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Chhota (to) MOTA ideas - CALL UPDATE: Venky's India Ltd - BUY - TP Rs.2650 - Kotak

Posted On: 2017-09-20 10:29:30

Following some weakness in July/ early August, poultry prices have picked up significantly over the last one month. In the one month ending 15th Sep, broiler prices were, on average ~30% higher (y/y). Along with continued weakness in key raw material prices, these trends augur well for near-term earnings, and provide greater visibility on FY18 earnings (2HFY18 has a favorable base, due to demonetization). Our interaction with the management, at the company's AGM, indicates that the company is confident about medium-term earnings direction, and is committed to a zero-debt capital structure, which will enhance investor confidence. Based on the trends in input/ output prices, we raise our earnings estimates 4%/4% for FY18/FY19. Longer-term potential for Venky's (secular growth in chicken consumption, possible curtailments on beef consumption, and movement towards a higher B2C, processed chicken mis), is combining well with consistent earnings momentum (on a y/y basis) in the near/ medium term. Institutional ownership of the stock remains low, providing further reason to believe there is significant room for expansion in valuations, likely to 15X-16X FY19E PER, over the next 6-9 months. We raise our price target to Rs 2650 (June-end, CY18) (prior price target was Rs 2000, for March - end, 2018). Key risk is adverse outcome/ news-flow in the IT proceedings initiated against the company in May, 2017.

Shares of VENKY'S (INDIA) LTD. was last trading in BSE at Rs.2186.2 as compared to the previous close of Rs. 2176.05. The total number of shares traded during the day was 11191 in over 1155 trades.

The stock hit an intraday high of Rs. 2237.85 and intraday low of 2169.45. The net turnover during the day was Rs. 24674867.

Source: Equity Bulls

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