Data Agro Limited (PSX: DAAG) was incorporated in Pakistan as a private limited company in 1992 and was converted into a public limited company in 1994. The company is engaged in the production and processing of agro seeds. Another activity of the company is the delinting of cotton crops.
Pattern of Shareholding
As of June 30, 2024, DAAG has a total of 4 million shares outstanding, which are held by 2,200 shareholders. Individuals have the majority stake of 45.99 percent in the company, followed by directors, the CEO, their spouse, and minor children who have a stake of 41.24 percent in the company. Data Enterprises (Private) Limited, an associated company of DAAG, accounts for 9.87 percent of its shares. Around 1 percent of the company’s shares are held by NIT and ICP. The remaining shares are held by other categories of shareholders.
Historical Performance (2019-24)
Except for a marginal downtick in 2020, DAAG’s topline has boasted reasonable growth in all the years under consideration. The bottom line is that it posted a plunge in 2022 and 2024. The margins depict an oscillating pattern over the years. In 2019, gross and operating margins posted a downtick, while net margin picked up. This was followed by a considerable rebound in all the margins in 2020. In 2021, the gross margin fell, while net and operating margins inched up. The subsequent two years marked a significant augmentation in DAAG’s margin,s except for a downtick in net margin in 2022. In 2024, gross and operating margins strengthened while net margins slid. The detailed performance review of the period under consideration is given below.
In 2019, DAAG’s topline grew by 13.67 percent year-on-year to clock in at Rs.148.44 million. During the year, the company processed the seeds of cotton and wheat and produced hybrid corn. The revenue proceeds from seeds and delinting services posted a rise in 2019. Within seeds sales, the major revenue was driven from hybrid corn seeds, followed by wheat seeds. Fuzzy and cotton seeds and sale of paddy occupied the third and fourth spots in terms of revenue contribution. Third-party cultivation controlled DAAG’s cost, which inched up by 13.97 percent year-on-year and culminated in 12.53 percent year-on-year growth in gross profit in 2019. GP margin clocked in at 20.70 percent in 2019 versus a GP margin of 21 percent recorded in 2018. Higher payroll expenses due to inflation as well as fresh inductions and higher utility expenses pushed the administrative expense up by 26 percent year-on-year in 2019. Distribution expense inched down by 2.45 percent year-on-year in 2019 as the company didn’t record any doubtful debts, write-offs, or commission on sale in 2019, unlike the previous year. Operating profit posted a 5.97 percent year-on-year decline in 201,9, with OP margin sliding down to 4.93 percent from OP margin of 5.96 percent registered in 2018. Finance cost grew by 12.20 percent year-on-year in 2019, however, it mainly comprised of WWF, WPPF, and stock exchange fees as the company had no bank loans on its books until 2019. While profit before taxation was down by 8.36 percent year-on-year in 2019, deferred taxation resulted in a 27.59 percent rise in the bottom line, which clocked in at Rs.3.97 million in 2019 with an NP margin of 2.67 percent versus an NP margin of 2.38 percent posted in 2018. EPS grew to Rs.0.99 in 2019 versus EPS of Rs.0.78 posted in the previous year.
In 2020, DAAG’s sales plunged by 1 percent year-on-year to clock in at Rs.146.88 million. The outburst of COVID-19 at the end of 2020 put economic activities at a halt and exerted pressure on the demand for hybrid seeds. During 2020, the sales proceeds from fuzzy and cotton seeds, Okra, and micronutrients posted a massive decline. Sales of paddy, Lint, and Vanda also slightly tumbled. Conversely, the revenue from delinting increased during the year. The cost of sales dropped by 3.43 percent year-on-year in 2020, resulting in an 8 percent year-on-year rise in gross profit. The GP margin also climbed to 22.6 percent in 2020. Administrative expenses grew by 8.97 percent year-on-year in 2020 due to higher salaries and wages as well as a provision for loss allowance booked during the year. Conversely, distribution expenses dropped by 9 percent year-on-year due to fewer advertisement and sales promotion expenses incurred in 2020. Operating profit multiplied by 30.92 percent year-on-year in 2020, with OP margin improving to 6.5 percent. Finance cost grew by 11.62 percent year-on-year in 2020 due to higher provisioning done for WWF and WPPF. Net profit grew by 47 percent year-on-year in 2020 to clock in at Rs.5.84 million with an NP margin of 3.97 percent. EPS inched up to Rs.1.46 in 2020.
