Hope you are doing well.
If you love eating non-veg, specially Chicken and Eggs, there's a high probability you might be aware of the brand "Venky's".
Venky's India is a part of the VH Group (Venkateshwara Hatcheries) and is primarily engaged in the business of production and sale of day old broiler chicks, layer chicks, chicken processing (including ready to eat products), production of SPF eggs, manufacturing of medicines and poultry feed supplements and processing of soya.
Last few quarters have been really bad for the company on account of significant rise in the feed cost. The stock is down 40% from the peak and we therefore decided to look at the company.
Below, we have shared our notes from the Q4 FY 22 con-call of the company. Hope you find them useful for your own investments or to add the stock to your watch list:
[New Special situation opportunity] – Sometime back, we released new special situation recommendation for our Alpha + members. It looks like a relatively low downside opportunity based on the combination of factors discussed in our report. The holding period for this one should be around 3-4 months
Regarding upside, 20-50% is possible from our recommended levels; however, nothing can be said with certainty in such cases. For details Click HERE
Venky's (India) - Q4 FY 22 con-call notes
- Venky’s has registered satisfactory performance for the quarter ended March 31, 2022, in spite of challenges in the form of high feed cost
- Segment wise if you see - Poultry and Poultry related products the turnover increased 20% over the last year 2021
- In the animal health products the growth is almost 34% over last year. In oil seed segment the growth is almost 63% over the last year, so overall percentage if you see the turnover, it is 42% higher than last year
- Poultry segment -
- The increase in feed prices has impacted the profit margins for the year ended March 31, 2022. The average price of soya was approximately Rs 67 per kg during the year as compared to Rs 41 per kg for the year ended March 2021
- There is a good improvement as far as broiler bird prices are concerned. However, the ingredient prices and that too particularly soya price was extremely high in FY 2022 as compared to FY 2021
- With regard to ingredient prices, Soya prices are expected to cool down on account of the following - government of India has cleared import for 5.5 million metric ton that will give a kind of relief to the industry
- Feed cost per kg - For Q4 it was Rs 37.08 against Rs 27.76 for Q4 FY 21
- If you see soya bean cost to total feed cost, it is 25%
- Realizations - When you talk about eggs I am taking it as a broiler hatching egg because we are not into commercial eggs. If we see the past three years then in 2019 – 2020 the average realization was Rs 18.77, 2021 it was Rs 24.11, however in 2021 – 2022 the realization dropped on account of extreme increase in the ingredient prices and it dropped to Rs 22.45
- Same was the case with broiler chicks, in 2019 – 2020 the average realization was Rs 23.00, 2021 it was Rs 32.00 and 2021 – 2022 it dropped to Rs 28.50
- QSR - When we calculate on the financial terms, the QSRs contribute to our processed food division to around 35%. We expect a growth of yearly 25% plus on sales to QSRs
- We deliver to majority of the QSRs particularly Vista Foods, McDonald, KFC, Pizza Hut and Taco Bell. These QSRs are now stabilizing their businesses and also increasing their business
- We signed agreements with these QSRs for a year and now we have changed our pattern of agreements with the QSR which is for a quarter or for the six months, so we are expecting a better profitability
- AHP (Animal healthcare Products) - The company had announced setting up second unit under its AHP segment in December 2021. Construction activity of the plant has commenced and is expected to be completed by November – December 2022
- For AHP our expansion project will likely complete by end of this financial year and revenues will be reflected in 2023 – 2024, which will give us additional revenues of around 30% in the phase-1
- In AHP unit, Rs 35 Crores is our initial capital investment and in phase-2 there will be another Rs 12 Crores to Rs 15 Crores
- Guidance - FY 2022 was an abnormal year with regard to the profitability, with regard to the overall abnormal increment in Soya prices
- If we compare 2022 versus 2023 all the predictions are satisfactory, and we expect a relief for FY 2023 as compared to FY 2022
We are working on few interesting stock investment opportunities and will share something good in the next few days. You can get it along with our other Premium Members by signing up HERE
Disclaimer: This is not a recommendation to buy/sell Venky's India. These notes are as announced by the companies on exchanges and only for the purpose of information and education.
SEBI Research Analyst Registration No. INH100001690
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
Details of Associate: Not Applicable
Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.
The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision
This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.
We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.
Disclaimer: You can access it here - LINK
Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – No
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months – No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject company – No