Venky’s shares up 279% in 2017: Is cow slaughter crackdown aiding sales?
MUMBAI: As few BJP-ruled states crack down on illegal meat shops, shares of a poultry firm are making a killing at Dalal Street. Share prices of Venky’s (India), which specialises in poultry products (including broiler chicken, day-old broiler chicks, and eggs), production of chicken feed and animal health products, have jumped by a whopping 273.73% in a year period ending June 29.
It touched record high at ₹1,636 per share intraday on Thursday.
In 2017 so far, the stock has increased 279.49%. In contrast, BSE Sensex and Nifty are up 15.89% and 16.1% respectively, while BSE Midcap gained 20.95% while BSE Smallcap grew 27.10% in tyear-to-date period.
Kotak Securities Limited believes Venky’s stock could potentially double on high likelihood of strong gross margins running through to FY19. According to the research firm, measures taken by the industry from FY15-16 to correct supplydemand mismatch in poultry have resulted in chicken price increase.
“The protection of cows and enforcement of various state laws to restrict and discourage cow slaughter has acquired a new urgency. We believe that the actions by various state governments on this count are likely to place upward pressure on prices of other meats, especially mutton and chicken,” said Ritwik Rai, analyst, Kotak Securities in a report on June 29.
The research firm added that as Venky’s operates in North and West India regions, which have shown greater activity in ban on slaughter-houses and beef consumption, it may result in stronger volume and pricing growth way forward.
“On a steady-state basis, without restrictions on other meats and without proactive steps to ramp up rural growth, we believe chicken consumption growth in India is likely to be 7-8%,” the report said.
Kotak Securities estimates 42% compound annual growth rate (CAGR) in earnings through FY17-FY19 and expect significantly improved return ratios and reduction in debt.
In FY17, Venky’s reported 17% growth in sales, and 5.2 percentage points expansion in EBITDA margin, on account of improvement in prices.