Opportunity in crisis? Stocks of 4 rice exporters have upto 25% upside scope on climate issues in Pakistan, China
After touching multi year high, prices of select agricultural products like rice and sugar are trading at close to the 10 to 15 years high. Neither it first, nor the last time that this trend has been visible. More important is whether this trend is sustainable, if yes, than what it means for companies which are part of the whole chain, either as consumer or supplier. Another important issue is whether retail investors should look at these stocks as tactical plays or as long term investment. To understand whether the up trend would be sustained or not, we have to look at the reasons for why prices are moving upward.
First, is the Ukraine war, which led to logistic issues at some important ports. Second, countries are becoming more protectionist. Third,sudden changes in climatic conditions lead to a drop in production of rice.
War will get settled, hopefully sooner than mater, but if the prices stay at elevated levels, protectionist policy will get a further push as no government would want food inflation to stay at higher levels, especially for locally produced agricultural products.
As far as climatic changes are concerned, they keep happening in different parts of the world and impact different crops. The only thing which may happen is that the frequency of these disturbances may get higher.
The current wave of rising prices brings in a mixture of head and tailwinds. Companies which are exporting rice and that too branded are likely to gain. Companies where
agro products like sugar and rice go as inputs are likely to face some pressure on margins.
When we looked at companies in the sector, of the four companies, only two had ratings from analysts. Given the fact that most of these companies are in small cap space they don’t get much attention from institutional investors. But if one looks at the price performance of these stocks in the last month it is clear that the street is smelling the aroma of basmati rice.
The data used in screening down these stocks has been gathered from Refinitiv’s Stock Report Plus. The data used in screening the following 4 stocks has been gathered from the latest Refinitiv’s Stock Reports Plus report dated June 9, 2023.
KRBL Limited is a basmati rice processing company. The Company is engaged in seed development, contract farming, procurement of paddy, storage, processing, packaging, branding and marketing of basmati rice. It operates in Domestic Agri-division, which includes agricultural commodities, such as rice, Furfural, seed, bran and bran oil, and others; and Power division, which includes power generation from wind turbine, husk-based power plant and solar power plant. The Company’s geographical segments include Sales within India and Sales outside India, including the Middle East and Other than the Middle East. The Company offers its rice under a range of brands, including India Gate, Nur Jahan, Telephone, Train, Unity, Lotus, Lion, Doon, Aarati, Shubh Mangal, Al Wisam, Al Bustan, Alhussam, Blue Bird, City Palace, Necklace, Southern Girl, Taj Mahal Tilla, Bemisal and Indian Farm, among others. It exports its products to Saudi Arab, Iran, Iraq, Yemen Republic, Kuwait, and others.
LT Foods Limited is a consumer food company. The Company operates through the manufacture and storage of rice segment. It operates in three principal geographical areas of the world: India, America, Europe and other countries (Rest of the world). The Company is primarily in the business of milling, processing and marketing branded and non-branded basmati rice and manufacturing of rice food products in the domestic and overseas market. Its operations include procurement, storage, processing, packaging and distribution. The Company is also engaged in research and development to add value to rice and rice food products. The Company’s rice product portfolio comprises brown rice, white rice, steamed rice, parboiled rice, organic rice, quick-cooking rice, value-added rice and flavored rice in the ready-to-cook segment. Its brands include Daawat, Heritage, Devaaya, Chef Secretz and Rozana, which cater to a diverse customer portfolio.
Chaman Lal Setia Exports Limited is a company which is engaged in the business of milling and processing of basmati rice. The Company exports to approximately 80 countries around the world, which included European, Middle eastern, American, Asian and many other markets. The Company has a manufacturing unit located in Karnal, Haryana, which has an installed capacity of approximately 12 metric tons per hour, this facility is a state of art and automated rice processing unit. The Company also has grading and sorting facilities in Amritsar, Punjab, and Kandla, Gujarat. The Company processes rice in-house and uses a parboiled, raw, steam process. The Company’s brands include Maharani, Mithas and Begum basmati brands. It is also involved in selling non-basmati rice under its brand Green World A romatic Rice. The Company also sells other products, such as Maharani Diabetics Rice and Basmati Rice Plus, and organic products, such as Maharani – Brown Basmati Rice.
Kohinoor Foods Limited is a company that is engaged in the business of manufacturing, trading, and marketing food products. The Company’s assortment of food products includes Basmati Rice, Wheat Flour, Ready to Eat Curries and Meals, Simmer Sauces, Cooking Pastes to Spices, Seasonings and Frozen Food. It also offers Pure Ghee, Paneer (Indian Cottage Cheese), Ready Mixes, Namkeens and Sweets. Its Basmati Rice includes Premium Basmati, Organic Basmati, Brown Basmati, Special Rice and Sela (Parboil) Basmati. Its packaged food includes dairy, biscuits and cookies, pickles, dry fruits and rice brain oil. The Company offers its products under the Kohinoor brand name. The Company’s offerings are preferred by connoisseurs across the globe ranging from the United States, Canada, Australia, New Zealand and the United Kingdom to the Middle East and southeast Asian countries.
Stock Reports Plus, powered by Refinitiv, is a comprehensive research report that undertakes an in-depth quantitative analysis to generate standardized scores for each of the five key components. A simple average of these scores is then normally distributed to reach an average score. Each stock is ranked on a scale of 1 to 10. A score of 8 to 10 is considered positive, 4 to 7 is neutral and 1 to 3 is given a negative outlook.
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Published Date: June 9, 2023