In a note to investors, JP Morgan analysts broke down the highlights of their meeting with AGCO CFO Damion Audia and VP of Investor Relations Greg Peterson at SIMA in Paris, France.

AGCO stated farmer education is the key to boosting precision sales, with a goal of more than doubling sales to over $900 million by 2025. According to the note, Precision Planting's aftermarket/OEM mix is 80%/20%. 

"As a reference, management noted there are ~90K planters in Europe with ~7% typically replaced with new machines each year, while the remaining ~93% is the core addressable market for AGCO’s retrofit strategy," the note said.

Precision Planting will grow to 60 dealers in Europe by the end of 2022 and expects 25% growth next year. It is also opening a new operations center in Illinois that will double its capacity (500K sq ft) to fuel further growth. 

"By more than doubling sales of precision ag to $900MM by 2025, we see the opportunity to improve enterprise operating margin by 30-50 bps on FY22E sales as a base. PP products were not historically made for use in European brands, but now AGCO is investing in R&D to ensure compatibility and thus accelerate growth," said JP Morgan analysts.

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