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Please find details on the value pick of the month "Venkys India Ltd. (BSE CODE - 523261)"
Venky's India
Venky's (India) Ltd (VIL) formerly known as Western Hatcheries (WHL) was incorporated in 1976 and is a part of Rs.1300 crore Venkateswara Hatcheries (VH) Group The company, engaged in poultry breeding, producing eggs and hatching layer and broiler chicks and is one of the most integrated poultry player in the country. It is also involved in rearing of pureline breeds, grandparent and parent stock, sale of commercial day old chicks (DOCs), processed chicken, as well as related requirements of the sector such as poultry feed, medicines and health products.
Venky’s India, the reason is that this company is a leader in its business segment. When one thinks of poultry, Venky’s is the number one player in the industry and this is an industry where there is no distant number 2. So the business is very good. During the financial year 2008-09, industrial production growth came down as compared to the previous year. While most of the industries showed a decline, the poultry industry managed to withstand the impact of global meltdown as the industry in India is primarily domestic demand driven.
Inflation and other growth drivers
Although the figure for WPI (Wholesale Price index) is negative, but if one considers the CPI (Consumer price Index), then its very clear that the common man is still reeling under the pressure of increasing food prices. Everyone is aware that prices for vegetables and other food items have skyrocketed. Prices of all commodities - be it rice, wheat or vegetables are going up. I think this is going to lead to increased demand for poultry products, of course there are some very evident risk in their business that of the bird flu, which affect the sentiments for sometime, but such news remain largely shortlived.
The vast gap between our present per capita consumption (52 eggs and 3.1 kg of poultry meat) and National Institute of Nutrition (NIN) recommended level (180 eggs and 11 kg of poultry meat) offers a tremendous opportunity for the growth of poultry industry for several years to come.
The allocation for Mid-Day Meal program has been stepped up significantly by Central and State Governments. The Tamil Nadu Government has increased it from 2 eggs to 3 eggs per week. NECC is constantly following up with various State Governments for Inclusion of eggs in the Mid-Day Meal Programme.
Performance
The Company's sales turnover registered a growth of 9% for the year FY2008-09 at Rs.570.26 crores as compared to Rs.524.89 crores In the previous year. Profit before tax declined by 30% at Rs.31.04 crores as compared to Rs.41.82 crores.
The profitability of the Company was affected due to steep increase in price of soya and maize (the key ingredients of poultry feed) and the Company could not pass on the increase to its customers especially during the period July, 2008 to September, 2008.
However with increasing prices for various other food items, I believe that this company will be able to pass on the increased maize prices in the form of higher poultry prices because of which, the prices of poultry products can go up in the future. There's an improvement in performance for June quarter where the sales turnover registered a growth of 19% at Rs 169 Cr over June'08. Also the PAT improved by 15% at Rs 11.1 Cr for the same period.
Valuations
So this is a company where we like the business, we like the leadership status of the company, the fact that it is a scalable business, the fact that it is trading at a very reasonable price to earning ratio of about 6 and a very reasonable marketcap of just about Rs 130 crore, so from these levels the downside looks restricted. The fact that the current market price is below the book value of Rs 167, provides a very good investment opportunity, in terms of both valuations and growth outlook.
Venky's (India) Ltd (VIL) formerly known as Western Hatcheries (WHL) was incorporated in 1976 and is a part of Rs.1300 crore Venkateswara Hatcheries (VH) Group The company, engaged in poultry breeding, producing eggs and hatching layer and broiler chicks and is one of the most integrated poultry player in the country. It is also involved in rearing of pureline breeds, grandparent and parent stock, sale of commercial day old chicks (DOCs), processed chicken, as well as related requirements of the sector such as poultry feed, medicines and health products.
Venky’s India, the reason is that this company is a leader in its business segment. When one thinks of poultry, Venky’s is the number one player in the industry and this is an industry where there is no distant number 2. So the business is very good. During the financial year 2008-09, industrial production growth came down as compared to the previous year. While most of the industries showed a decline, the poultry industry managed to withstand the impact of global meltdown as the industry in India is primarily domestic demand driven.
Inflation and other growth drivers
Although the figure for WPI (Wholesale Price index) is negative, but if one considers the CPI (Consumer price Index), then its very clear that the common man is still reeling under the pressure of increasing food prices. Everyone is aware that prices for vegetables and other food items have skyrocketed. Prices of all commodities - be it rice, wheat or vegetables are going up. I think this is going to lead to increased demand for poultry products, of course there are some very evident risk in their business that of the bird flu, which affect the sentiments for sometime, but such news remain largely shortlived.
The vast gap between our present per capita consumption (52 eggs and 3.1 kg of poultry meat) and National Institute of Nutrition (NIN) recommended level (180 eggs and 11 kg of poultry meat) offers a tremendous opportunity for the growth of poultry industry for several years to come.
The allocation for Mid-Day Meal program has been stepped up significantly by Central and State Governments. The Tamil Nadu Government has increased it from 2 eggs to 3 eggs per week. NECC is constantly following up with various State Governments for Inclusion of eggs in the Mid-Day Meal Programme.
Performance
The Company's sales turnover registered a growth of 9% for the year FY2008-09 at Rs.570.26 crores as compared to Rs.524.89 crores In the previous year. Profit before tax declined by 30% at Rs.31.04 crores as compared to Rs.41.82 crores.
The profitability of the Company was affected due to steep increase in price of soya and maize (the key ingredients of poultry feed) and the Company could not pass on the increase to its customers especially during the period July, 2008 to September, 2008.
However with increasing prices for various other food items, I believe that this company will be able to pass on the increased maize prices in the form of higher poultry prices because of which, the prices of poultry products can go up in the future. There's an improvement in performance for June quarter where the sales turnover registered a growth of 19% at Rs 169 Cr over June'08. Also the PAT improved by 15% at Rs 11.1 Cr for the same period.
Valuations
So this is a company where we like the business, we like the leadership status of the company, the fact that it is a scalable business, the fact that it is trading at a very reasonable price to earning ratio of about 6 and a very reasonable marketcap of just about Rs 130 crore, so from these levels the downside looks restricted. The fact that the current market price is below the book value of Rs 167, provides a very good investment opportunity, in terms of both valuations and growth outlook.
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Basic Info:-
- CMP = Rs 144-147, as on Sept 14th 2009. [Check the CMP Now!!!]
- EPS = 23.42 & PE = 6.28
- Book Value = 167
- Mcap = 130-138Cr
- 52 week's high/low = Rs 157/65
- During last 5 years : Lowest price = Rs70 & Lowest PE = 2.61 in Jan 2009
- During last 5 years : Highest price = Rs 281 & Highest PE = 17.39 in Jan 2008
-Team MPS
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