Advanta

Advanta (CMP: Rs951)

Mkt Cap: Rs16bn; US$401m Bloomberg code (ADV IN)

Advanta’s Q4CY07 results are marginally ahead of estimates driven by strong revenue growth and higher other income. Advanta has reported revenues of Rs1.57bn against estimates of Rs1.37bn with net profits of Rs251mn (against estimates of Rs212mn). Key positives include very strong growth all across key geographies particularly Thailand and Argentina. Australia regained momentum in 2HCY07 after a rain impacted first half. India business has underperformed due to loss of sales in BT cotton and overall softness in the hybrid rice market. Advanta has taken multiple steps to strengthen its business model in the first full year under the new management and we expect the results of these initiatives to be evident in coming years. We have increased our CY08 earning estimate by 5% to account for the recent acquisitions. We maintain that with its geographically diversified business model and strong R&D capabilities, Advanta is one of the best stocks to play the agriculture theme in developing countries like India, Asia Pacific and Latin America. Maintain Outperformer We expect Advanta to continue pursuing inorganic growth and incremental acquisitions will be upsides to our estimates.