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Monday, June 14, 2010

Venkys India: Year End March 2010 Result Review: Hold


Venkys is the largest chicken company in India.
- Venkys was first recommended on May 29,2009 at Rs 147 per share.
- Venkys was recommended as a hold on Dec 25,2009 at a price of 239 per share.

Venkys today is quoting at Rs 420.45 per share and today we will review March 2010 results.
Market Cap: 394.87Cr Annual March 2010 Sales: 705.47Cr, Debt March 2010: 89.92Cr


The results are great in all sense..
1. Operating profit margins have improved from 7.3% (2009) to 12.92% (2010)
2. Taxes paid as percentage of sales has also improved from 1.84% (2009) to 3.96%(2010)
3. Reserves have also increased from 147.68Cr (25.94% year 2009) to 197.21Cr ( 27.95% year 2010)

I think right now Venky's has put its best foot forward.. and all weak hands have sold off.
Infact Serum institute one of the largest vaccine manufacturers in the world (pvt company) has sold off its 1+% stake in Venky's..

The stock could go up further from these levels because we have not seen the pump yet (Flow of positive news in the media) Also the stock was previously available at a deep discount and right now the valuations are normal.. Enterprise value: 394.87+89.92-62.5 = 422.29Cr which is still 0.59 times its March 2010 sales(705.47Cr).

I must also warn you that the current levels are multi year high for Venky's stock..so buying now and if the stock turns negative you could see your stock value fall dramatically...
There has been some news flow about Venky's.. recently
1. Company is setting up a 4500Tonnes animal feed plant in Vietnam
2. Company is planning additional ventures in Bangaladesh and Philippines
3. Company is also going to set up an animal vaccine plant in Switzerland

Conclusion: Venky's has a lot of depth and I am sure the company is capable of providing further growth.. With a growing Indian economy it is a know fact that protein consumption increases dramatically with increase in per capita income levels..however ..at these levels we also need to consider how to retain the stock price appreciation as profits..

Strategy:
If you expect Venky's to do exceptionally well (which I do!!) then you can have the following strategy.. every 30% rise in profit sell 10% of your holding till you reach 50% of current holdings..
So 1000 shares: CMP 420.45
Next Sell price: 546 Sell 100 shares
Next Sell Price: 672.72 Sell 100 shares
..
Instead of 30% you could set 20% or 50% as your sell target depending on your comfort level with company fundamentals..

PN:Here is the link to the CNBC TV18 interview of Venky's management(Link)

5 comments:

Anonymous said...

venkys on fire i bought it thanks

What'sUp Prahalad said...

Anonymous:

Congratulations and happy investing ..
do have a strategy in place to book profits ..

With Best Regards
-WhatsUpPrahalad

Vijay Chandrakar said...

Dear Prahalad,

Do you see value at this point in Venkys at current price. My take is Indians have recently started eating chicken and there is long way to go. Do you see it giving good returns in two to three years perspective.

Regards,
Vijay

What'sUp Prahalad said...

Vijay:
Jan 6,2010 (ie last year Venky's stock price was 256)

today the stock price is 568.65 ..

So even on a 1 year perspective we have holders with 100% tax free profits in venky's..

I think the stock needs some more time to settle down..

Generally it would be best to avoid the stock for a year.. see how the results pan out .. generally companies will not be able to sustain the high margins..(if they are inflated numbers..)

Its quite easy for promoters to hike margins for a 1 year term.. but to do it successfully for a number of years is difficult..

Conclusion: Lets wait for some more time..

=happy investing
whatsup-indianstockideas.blogspot.com

Vijay Chandrakar said...

Thanks man.