Advanta India Limited Expanding International Presence via Extensive Research and Development

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Advanta India Limited is expected to expand its revenue at a CAGR of 24.1% from 2012-2017. The company has entered into a GM corn agreement with Monsanto for Brazil and Philippines. This agreement is expected to give its results in 2015. EDITDA of the company is expected to be a little under pressure as the company is focusing on research and development expenditures. The company is planning to introduce 15 new products which will generate positive cash flow for the company and will increase its revenues. Also increase in research and development expenditure will improve the quality of current products of the company. This will lead to production of more cost efficient products in future and will increase the operating margin of the company.

The report focuses on providing analysis’s on the company’s valuation in the industry and also provides for a detailed analysis of the company’s enterprise value and it’s positioning against its competitors. The company has showcased a revenue multiple of 2.2x as on 31st December 2012. The report inculcates a comprehensive analysis of the company’s balance sheet, cash flow statement and income statement. The future projections of the same have been included in the report complemented with the future forecast of company’s ration analysis.

For more information on the Equity Research Report please refer to the below mentioned link:

http://www.kenresearch.com/detail-company-report/12/advanta-india.html

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Advanta India Limited Expanding International Presence via Extensive Research and Development

  1. 1. 1ADVANTA INDIA LIMITED © This is a licensed product of Ken Research and should not be copied
  2. 2. TABLE OF CONTENTS1. Executive Summary: Advanta India Limited2. Advanta India Limited Business Overview Introduction Expertise Product 2.1 Corporate Timeline 2.2 Major Investments in the Company Evolution 2.3 Ownership Structure 2.4 Advanta India Limited Organisational Structure3. Advanta India Limited Products Portfolio 3.1 Oil Seeds 3.2 Field Crops 3.3 Vegetable Crops4. Advanta India Limited Financial and Operational Performance 4.1 Valuation Analysis and Financial Summary 4.2 Advanta India Limited Geographical Revenue Segmentation, FY’2011 and FY’2012 4.3 DCF (Discounted Cash Flow) Valuationa and Upside Potential5. Advanta India Limited Annotated Stock Chart and Analyst Recommendations 5.1. Advanta India Limited Annotated Stock Price Performance 5.2. Analyst Recommendations Expected Bullish Stock Performance Buy Recommendation in Long term Expectation of Earning Growth6. SWOT Analysis Strengths 2 © This is a licensed product of Ken Research and should not be copied
  3. 3. Weaknesses Opportunities Threats7. Advanta India Limited Key Professionals 7.1. Board of Directors Profile 7.2. Management Profile8. Macro Analysis of Seed Industry 8.1. Indian Hybrid Seed Industry Overview and Size, FY’2008- FY’2012 8.1.1 Indian Hybrid Seed Industry Segmentation, FY’2012 8.1.2 Market Share of Major Players in the Indian Hybrid Seed Market, FY’2012 8.2 Australian Seed Industry Market Size, FY’2008-FY’2012 8.3 Argentina Seed Industry Market Size, FY’2008-FY’-20129 Competitive Analysis 9.1 By Products Offered/Revenue/Business Strategy 9.2 By Financial Performance (Topline/ Enterprise Value/ Multiples) 9.3 A Relative Valuation Analysis of Indian Seed Industry10. Advanta India Limied Management Outlook and Future Projection 10.1. Advanta India Limited Future Projections 10.2. Advanta India Limited Company Financials Future Projections 10.3. Advanta India Limited Ratio Analysis11. Appendix 11.1. Market Definitions 11.2. Abbreviations 11.3. Research Methodology Data Collection Methods Approach Non-linear Factor Based Regression Model 3 © This is a licensed product of Ken Research and should not be copied
  4. 4. 11.4. Disclaimer 4 © This is a licensed product of Ken Research and should not be copied
