Venkys (India) Ltd –Feeding India

Venkys (India) Ltd’s major business segment is poultry and poultry products which consists of production and sale of day old broiler and layer chicks, processed chicken products, specific pathogen free eggs and poultry. Their products include pellet feeds, animal health products, processed and further processed chicken products, SPF eggs, solvent oil extraction, nutritional health products for humans, and pet food & health care products. The company operates through 3 business segments that are poultry and poultry products, animal health products and oilseed.Venkys (India) Ltd is one of the Multibagger Stocks, identified by Dynamic Research based on technical and fundamental research.Venkys share price has touched a 52 week high of Rs. 577 on 08 -Sep -2016 and a 52 week low of Rs.220 on 12 -Feb -2016, and is currently trading at Rs.815.

Share HoldingThe promoters holding in Venkys stood at 56.11%, while Institutions and Non-Institutions held 0.15% and 43.75% respectively.Financial AnalysisQuarterly ResultsFor the quarter ended June 2016, the total income from operations Venkys (India) Ltd has reported a growth of 15.39 % on Y-o-Y basis to Rs. 644.19 cr as against Rs. 558.28 cr during the same quarter last year. An enhancement in total income from operations suggests strong development in business.The operating profit of Venkys on standalone has shown a growth of 108.34% Y-o-Y to Rs. 75.65 cr as against Rs. 36.31 cr during the same quarter last year.The net profit of Venkys has registered a growth of 159.04% Y-o-Y to Rs.40.98 cr as against Rs 15.82 cr during the same quarter previous year. The increase in net profit is on back of increase in sale.The earnings per share of the company have grown by 77.55% Y-o-Y to Rs. 29.09 as against Rs 16.84 during the same quarter last year.

Annual ResultsFor the year ended March 31, 2016 Venkys on standalone basis reported net sales of Rs. 2121.86 cr compared to Rs. 1730.81 cr FY2015.For the year ended March 31, 2016 Venkys on standalone basis reported net profit of Rs. 29.85 cr compared to profit of Rs. 18.70 cr FY2015.

Ratio AnalysisSl no.NameRatio1Current Ratio (x)2.552Quick Ratio (x)23Dividend yield (%)0.974Interest Coverage ratio (x)1.945Debt equity ratio (x)1.786Return on Asset (%)2.377Return on Equity (%)7.65

The above ratio suggests that the company is operating with a debt-equity ratio of 1.78. Venkys can meet up with the interest expenses pertaining to its debt obligations. The company has generated positive returns with shareholders fund.

ExpansionAll the expansion programmes of the Company i.e. to augment capacities in poultry and poultry products segment and setting up a new plant for processing of soya seeds have been completed. Setting up of Venky’s XPRS outlets at various locations is under way.

Investment Rationale

• The world economy continues to grow at a moderate rate and recent data reflects marginal pick-up in growth in some advanced economies.
• The poultry industry is expected to maintain its growth rates in the coming years as well. Presently, the poultry industry is a Rs. 95,000 crore industry that provides direct and indirect employment to 5.0 million people and also supports the economy of over 2 crore agricultural farmers, especially the maize and soya grower, dependent on this industry. 75% to 80% of the cost of production in the poultry industry consists of feed ingredients, like maize and soya.
• With an annual production of 67,000 million eggs, India ranks second in the world in egg production. The broiler production is estimated at 4 million tons of chicken meat and India ranks 3rd in the world.
• 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.
• Venky’s is one of the largest poultry producers in the country and is well equipped to cater to this growing demand.
• Factors like increasing disposable income and rapid urbanization are expected to contribute to the growth in demand for poultry products.
• The outlook for the year 2016-17 is expected to be better as compared to the year ended 31st March, 2016.

At CMP of Rs.513 the Venky share price closed at a P/E of 13.14, the market cap of the company is 719.58 crore. As per Dynamic Levels we recommend a buy on Venkys (India) Ltd at CMP with a price target of Rs.570.

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