Venkys India...Spicy multibagger

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Company Name: Venky’s India (BSE code: 523261)

Industry: Packaged foods

Recommendation: Buy in the range of Rs.1350-1450 for long term holders and add on dips at Rs.1100
(Short term holders can buy with expected price of Rs.1650-1700 in one year frame with a medium risk since it is trading at 52 week high)

Investment horizon: 4-5 years

About the company:
The VH group was established in 1971, when motivated by his wife Late Smt. Uttaradevi Rao

Our founder Chairman Late Padmashree B.V Rao, fondly referred to as “The Father of the Indian Poultry Industry”, established Venkateshwara Hatcheries Pvt. Ltd. in Pune (India). Today the group is popularly known the world over as “Venky’s”. With a unique combination of expertise and experience and supported by strategic collaborations, the company diversified its activities to include SPF eggs, chicken and eggs processing, broiler and layer breeding, genetic research and Poultry diseases diagnostic, Poultry vaccines and feed supplements, vaccine production, bio-security products, Poultry feed & equipments, nutritional health products, soya bean extract and many more. Today the group is the largest fully integrated poultry group in Asia. The VH group today plays proud parent to a number of reputed organizations under its wide umbrella and successfully caters to poultry and its allied sectors.The pioneering efforts of the VH Group have been well rewarded with several national and international awards
Venky’s is an integrated player in the poultry business. Venky’s rears chicken which is sold as live birds to distributors and which are finally sold as chicken meat.  







Pros:
  • Institutions are increasing their holdings
  • Strong promoter holding 56%
  • Demand of chicken to grow at a faster pace of 20%p.a. The vast gap between our present per capita consumption (64 eggs and 3.5 kg. of meat) and National Institute of Nutrition (NIN) recommended level (180 eggs and 11 kg of meat) offers an excellent opportunity for the growth of poultry industry at least for the next two decades.
  • Innovation and Quality are the main focus
  • Reaching out the Customers through technology
  • (Packed Raw Chicken –easy to make the fried items available at bigbasket.com)
  • It could be the next Britannia Industries

Cons:
  • The Industry is vulnerable to certain risks like death of chicks due to disease
  • Raw material cost is being regulated
  • Even though debt is used for meeting the increased demand but the inherent risks involved in the industry influences the decision making of the management
  • Low return on equity


Financial Highlights:
  • Healthy dividend pay-out ratio-20%
  • Top line is growing at 20% which is consistent and OPM is at around 6% in FY 16 and it is at 11% in FY 17
  • The company is acquiring the market share rapidly with slight increase in the OPM gives a rapid increase in Net profits
  • Debt is at Rs.700 crores which is 5 times the Net profits of FY 16. The company has raised the debt only to cater the growing demand.
  • The stock is trading at a P/E ratio of 16 whereas the other companies in the industry like Hatsun and Glaxosmith are trading at 35 P/E
  • Sales per share is at Rs.1650
  • Average Return on equity for last 3 years is at 7.65
  • Credit rating of A1 from ICRA


Narration
2012
2013
2014
2015
2016
2017
Sales
           992.46
       1,426.43
       1,736.12
       1,730.81
       2,121.86
 2,476.36
Expenses
           924.33
       1,366.05
       1,669.52
       1,628.93
       1,993.77
 2,198.21
Op Profit
             68.13
             60.38
             66.60
           101.88
           128.09
     278.15
OPM
                6.86
                4.23
                3.84
                5.89
                6.04
        11.23
Net profit
             41.06
             24.78
             34.04
             18.70
             29.85
     124.75
EPS
             29.15
             17.59
             24.16
             13.27
             21.19
        88.55
Price to earning
                8.95
             20.81
             13.94
             16.64
             17.85
        16.10
Price
           260.91
           366.04
           336.78
           220.86
           378.21
 1,425.35


Management:
  • Anuradha J Desai - Chairperson VH group
  • B Venkatesh rao – MD Uttara foods & Feeds Ltd
  • Balaji rao-- Managing director, Venkys india ltd
  • Jitendra M desai-MD Venkateshwara Research & Breeding Farm Pvt. Ltd.

Rating:

  • Technical Rating: 85
  • Fundamental Rating: 70
  • Overall rating: 78


Valuations: With the investment horizon given, considering all the inputs of estimates  the valuations are at Rs. 6500

(The valuations are calculated on the basis of financial inputs but investors are required to invest based on the business potential and business risks too) 

 ANNUAL REPORT FY 16

ANNUAL REPORT FY15

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