbour Pakistan where its 1.3 kg/hectare. The low usage of agrichemicals leads to enormous losses caused by insects, fungus and unwanted weeds.
Gains from new launches. Monsanto has minted money with the launch of new hybrids. New launches over the last two years now account for 40 per cent of its revenues. The company is working on newer launches in the insecticide and herbicide segments.
The risks. Monsanto is exposed to a number of risks, the biggest being monsoons. Poor rains can impact sales. Competition is gearing up. A number of new players have made their mark in the domestic market. Monsanto could continue to find the going tough for its GM seeds in the country. Increased opposition from environmentalists, political parties and individuals continue to derail any chances of usage of GM seeds for a long time.
Valuations and outlook. Monsanto has reported annual sales growth of 21.58 per cent in the last three years. Earnings per share has compounded at 69 per cent annually in the same period. The company has set a growth target of 10 per cent this year. Even though Monsanto has run by over 300 per cent in the last one year, the stock trades at a PEG ratio of 0.5. Do not expect the same stock price run in the immediate future though. Monsanto is a consistent performer. Buy.