  5. 5. LIST OF FIGURESFigure 1: Advanta India Limited Corporate Timeline 1994-2012Figure 2: Advanta India Limited Ownership Structure in Percentage as on 31st December 2012Figure 3: Advanta India Limited Organizational StructureFigure 4: Advanta India Limited Product PortfolioFigure 5: Advanta India Limited Annotated Stock Price Performance on the Basis of VolumeTraded and Stock Prices in Thousand Shares and INR per Share, 29th February 2012-1st March2013Figure 6: India Hybrid Seed Industry Market Size and Contribution in the Overall Indian SeedMarket on the Basis of Revenue in INR Crore and Percentage, FY’2008-FY’2012Figure 7: India Hybrid Seed Industry Segmentation on the Basis of Contribution in the OverallHybrid Seed Industry in Percentage, FY’2012Figure 8: Market Share of Major Players in Indian Hybrid Seed Market on the Basis ofContribution by Revenue in Percentage, FY’2012Figure 9: Australia Seed Industry Market Size on the Basis of the Revenue in INR crore,FY’2008-FY’2012Figure 10: Argentina Seed Industry Market Size on the Basis of Revenue in INR Crore,FY’2008-FY’2012Figure 11: Advanta India Limited Future Projections on the Basis of Revenue, EBITDA Marginand Net Profit Margin in INR Crore and Percentage, 2013-2017Figure 12: Non-linear Regression Analysis and Scatter Chart Based upon Indian Hybrid SeedIndustry Market size, FY’2008-FY’2012 5 © This is a licensed product of Ken Research and should not be copied
  6. 6. LIST OF TABLETable 1: Advanta India Limited Financial Summary on the Basis of Revenue, Growth and NetProfit Margin in INR Crore and Percentage, 2008-2012Table 2: Advanta India Limited Major Investments in Company Evaluation on the Basis DealStake, Deal Value and Implied Enterprise ValueTable 3: Advanta India Limited Ownership Structure on the Basis of Shares Held as on 31stDecember 2012Table 4: Advanta India Limited Promoters Stake on the Basis of Number of Shares Held and thePercentage of Shares Held in Shares Outstanding, as on 31st December 2012Table 5: Advanta India Limited Revenue Segmentation on the Basis of Contribution by Productsin the Overall Revenue, in FY’2011-FY’2012Table 6: Advanta India Limited Recent Developments in Oil SeedsTable 7: Advanta India Limited Recent Developments in Field CropsTable 8: Advanta India Limited Recent Developments in Vegetable CropsTable 9: Advanta India Limited Financial Performance on the Basis of Revenue, EBITDAMargin and Net Profit Margin in INR Crore, and Percentage, 2008-2012Table 10: Advanta India Limited Valuation Analysis on the Basis of Market Capitalization, NetDebt and Enterprise Value in INR Crore and Units as on 1st March 2013Table 11: Advanta India Limited Valuation Multiples on the Basis of Revenue, EBITDA and NetProfit Multiples, 2008 -2012Table 12: Advanta India Limited Revenue Segmentation on the Basis of GeographicalContribution in Overall Revenue in Percentage, FY’2011-FY’2012Table 13: Advanta India Limited Discounted Cash Flow Valuation on the Basis of WeightedAverage Cost to Capital, Present Value of Company Valuation and Target Share PriceTable 14: Advanta India Limited Sensitivity Analysis of Discounted Cash Flow Analysis,Perpetuity Growth Rate and Weighted Average Cost of Capital on the Basis of PerpetuityGrowth Rate Method in INR Crore and in PercentageTable 15: Advanta India Limited Board of DirectorsTable 16: Advanta India Limited Management ProfileTable 17: Company Comparables on the basis of Products Offered, Revenue and BusinessStrategies 6 © This is a licensed product of Ken Research and should not be copied
  7. 7. Table 18: Company Comparable Analysis on the Basis of Financial Performance in INR Croreand Valuation Multiples as on LTM 31st December 2012Table 19: Company Comparables on the Basis of Revenue in INR Crore, FY’2008-LTM yearending 31st December 2012Table 20: Relative Valuation Analysis on the Basis of Deal Value, Deal Stake, ImpliedEnterprise Value and Multiples in INR Crore, Percentage and MultiplesTable 21: Advanta India Limited Company Balance Sheet, 2011-2015Table 22: Advanta India Limited Company Income Statement, 2011-2015Table 23: Advanta India Limited Company Cash Flow Statement, 2011-2015Table 24: Advanta India Limited Ratio Analysis on the Basis of Liquidity, Asset Management,Profitability and Leverage Ratios in Multiple and Percentage, 2008-2015Table 25: Regression Coefficients of the Advanta India LimitedTable 26: Regression Intercepts of the Advanta India Limited 7 © This is a licensed product of Ken Research and should not be copied