In 2021, DAAG posted 30.47 percent year-on-year growth in its topline, which clocked in at Rs.191.63 million. This came on the back of improved demand as well as prices. The international seeds market also showed recovery in 2021. The company’s annual production increased by 84 percent year-on-year in 2021 to clock in at 1,569 M Tons seeds. Third-party processed seeds, however, posted a 31 percent drop to clock in at 1,910 M tons. The cost of sales grew by 34.19 percent year-on-year, mainly on account of higher prices of seeds, chemicals, as well as fuel and power. Research and development expenses also grew during 2021 as the company continuously strived to introduce new varieties of seeds to boost agricultural output within the country. Gross profit increased by 17.70 percent year-on-year in 2021, however, GP margin slumped to 20.40 percent. Administrative expenses grew by only 3.73 percent year-on-year as the company considerably reduced the provision for loss allowance in 2021, which offset the higher payroll expense incurred during the year. Distribution expense grew by 11.14 percent year-on-year in 2021 due to higher payroll expense, repair and maintenance charges, as well as freight and octroi charges incurred during the year. Operating profit grew by 40 percent year-on-year in 2021, and OP margin also jumped up to 7 percent. Finance cost inched up by a mere 1.26 percent in 2021, primarily on account of higher provisioning done for WWF and WPPF. All these factors culminated in a 37.78 percent year-on-year rise in net profit, which clocked in at Rs.8.04 million in 2021, with an NP margin of 4.2 percent. EPS clocked in at Rs.2.01 in 2021.
In 2022, DAAG registered a 5.74 percent year-on-year improvement in its topline, which clocked in at Rs.202.62 million. While the sale of services, i.e., seed processing as well as cleaning and drying, posted a considerable growth of 42 percent during the year, the sale of seeds grew by less than 1 percent in 2022. As of 2022, the sale of services had a 16 percent contribution to the overall sales mix of DAAG. During 2022, DAAG produced 3,679 M tons of seeds, up 5.7 percent year-on-year. The cost of sales grew by 1.43 percent year-on-year in 2022. Gross profit strengthened by 22.56 percent year-on-year, translating into a GP margin of 23.6 percent in 2022. Administrative expenses grew by 6.87 percent year-on-year in 2022 due to higher payroll expenses as well as the write-off of bad debts during the year. Distribution expenses posted a 20.65 percent year-on-year rise in 2022 due to higher vehicle running expenses as fuel charges profoundly increased during the year. Operating profit grew by 49.2 percent year-on-year in 2022, and OP margin surged to 9.89 percent. Finance cost escalated by 25.79 percent year-on-year in 2022 due to higher provisioning for WPPF. Profit before taxation grew by 51.39 percent year-on-year in 2022; however, the payment of deferred taxation resulted in a 66.7 percent shrinkage in net profit, which stood at Rs.2.68 million in 2022 with an NP margin of 1.32 percent – the lowest among all the years under consideration. EPS also dwindled to Rs.0.67 in 2022.
