Seed Co Limited poised to grow revenue
Revenue for Seed Co Limited is expected to grow by 59 percent in the current financial year to $7,58 billion from $4,77 billion recorded in the financial year ending 2021.
According to analysts at IH Securities, the growth will be sustained by a combination of strong seed demand from public sector programmes and good weather.
“We anticipate Government input programmes to continue sustaining seed demand,” said the brokerage firm in a recent research note.
“The need to achieve food security during these Covid-19 unprecedented times is also expected to add an extra boon to seed demand,” IH added.
The Government is spending billions of dollars each year to support agriculture production through programmes such as climate proofing Pfumvudza concept, which is the flagship of the Agriculture Recovery Plan.
On the other hand, the bumper harvest that was achieved during the 2020/21 agriculture season may also weaken maize grain prices thus threatening seed demand.
Seed Co Ltd and its sister company Seed Co International, is one of southern Africa’s biggest seed makers and supplies the bulk of seed in similar public projects not only in Zimbabwe but also in Malawi, Mozambique, Tanzania and elsewhere in Africa.
For the year to March 31, 2021, the company sold a total of 29 302 metric tonnes of seed including maize, soybean and wheat, which was 36 percent above prior year.
Of the overall volumes, maize remained the flagship seed crop growing by 61 percent due to Government support programmes and open market demand.
“Normal to above normal rainfall positively impacted seed sales in Zimbabwe as well as the regional markets,” said chief executive officer Mr Morgan Nzwere during a virtual results presentation recently.
Wheat sales grew 66 percent buoyed by a once-off 2 000 metric tonne export order to Nigeria while soybeans volume was 17 percent above prior year driven by strong oilseed local demand.
Sorghum and barley remained stable.
IH Securities said it expects Seed Co Ltd “to benefit from the improved operating environment on the back of a stable currency and inflation deceleration. We expect the recently completed artificial seed drier to help the group increase profitability on the back of improved efficiency.”
The analysts have guided earnings before interest, tax, depreciation and amortisation (EBITDA) margins to close financial year 2022 at 36,8 percent from 57,7 percent a year earlier.
Shares of Seed Co Ltd are forecast to reach a 12-month target price of $$83,47 and IH gave a hold recommendation for the stock on the local bourse.
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