KGI Securities has initiated coverage on wheat and milk producer Don Agro International with an “outperform” rating and target price of 64 cents.
The brokerage believes the company Russia-based company is a “bowl full of opportunities”.
See also: Don Agro, off recent lows, bulks up with more land; eyes lucrative market of organic crops
Citing estimates from the US Department of Agriculture’s Foreign Agricultural Service (USDA FAS), KGI notes that wheat demand is forecast to grow almost 18% from 2019 to 2029.
Moreover, wheat, as a staple food source, provides a resilient revenue stream for Don Agro despite changing economic trends, it says.
In addition, the company’s wheat fields in the Rostov and Volgograd regions are among the most fertile in Russia.
For FY2020 ended Dec 31, Don Agro reported y-o-y earnings growth of 66% to $8.7 million.
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The FY2020 earnings were more than double the company's earnings in FY2016 and FY2017, notes KGI.
“Favourably located and well managed, Don Agro is in a sweet spot,” KGI analysts Joel Ng and Chen Guangzhi write in a note dated July 23.
As at 2.11 pm, Don Agro was up 3.5 cents or 9% at 42.5 cents with 245,300 shares changed hands.