  8. 8. EXECUTIVE SUMMARY: ADVANTA INDIA LIMITEDRecommendation: ~ Target Price: INR ~ Date: 1st March 2013Advanta India Limited is an agronomic seed company with major operations in India, Australia, Thailand,the US and Argentina. The company is involved in production of hybrid seeds of field crop and vegetableseeds. The company specializes in the production of hybrid sunflower seeds by technical plant breedingand application of bio-technological methods. The company was listed on the Bombay Stock Exchangethe National Stock Exchange of India in 2007 and having its registered office in Hyderabad.Key  Advanta is dominant player in the Thailand corn marketDifferentiators  Dominates the international sorghum market  The company has 16 subsidiaries all over the world representing its global presence  First Indian multinational seed companyCompetition and  Advanta dominates the sunflower seed market in Argentina with ~%Positioning market share as of 31st December 2011    Key  In 2011 the company established a new research and breeding station inDevelopments Toulouse, France so as to cater the growing demand of the European markets    Financial Advanta India Limited Financial Summary on the Basis of Revenue, GrowthSummary and Net Profit Margin in INR Crore and Percentage, 2008-2012 Particulars 2008 2009 2010 2011 2012 Revenue Growth% Net Profit% 8 © This is a licensed product of Ken Research and should not be copied
  9. 9. CORPORATE TIMELINEAdvanta was established in 1994 as a joint venture between ITC Limited and Zeneca Limited.On 24th January 1994 the company started its production of hybrid seeds from its registeredoffice at Hyderabad. The joint venture was named as ITC Zeneca Limited with the objective ofproduction of hybrid seeds in the Indian seed market. In 1994, the company acquired seedbusiness of Hysun India Limited…In 2007, Advanta India Limited came with an IPO of INR ~ crore. The IPO was of ~ equityshares at a price of INR ~ per equity share…Advanta India Limited Corporate Timeline 1994-2012 9 © This is a licensed product of Ken Research and should not be copied
  10. 10. ADVANTA INDIA LIMITED ORGANISATIONAL STRUCTUREThe company currently has ~ plants in India, out of which ~ plants are located in Andhra Pradeshand ~ plant in Haryana. Out of 16 subsidiaries across the world Advanta Netherland HoldingsBV was the highest profit making subsidiary of Advanta, generating a net profit of INR ~ croreduring 2011 and Advanta Holdings BV was the highest loss making subsidiary of INR ~ crore in2011…Advanta India Limited holds ~ shares that is 100.0% of Advanta Semillas SAIC and ~ shares ofPacific Seeds Pty. Limited implying 100.0% stake in the subsidiary…Advanta India Limited Organizational Structure 10 © This is a licensed product of Ken Research and should not be copied
  11. 11. ADVANTA INDIA LIMITED PRODUCTS PORTFOLIOThe company engages in ~ types of hybrid seed products in India and across the globe such assorghum, corn, cotton, sunflower, mustard, canola and others and for vegetable such as tomato,cauliflower, sweet corn, hot pepper, okra and others. Business cycle of the company is toresearch and develop, produce and distribute the seeds to farmers through its distributors…Advanta India Limited Product PortfolioOIL SEEDSOil seeds are produced as a source of the production for different types of oil. The oil seedportfolio of the company consists of the three hybrid seeds namely sunflower, canola and Indianmustard. These three products contribute the largest proportion of the company’s revenue... 11 © This is a licensed product of Ken Research and should not be copied
