Don Agro International - SAC Capital 2020-12-07: A Leading Agriculture Business In Russia.


Don Agro International - A Leading Agriculture Business In Russia.

  • Don Agro International (SGX:GRQ) and its subsidiaries (collectively the “Group” or “Don Agro”) are one of the largest agricultural companies in the Rostov region in Russia that focus on crops and milk production.
  • Don Agro operates a controlled land bank of over 53,000 hectares (approximately 41,000 hectares are arable land). Of this landbank, more than 15,000 hectares are owned. It also owns more than 4,000 head of dairy cattle (approximately 2,000 are milking cows) across 3 production divisions.
  • Strategically located in one of the most fertile regions of Russia and situated in close proximity to major international ports, Don Agro is able to produce quality and better yielding agricultural products and milk while achieving cost advantage through lower transportation costs.

Rising importance of the agricultural sector in Russia

  • The agriculture sector is paramount to the Russian economy. According to the Russian Ministry of Agriculture, a long-term grain industry development program was adopted in 2019. Russia is expected to be harvesting an average of 140 million tonnes of grain per year until 2035.
  • The Ministry also announced that approximately 281 billion Russian Rubles or US$4.3 billion will be invested into various infrastructure projects to improve logistics in the Russian grain and feed industries. The anticipated grain production increase is expected to drive the value of Russia’s agricultural exports to US$45 billion in 2030.

Strong and growing demand for Don Agro’s products

  • According to a report by the United States Department of Agriculture (the “US$A”) in 2019, demand for wheat is experiencing major growth. In particular, Southeast Asia has become the world’s top wheat importing region as a result of a shift in consumption habits to wheat as diets diversify. The lack of domestic production of wheat (less than 1% of demand requirements) and the growth in consumption has led directly to higher import demand for wheat.
  • Don Agro is well-positioned to capture the growth of the market. Domestically, demand for Don Agro’s products remains high owing to the import ban on EU food and agriculture produce and cheaper local goods relative to imported goods, as a result of the depreciation of the Russian Ruble.

Key risks:

Lam Wang Kwan SAC Capital Research | https://www.saccapital.com.sg/ 2020-12-07
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