Monday, July 14, 2008

Camson Biotechnologies Ltd - One for Phillip A. Fisher

When Phillip A. Fisher , one of the pioneers of modern investment theory, wrote his masterpiece "Common Stocks, Uncommon Profits", the very 1st point he listed in his checklist of things to look for in a company before making a purchasing decision was :

" Does the company have products & services with a sufficient market potential to make possible a sizable increase in sales for at least several years ?"

Well, if there ever was a company that so perfectly fitted the above postulate, it is Camson Biotechnologies Ltd (BSE Code : 590076).

Since pictures speak more than a thousand words, I will save myself a few thousand by entreating the reader to watch the following presentation which will explain what Camson Biotechnologies & the sector it operates in is all about :

To tie-up a few salient points :

  • Camson is fully integrated agri-biotech company producing bio-pesticides, bio-fertilizers, hybrid seeds & zero-residue fruits. It currently has 22 Bio Pesticides, 7 Bio Fertilisers and 17 Hybrid Seeds in it's product range.
  • With the world increasingly becoming sensitive to chemical-free food, and exports increasingly needing to be zero-residue, demand for bio-fertilizers & bio-pesticides is zooming yearly. The world over, countries are moving towards banning agro-chemicals due to the increasing realisation of the longer term costs on the health of their populations.
  • Bio-pesticides & hybrid seeds make up around 80% of the current turnover of the company. The company sells it's products at lower than the equivalent prices for the chemical-based products, and with the "chemical-free, zero-residue" advantages. This makes it a win-win for the farmer / contract farmer. Company has all the necessary certifications of it's products.
  • Extensive details regarding the company, it’s products, it's vision etc can be accessed on it’s website :
  • Was ranked 34th fastest growing technology company in India in 2007 in the 'Technology Fast50 India 2007' programme conducted by Delloitte Touche Tohmatsu, Asia Pacific :
  • Management belongs to a family of agricultural technologists with decades of experience in agriculture.
  • Promoters, Associates & group companies holding (including warrants outstanding) is around 55-60% though in the classification only 19.9% is currently shown as promoter holding.
  • Company has grown 450% plus in last 2 years, scaling up from around 8-9 Cr in FY06 to 41 Cr in FY08. The company is targeting a 100% growth in topline in FY09, and a similar jump in FY10 too, which would need some further capital infusion, as the sector is capital-intensive.
  • The company has built the base to continue this scorching pace of growth for the next several years.
  • Among it's clients are HLL, Rajshree Sugar, Russel Tea, various state co-operatives etc.
  • As far as seasonality of the business is concerned, some fruits , vegetables & crops are seasonal, while others are not, so overall seasonality factor is not very large.
  • No Government controls for it's products.
  • It has an impressive list of non-promoter shareholders ; Vivek Mundra is the latest entrant, having picked up a 1% stake recently.

Risks :

  • Any adverse weather conditions affecting farming will impact the company in that particular quarter.
  • Equity dilution - the author is informed that the fully diluted equity stands at 16 Cr . The Industry is working-capital intensive so maintaining the current rate of growth (company is growing 100% yearly) will require further cash infusions resulting in equity dilution – however incremental earnings will be at a far faster pace than any incremental equity dilution hereon.
  • HR & other challenges typical to smaller companies growing at scorching rates

Recommendation : The stock quotes at Rs 74.10 as on 11th July, 2008. The author recommends buying the stock around it's March 2008 low of Rs 55 or below, strictly for a 3-5 year hold.

Author : Bosco Menezes

Recommendation Date : 14.07.2008

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at .