SECURITIES firm, Morgan & Co, has predicted that Seed Co Limited’s stock price will surge to 33,6 US cents per share over the next 12 months, driven by strong seed sales later this year.
At that level, Seed Co’s valuation would rise to US$83,78 million, an increase of about 251% from its current value.
Seed Co’s share price closed at ZiG2,53 per share on the Zimbabwe Stock Exchange (ZSE), translating to 9,57 US cents per share.
In a statement, Morgan & Co said seed sales under the firm were expected to be boosted by the transition from the El Nino weather phenomenon from last year to La Nina.
La Nina is a weather phenomenon that has average to above-normal rainfall.
“...Q4 to ride on strong Q3 but high interest rates likely to cut into earnings the transition to La Nina is expected to drive strong seed sales the second half, especially among early maturity varieties,” Morgan & Co said.
“This will be complemented by strong demand coming from the government’s summer agriculture plan.”
However, Morgan & Co said the tight monetary and fiscal policies could result in a surge of receivables while high interest rates would likely drag earnings growth through the business’ seasonality-induced working capital gaps.
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“We revise our 12-month price target upwards to 33,60 US cents mainly because of stronger-than expected sales volumes and margins recovery regardless of tighter ZWG liquidity. We maintain our BUY recommendation on the counter.”
The firm warned that tight monetary and fiscal policies could result in a surge in receivables, while high interest rates will likely drag earnings growth through the business seasonality-induced working capital gaps.
In the nine months to December 2024, Seed Co sales rose 48% to US$62,7 million, while operating profit improved by 25% to US$25,8 million.
“The transition from El Nino to La Nina is expected to drive strong seed sales in the second half, especially among early maturity varieties given sparse rainfall to date,” Morgan & Co said.
“This will be complemented by demand coming from the government’s summer agriculture plan, which allocated ZiG$1,4 billion (US$100 million) for procurement of inputs in the agriculture sector at the beginning of the year.”
