Hey friends! In today's video, we will talk about such a sector that directly/indirectly gives employment to 2/3 people out of the total population in India.
This sector makes a 15% contribution to India's GDP. When Covid's situation was at the peak all sectors were going through a downturn.
But this sector stood with rigidity and had a great performance. The name of the sector I am going to talk about is the Agriculture sector.
The Tractor sales a few months ago (during Covid) had touched an all-time high. When all sectors were down agriculture sector had a great performance even then.
All things related to the agriculture sector directly/indirectly showed a great performance.
Following this, we have brought today's video where we will talk about 5 such stocks that are directly/indirectly linked to the agriculture sector.
I Jagdeep Singh welcome you to the Groww youtube channel. Without taking much time let's speedily start today's video.
Before starting the video if you have not subscribed to our channel then surely do it so that you don't miss any of our videos.
The video will be divided into two parts. In the first part, I will tell you about the Agriculture sector (key highlights).
These points are quite important for you. In the second part, I will discuss 5 such stocks that trade on the share market and directly/indirectly derive their business through the agriculture sector.
The agriculture sector is considered quite important for the Indian economy as a lot of people are connected to this.
It is considered that out of India's total food market food processing industry has high growth potential. About 32% share of the entire food industry is held by the food processing industry.
India's food industry is the world's 5 largest in terms of production, consumption, and operations(end products).
From here you can understand that the food processing industry is a huge one in the agriculture sector. The total food grain production for the 2019-20 crop year was 295 million tonnes.
It is predicted that by next year this number will rise to 298 million tonnes. Milk production (that is directly linked to the agriculture sector) during FY 20 was 198 million tonnes.
It is predicted that by next year this number will rise to 208 million tonnes. There is a 10% growth estimate in the production.
India comes under the top 15 world food product exporters. The export value from India's agriculture sector is US$ 35 billion.
From here you can understand that under export the food industry has a huge share.
The target set for 2022 for agriculture export is US$ 60 billion. But in the coming time, we will know how this is taken forward.
Now let's move to the second part of the video where we will talk about 5 such companies whose business is directly or indirectly related to the Agriculture sector.
Without taking much time let's move to the first company. First I will talk about the company that was in news in recent days. Its name is UPL(United phosphorous limited).
UPL business includes manufacturing, marketing, and distribution of crop protection materials (The things that are used for crop protection).
UPL's business also includes the manufacturing of intermediates and specialty chemicals. A unique thing about UPL is that for expanding itself; it does a lot of takeovers and acquisitions.
About 200 entities operate in UPL. An interesting fact about UPL is that it has registered its name in the top 5 agrochemical companies of the world.
Their revenue is quite diversified. Its 70% revenue comes from countries like Latin America, Europe.
The companies that are associated with the agriculture sector face the issue of cyclicity. When there is crop season their sales increase. While at other times their sales decrease.
The companies that diversify themselves in terms of geography do not face much impact of the cyclicity.
UPL faces less cyclicity impact as it has diversified itself in different geographies. The share price of UPL is around Rs.469.
Its market capitalization is above Rs.35,000 cr. Last one year's return (to its investors) of UPL is negative 20%.
Recently you might have heard about its news. If you have not heard about it you can search on the internet.
After this news, UPL's share price started falling. The P/E ratio of UPL is around 11. While the industry P/E ratio is around 24.
As compared to this UPL's P/E ratio is quite low. Return on Equity of UPL is around 16%. The company's last 5 year's CAGR growth in net profit is 10%.
This means that last 5 years the CAGR growth of its profit is 9.5% (around 10). Now let's talk about the second company. Its name is PI industries.
This company also works in agrochemicals. The products of this company are sold in and outside India.
The products of this company include insecticides, fungicides, and herbicides. Besides this, it also manufactures specialty fertilizers and hybrid seeds in India.
Its products are sold outside India as well. The key highlight of this company is its CSM business (Custom synthesis manufacturing).
The company generates 70% revenue from this business. Besides this PI industries has diversified itself.
The order book of its CSM business is US$ 1.5 billion. This can be considered as a remarkable order book.
The share price of PI industries is around Rs.2,250. An interesting fact is that in the last one year it has given more than 50% return to its investors.
The market capitalization of this company is around Rs.34,000 cr.
The P/E ratio of PI industries is 57. As compared to the industry's average of 24 this company has a double P/E ratio.
Now let's talk about an interesting parameter i.e. net profit growth in the last 5 years. This number for PI industries is 13%.
While the Return on Equity of PI industries is around 18%. While the debt to equity ratio is 0.02. This company is almost debt-free.
Now let's talk about the third company. Its name is Bayer CropScience. This company is directly connected with the agriculture sector.
The business of this company includes the manufacturing of herbicides, insecticides, and pesticides.
After manufacturing, it markets and supplies it to end customers. It also runs its business in crop protection, seeds, traits environmental science, and digital farming.
From here you can understand that the business of this company is quite diversified. When we talk about Bayer then Monsanto's name also comes up.
Monsanto is one such company that works in the agriculture sector. In recent times there was news regarding the merger between them.
If both of them merge then a wonderful synergy will be seen as they have different businesses and will be able to derive a lot of value from each other.
Bayer is associated with crop protection. While Monsanto is connected with seed. If both of these companies merge then synergies will be seen.
In the coming time, we will know about their merger. This was a fact/news that I wanted to communicate to you.
The share price of this company is above Rs.5400. In the last one year, it has given a 45% return to its investors. The market capitalization of this company is around Rs.24,000 cr.
While its P/E ratio is around 36. The return on equity of this company is 23% and debt to equity is 0. This means that it is virtually debt-free.
Now let's talk about the 4th company. Its name is Godrej Agrovet. This company is also directly connected to the agriculture sector.
The business of this company is directly connected to animal feed, oil palm plantation, agrichemicals, and poultry. This company primarily runs its business to improve the productivity of farmers.
This company recently brought a technique- Dripzyme. This company provides its technology in drip irrigation that helps farmers in more production.
It helps them in improving their yield. So this was the discussion regarding the company's core business.
An interesting thing about Godrej Agrovet is that it sells more than 1 million tonnes of high-quality feed. Their feed is used in poultry and aqua.
The share price of Godrej Agrovet is Rs.542. In the last one year, it has given a positive 5% return to its investors.
The market capitalization of Godrej Agrovet is around Rs.10,000 cr. Its P/E ratio is around 30.
While the return on equity is around 17%. Now you might want to know the CAGR growth of the company for the last 5 years in terms of profit. This figure is around 7%.
Now let's talk about the fifth and last company. Its name is Bharat Rasayan. This directly connected with the agriculture sector.
This company mainly manufactures pesticides. Besides this, it makes intermediaries that are used in pesticides.
The main production plants of this company are in Rohtak (Haryana) and Gujrat. Earlier its prime focus was in India but recently it has started expanding its business outside India.
The share price of this company is around Rs.9,600. In the last one year, it has given more than 50% return to its investors. The market capitalization of this company is around Rs.4000 cr.
The P/E ratio of this company is 28. The return on equity of this company is more than 32%. This can be considered an outstanding number.
Its debt-equity ratio is almost 0. This means that the company has no/negligible debt.
The most interesting thing about this company is its CAGR growth in its last 5 years profit. This number is 37%.
In the last 5 years, the net profit of the company has increased by 37% every year. This can be considered a remarkable number.
So this was the discussion regarding the 5 companies that are directly/indirectly linked to the agriculture sector.
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Happy investing!