Monsoon rains ruined the agricultural infrastructure in the southern region of the country and significantly affected the purchasing power of farmers. However, demand recovery toward the end of the financial year enabled DAAG to post a 7.67 percent year-on-year rise in its net sales in 2023. DAAG’s net sales were recorded at Rs. 218.17 million in 2023. The sale of hybrid corn seeds continued to be the star product of the company, contributing over 47 percent to the overall sales mix in 2023. Third-party cultivation enabled the company to reduce its costs, which grew by 5.34 percent in 2023. As a consequence, gross profit built up by 15.22 percent in 202,3, with GP margin attaining a new high level of 25.28 percent. Administrative expenses multiplied by 13.50 percent year-on-year in 2023, mainly on account of higher payroll expenses due to inflationary pressure. Distribution expense inched up by only 2.77 percent in 2023 due to lower payroll expense as well as curtailed vehicle running and advertisement expense incurred during the year. DAAG’s operating profit rose by 11.19 percent year-on-year in 20,23, with the OP margin climbing up to 10.21 percent. Finance cost surged by 316.77 percent in 2023 as the company acquired running finances to meet its working capital requirements during the year. Until last year, the company had no external borrowings on its books. While the company posted a 12.61 percent year-on-year decline in profit before tax in 2023, deferred taxation resulted in a tax credit of Rs.0.58 million in 2023. As a consequence, net profit registered 582 percent year-on-year growth to clock in at Rs.16.82 million in 2023 with EPS of Rs.4.21 and NP margin of 7.71 percent.
Better farm economics and improved agricultural output enhanced the purchasing power of farmers during the year. This resulted in a 67 percent year-on-year improvement in the net sales of DAAG, which clocked in at Rs.362.31 million. Robust net sales were the result of improved off-take of wheat seed, paddy seeds, and sesame seeds. Seed processing/delinting was recorded at 3774 tons in 2024, up 14.19 percent year-on-year. The cost of sales grew by 65.11 percent in 2024 due to higher prices of raw materials. However, better sales mix and improved prices resulted in a 68.91 percent escalation in gross profit with GP margin recorded at 25.72 percent – the highest during the period under consideration. Administrative expenses surged by 16.30 percent during 2024 on account of higher payroll expenses, which were in line with inflation. Distribution expenses also escalated by 53.73 percent in 2024 due to higher salaries for the sales force, elevated freight charges, and hefty vehicle running expenses incurred during the year. The 650.73 percent improvement in other income in 2024 is the result of gain recognized on the disposal of fixed assets during the year. DAAG posted an operating profit that was 142.28 percent higher than the operating profit in 2024, with the OP margin clocking in at 14.89 percent. Finance cost mounted by 686.75 percent in 2024 due to increased short-term loans obtained during the period, coupled with a higher discount rate. High finance cost marred the bottomline, which dwindled by 55.49 percent to clock in at Rs.7.487 million in 2024. This translated into EPS of Rs.1.87 and an NP margin of 2 percent.
Recent Performance (1HFY25)
During the first half of the ongoing fiscal year, DAAG’s net sales dipped by 2.45 percent to clock in at Rs.186.45 million. The massive reduction in the prices of wheat crop took its toll on the purchasing power of farmers and the overall liquidity of the sector. The cost of sales dipped by 6.43 percent in 1HFY25. This resulted in a 29.55 percent higher gross profit recorded during the period, with GP margin clocking in at 14.69 percent versus GP margin of 11 percent posted in 1HFY24. Administrative expenses surged by 45.52 percent in 1HFY25 due to inflationary pressure. Distribution expenses ticked up by 9.11 percent. Higher operating expenses pushed down operating profit by 24.6 percent in 1HFY25, with OP margin recorded at 2.19 percent versus an OP margin of 2.83 percent recorded in 1HFY24. Finance cost escalated by 27.12 percent in 1HFY25 due to increased short-term borrowings obtained during the period. DAAG posted a net loss of Rs.22.636 million in 1HFY25 versus a net loss of Rs.16.774 million recorded during the same period last year. Loss per share also enlarged from Rs.4.19 in 1HFY24 to Rs.5.66 in 1HFY25.
Future Outlook
DAAG has invested in new seed varieties of cotton, corn, and wheat, besides tapping the vegetable seeds market. This will improve the core income of the company. Furthermore, delinting and processing of seeds for third parties will add to the other income of the company. Third-party seed cultivation will continue to keep the cost in check. All these factors signal robust financial performance in the future.
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