  12. 12. The company operates in the Australian canola seed market through its 100.0% ownedsubsidiary namely, Pacific Seeds Pty Limited. Pacific Seeds is involved in the production of ~types of hybrid canola seed variety such as HYOLA@404RR, HYOLA@474CL,HYOLA@971CL, HYOLA@555TT and others. The company has achieved ~ % growth in itsglobal canola business in 2011 y-o-y. The company has a pan India presence in the Indian hybridmustard market. UPL group in collaboration with state government of Gujarat has entered into aproject for the production of coral-432 with the average selling price of seeds INR 22.5 andaverage selling price of oil INR 56.0 under normal conditions.Advanta India Limited Recent Developments in Oil SeedsCountries Recent Developments in Product PortfolioIndiaMexicoADVANTA INDIA LIMITED FINANCIAL ANDOPERATIONAL PERFORMANCEVALUATION ANALYSIS AND FINANCIAL SUMMARYThe company’s revenue has showcased a CAGR growth of 16.4% from 2008 to 2012. Increasein revenue was due to the expansion of company’s operations in various countries in the last fiveyears by mergers and acquisitions of different companies. Additionally, over the years thecompany has been spending considerable amount on research and development. These researchand development expenditure has produced new and improved products for the company such asPAC 801, PAC 807 and others in hybrid rice seed which had enhanced the company’s revenues.The revenue for 2012 was INR 1073.0 crore showcasing a growth of 17.7% by y-o-y…Net profit of the company has increased at a CAGR of ~% from 2008 to 2012… 12 © This is a licensed product of Ken Research and should not be copied
  13. 13. The company has been valued at INR ~ crore as on 1st March 2013. The revenue multiple of thecompany has shown a declining trend. Revenue multiple represents the amount that has to bepaid by the investor for purchasing the company’s sales. The revenue multiple has declined at aCAGR of ~% from 2008-2012 showcasing a decline in the value of the company against thecompany’s sales as the amount of sales has been increasing over the years which implies that thecompany is now more cheaper to purchase as compare to what it was in 2008…Advanta India Limited Financial Performance on the Basis of Revenue, EBITDA Marginand Net Profit Margin in INR Crore, and Percentage, 2008-2012Particulars (in INR Crore and Percentage) 2008 2009 2010 2011 2012Revenuey-o-y Growth%EBITDA%Net Profit%Advanta India Limited Valuation Analysis on the Basis of Market Capitalization, Net Debtand Enterprise Value in INR Crore and Units as on 1st March 2013Particulars (in INR Crore and Units)Share Price*Share Outstanding (in Units)Market CapitalizationNet DebtAssociates/ Minority InterestEnterprise ValueAdvanta India Limited Valuation Multiples on the Basis of Revenue, EBITDA and NetProfit Multiples, 2008-2012Particulars 2008 2009 2010 2011 2012EV/RevenueEV/ EBITDAEV/Net Profit 13 © This is a licensed product of Ken Research and should not be copied
  14. 14. DCF (DISCOUNTED CASH FLOW) VALUATIONA AND UPSIDEPOTENTIALAdvanta India Limited Discounted Cash Flow Valuation on the Basis of Weighted AverageCost to Capital, Present Value of Company Valuation and Target Share PriceParticulars Value (in INR Crore, Percentage and Units)WACCRevenue CAGR over 2013-17EPresent Value of Cash Flow till 2017ETerminal GrowthPresent Value (PV) of terminal cash flowPV of firmLess: Current DebtTotal present value of the EquityNumber of Equity Shares Outstanding (in Units)DCF - Target price (INR)Advanta India Limited Sensitivity Analysis of Discounted Cash Flow Analysis, PerpetuityGrowth Rate and Weighted Average Cost of Capital on the Basis of Perpetuity GrowthRate Method in INR Crore and in PercentageParticulars (in INR Crore and Percentage) Weighted Average Cost of CapitalPerpetuity Growth Rate 14 © This is a licensed product of Ken Research and should not be copied
  15. 15. MACRO ANALYSIS OF SEED INDUSTRYMARKET SHARE OF MAJOR PLAYERS IN THE INDIAN HYBRIDSEED MARKET, FY’2012The Indian hybrid seed industry is dominated by Nuziveedu Seeds Private Limited. Thecompany has a market share of ~% in the overall Indian hybrid seed industry, followed byMaharashtra Hybrid Corporation (Mahyco) and Vibha Agrotech Limited which have a share of~% and ~% respectively. As per the historical trend, the revenue of the seed companies has beeninclining…For Monsanto India, corn hybrid was the single biggest focus in seed business. Through itsProject Golden Rays project the company has signed a public-private partnership with Rajasthanstate government for increasing the maize hybrid yields by two folds. The project involves 7.8lakh tribal farmers. The company has a share of 4.4% in the overall hybrid seed market…Market Share of Major Players in Indian Hybrid Seed Market on the Basis of Contributionby Revenue in Percentage, FY’2012 Nuziveedu Seeds Private limited Maharashtra Hybrid Corporation (Mahyco) Monsanto India Limited (MIL) Rasi Seeds Private Limited Bayer CropScience Ltd. - India Du Pont Pioneer Syngenta India Ltd. Advanta India Limited Others 15 © This is a licensed product of Ken Research and should not be copied
