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Monday, June 20, 2011

Venky's (India) Ltd:-Buy/sell/,growth prospects and recommendation,news and results,target price and analysis,views and outlook,multibagger

Calls review:Venky's (India) Ltd.
Recommended price:175(22.10.09)
Present pricr:560

Scripscan:Venky's (India) Ltd.

Story:Think chicken and the first name which comes to mind is Venky’s.Venkys India Ltd. is a leading producer of poultry products in India. The company’s product portfolio includes animal health products, pellet feeds, processed, and further processed chicken products, solvent oil extraction, and Specific Pathogen Free Eggs.The Venkateshwara Hatcheries Group also caters to the related requirements of the poultry sector, such as poultry feed, vaccines, medicines and health products. The Poultry & Poultry Products business accounts for lion’s share of the revenues of the company. The other major contributors to revenue include Poultry Feed, Animal Health Products, and Solvent Extraction. Diversifying from mainstream poultry products, Venkys (India) Limited has added to its credit, manufacturing facilities for nutritional health products for humans, and pet food and health care products. The company has steadily grown to over 30 units spread across India.The company also produces high-tech specific pathogen-free eggs (SPFE). The company's Specific Pathogen Free Egg unit is among four such units in the world and the only one of its kind in the developing world. These eggs are used for making vaccines for human beings and chicken as well. Though this business accounts for only 6% of total revenues, its profitability is very high. The company produces a wide range of animal health products like antibiotics, growth promoters and feed supplements.We like the business model of the company – the company has presence in both the Institutional and Retail segment. Venky’s is a national brand and enjoys the positioning of a hygienic premium product and has a nationwide distribution network. The company faces competition from the unorganized sector in the Processed Chicken segment. However, the company has carved a niche for itself and supplies its products to quality-conscious institutional consumers in the hospitality industry. These include Domino's, KFC, Mc Donalds and Pizza Hut, major five star hotels and flight kitchens. The company is witnessing a good growth in demand from this segment. The company also sells various poultry products in the ready-to-eat segment through a nationwide distribution network. These products are sold under the brand name VENKY’S and are available at Supermarkets and retail stores in all major cities in India.Taking a stake in Venky’s India is akin to taking an exposure in the Indian Poultry industry, at a ridiculously low market cap of under Rs.170crores. The stock is currently underowned by the Institutional Investor. However, given the size and scale of operations of the company and its leadership position in the Industry, the stock has the potential to attract the Institutional Investors.Our major concern is a host of other promoter controlled companies involved in the same business, which could lead to a conflict of interest with the public listed company. Other concerns being outbreak of Bird Flu and rise in Maize prices, which can adversely effect profitability.The market cap of this leader of the poultry industry at its current price of Rs.175 is Rs.170crores. This for a business which paid a Tax of Rs.10 crores, generated a Cash Profit of Rs.29 crores (for FY 08-09) and has a track record of uninterrupted dividends for last 19 years.A great buy altogther for a period of 3-5 years.

Present update:Quoting at 500 odd but looks still as good a it was 2 years ago.Count your chicken before they are hatched.

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