BackVenky’s shares up 279% in 2017. Is cow slaughter crackdown aiding sales?
Venky's share price has risen 279% in 2017 and the stock touched a record high of Rs1,636 in intraday trading on Thursday
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Mumbai: The beef ban and the crackdown on illegal meat shops and slaughterhouses by some states may have benefited Venky’s (India) Ltd, whose shares are burning up Dalal Street.
Shares of Venky’s, which specializes in poultry products (including broiler chicken, day-old broiler chicks and eggs), chicken feed and animal health products, have risen 279% in 2017. They touched a record high of Rs1,636 in intraday trading on Thursday. In contrast, the Sensex and the Nifty (benchmark indices of BSE and the National Stock Exchange) are up 15.9% and 16.1%, respectively.
Kotak Securities Ltd says Venky’s stock could potentially double on high likelihood of strong gross margins running through to 2018-19. According to the research firm, measures take by the poultry industry from 2015-16 to correct the supply-demand mismatch have resulted in an increase in prices.
“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," Ritwik Rai, an analyst at Kotak Securities, said in a report on 29 June.
The research firm added that Venky’s operates in the northern and western parts of India, which have shown greater alacrity in cracking down on illegal slaughterhouses and banning beef. “On a steady-state basis, without restrictions on other meats and without proactive steps to ramp up rural growth, we believe the chicken consumption growth in India is likely to be in the region of 7-8%," the report said.
Another factor aiding the company’s performance is the fall in the prices of soya and corn—both used as chicken feed.
Kotak Securities estimates that Venky’s earnings will grow at 42% annualized rate between 2016-17 and 2018-19 and expect significantly improved return ratios and reduction in debt.
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