  16. 16. AUSTRALIAN SEED INDUSTRY MARKET SIZE, FY’2008-FY’2012Australia is the second largest exporter of canola in the world. Australian seed market hasdeclined at CAGR of ~% from USD ~ million to USD ~ million from FY’2008 to FY’2012.Decline in the Australian seed industry was mainly due to natural disaster in the country whicheffected the production of seeds.During the early FY’2000, the seeds industry of Australia was at its peak. The seed sales grew by~% to USD ~ million in FY’2007 from USD ~ million in FY’2005 due to pleasant weatherconditions in the country, higher commodity prices and positive market sentiments…Australian government policies had also played a major role in the performance of the seedindustry of the country. Australian government has strict regulations which have restricted theentry of major players in the country. These strict regulations of the government restricted thegrowth of the industry and debarred the nation from adoption of hybrid seeds which actuallyhave the potential to increase the agricultural productivity with the limited use of resources.Australia Seed Industry Market Size on the Basis of the Revenue in INR crore, FY’2008-FY’2012 2,500.0 2,000.0INR Crore 1,500.0 1,000.0 500.0 0.0 FY2008 FY2009 FY2010 FY2011 FY2012 16 © This is a licensed product of Ken Research and should not be copied
  17. 17. COMPETITIVE ANALYSISBY FINANCIAL PERFORMANCE (TOPLINE/ ENTERPRISE VALUE/MULTIPLES)Table: Company Comparable Analysis on the Basis of Financial Performance in INRCrore and Valuation Multiples as on LTM 31st December 2012(INR Crore, unless Stated) Last Twelve Months (LTM) Year Ending December 2012Company Market Net Enterprise EV/Revenue EV/EBITDA P/E Cap Debt Value (EV)JK Agri GeneticsLimitedAdvanta IndiaLimitedMonsanto IndiaLimitedNath Seeds IndiaLimitedKaveri SeedsCompany LimitedMeanMedian 17 © This is a licensed product of Ken Research and should not be copied
  18. 18. Table: Company Comparables on the Basis of Revenue in INR Crore, FY’2008-LTM yearending 31st December 2012Revenue (in INR Crore) FY’2008 FY’2009 FY’2010 FY’2011 FY’2012 LTMJK Agri Genetics Limited*Advanta India Limited**Monsanto India LimitedKaveri Seeds Company LimitedNath Seeds India LimitedADVANTA INDIA LIMITED FUTURE PROJECTIONAdvanta India Limited has been focusing the European hybrid seed market. After doing researchfor over 4 years, the company is planning its first hybrid sunflower seed sale in Romania,Ukraine, Romania and France. Advanta will launce ~ hybrids sunflower seeds products tofarmers of these countries under ALTA brand. The ~ hybrids sunflower seeds will generatortheir brand name in future and expected to capture sizable market share in the European seedmarket. This will lead to an increase in profits of the company in future.The company has recently entered into a genetically modified (GM) corn agreement withMonsanto for two countries namely, Brazil and Philippines. GM corn is developed by addinganimal’s DNA into seeds DNA and thus amplifies the utility of the seeds……The company is expected to showcase a revenue growth of CAGR ~% from 2012 to 2017.Additionally, the company is spending substantial amount on research and development ofproducts and these new products will generate positive cash flow in future and will increase therevenue of the company. All these factors will lead to an increase in company’s revenue fromINR 1,073.0 crore in 2012 to ~ crore in 2017. 18 © This is a licensed product of Ken Research and should not be copied
