13 October, 2008

Advanta India

Current market price: Rs 491

Target price: Rs 980

Upside: 99.5%

Brokerage: IDFC-SSKI Securities
 
Advanta India is one of the most aggressive hybrid seeds companies in India with strong presence in fast growing markets like Australia, Argentina and Thailand. Advanta has been working on a proprietary R&D project for developing a range of high oleic/stearic sunflower oils (possessing lower saturated fat levels) that will be marketed under Nutrisun brand.

Advanta has a sharp focus on the genetically modified (GM) seeds segment and its strategy involves in-licensing GM traits from biotechnology R&D players like Monsanto, to incorporate them into its hybrids. Advanta is among the very few players in the world with sweet sorghum germplasm, which can be used as a biofuel. It has acquired the sorghum business of Garrison and Townsend in Texas, (US) which has a very strong sorghum germplasm base, for $10.5 million and has thus acquired a head-start in this field.

Advanta’s revenues and earnings are expected to grow at a CAGR of 31 per cent and 30 per cent, respectively over CY07-09E, aided by consolidation of the recent acquisitions. The momentum will accelerate with unfolding of opportunities like Nutrisun oil, sweet sorghum for biofuel and wheat royalties in Australia. Limited exposure to the US/EU and crops like corn and soybean also insulates it from the ongoing global turmoil. The stock trades at 22.1x CY08E and 15.6x CY09E earnings. Maintain Buy.

CMP as on 10 October, 2008

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