  19. 19. Advanta India Limited Future Projections on the Basis of Revenue, EBITDA Margin andNet Profit Margin in INR Crore and Percentage, 2013-2017 3,500.0 16.0% 3,000.0 14.0% 12.0% 2,500.0 in PercentageINR Crore 10.0% 2,000.0 8.0% 1,500.0 6.0% 1,000.0 4.0% 500.0 2.0% 0.0 0.0% FY2013 FY2014 FY2015 FY2016 FY2017 Revenue EBITDA Margin Net Profit MarginADVANTA INDIA LIMITED COMPANY FINANCIALS FUTUREPROJECTIONSOver the years Advanta India Limited has been showing a constant growth in its shareholders’funds as the company has been constantly generating after tax net profit expect in 2010. Networth of the company has increased at a CAGR of ~% from 2009-2012, representing increase inprofitability margin of the company. The company is expected to follow the same trend in futureand anticipated to increase its net worth at CAGR of ~% from 2012-2015. As of now thecontribution of outsider’s funds in the total assets of the business is greater than shareholders’equity but with the increase in profitability the company is expected to reverse this scenario anddebt to equity ratio will decrease in future... 19 © This is a licensed product of Ken Research and should not be copied
  20. 20. The company’s cash flow from operation has showcased a positive growth trend in 2011 and2012. It is anticipated that the cash flow from operation of the company will increase at a CAGRof ~% from 2011-2015 largely due to increase in after tax net profit of the company. In 2015 it isexpected that the company will increase its revenue from operations by ~% y-o-y. An averageannual growth of ~% is expected in the company’s capital expenditure from 2011-2015 due tocommercialization and expansion of business.Overall cash and cash equivalent balance of the company is expected to increase at a CAGR of~% from 2011-2015… 20 © This is a licensed product of Ken Research and should not be copied
  21. 21. DISCLAIMERThe research reports provided by Ken Research are for the personal information of theauthorized recipient and is not for public distribution and should not be reproduced orredistributed without prior permission. You are permitted to print or download extracts from thismaterial for your personal use only. None of this material may be used for any commercial orpublic use.The information provided in the research documents is from publicly available data and othersources, which are reliable. Efforts are made to try and ensure accuracy of data. With respect todocuments available, neither the company nor any of its employees makes any warranty, expressor implied, including the warranties of merchantability and fitness for a particular purpose, orassumes any legal liability or responsibility for the accuracy, completeness, or usefulness of anyinformation, apparatus, product, or process disclosed, or represents that its use will not infringeprivately owned rights.The report also includes analysis and views expressed by our research team. The research reportsare purely for information purposes. The opinions expressed are our current opinions as of thedate appearing in the material and may be subject to change from time to time without notice.Investors should not solely rely on the information contained in the research documents and mustmake investment decisions based on their own investment objectives, risk profile and financialposition. The recipients of this material should take their own professional advice before actingon this information.Ken Research will not accept returns of reports once dispatched due to the confidentiality ofinformation provided in our reports. In case, a report qualify for return, we will issue a credit,minus shipping charges, of equal value to the original purchase price, toward a future purchase—no refunds. The decision about whether the product return can be accepted or not is solely at ourdiscretion. Any dispute will be subject to laws of India and exclusive jurisdiction of IndianCourts.No part of this manual or any material appearing may be reproduced, stored in or transmittedon any other Web site without written permission of Ken Research and any payments of aspecified fee. Requests to republish any material may be sent to us. 21 © This is a licensed product of Ken Research and should not be copied

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