UP's crackdown on abattoirs has Venky's crowing on the Street
MUMBAI: Shares of poultry firm Venky's India stock have surged 40% in less than three weeks, as investors bet that the crackdown on unauthorised abattoirs by Uttar Pradesh could benefit organised players. Analysts said the move by India's most populous state after Yogi Adityanath took charge as its chief minister on March 19 has led to prices of chicken surging in Northern parts of the country.
Shares of Venky's - the only listed poultry firm in India - which were trading at Rs 802 before March 19, ended at Rs 1,122 on Wednesday.
“The sudden crackdown on illegal slaughterhouses and meat shops across Uttar Pradesh has created shortage of meat in some of the northern states and as a result, prices of chicken have risen,“ said Shalini Gupta, analyst, Quantum Securities.
Prices of chicken in some parts of UP and Delhi have risen from Rs 180 to as high as Rs 240 in last two weeks, according to news reports.
More than half of Venky's revenues come from poultry business. This segment has posted 23% growth for the quarter ended December 2016 compared to its overall revenue growth of 18%.
A top Venky's official said the company is yet to see the impact of the move by Uttar Pradesh.
“Currently , there's no positive or negative impact on our business because of UP issues, but the real impact will be felt only after the nine-day-long Navratri," said K G Anand, general manager, Venkateshwara Hatcheries, the parent company of Venky's."Generally chicken prices soar after Navratri."
At current market price, the stock is trading at 14.5 times its estimated FY17 earnings and 12.5 times its FY18 earnings. Analysts said the measure by UP would benefit companies like Venky's only temporarily.
"The benefit for companies like Venky's will be only temporary till the registration process of meat shops and slaughterhouses in UP sorted out. I don't think it will have any major impact on its topline or bottomline," said Quantum's Gupta.
Shares of Venky's - the only listed poultry firm in India - which were trading at Rs 802 before March 19, ended at Rs 1,122 on Wednesday.
“The sudden crackdown on illegal slaughterhouses and meat shops across Uttar Pradesh has created shortage of meat in some of the northern states and as a result, prices of chicken have risen,“ said Shalini Gupta, analyst, Quantum Securities.
Prices of chicken in some parts of UP and Delhi have risen from Rs 180 to as high as Rs 240 in last two weeks, according to news reports.
More than half of Venky's revenues come from poultry business. This segment has posted 23% growth for the quarter ended December 2016 compared to its overall revenue growth of 18%.
A top Venky's official said the company is yet to see the impact of the move by Uttar Pradesh.
“Currently , there's no positive or negative impact on our business because of UP issues, but the real impact will be felt only after the nine-day-long Navratri," said K G Anand, general manager, Venkateshwara Hatcheries, the parent company of Venky's."Generally chicken prices soar after Navratri."
At current market price, the stock is trading at 14.5 times its estimated FY17 earnings and 12.5 times its FY18 earnings. Analysts said the measure by UP would benefit companies like Venky's only temporarily.
"The benefit for companies like Venky's will be only temporary till the registration process of meat shops and slaughterhouses in UP sorted out. I don't think it will have any major impact on its topline or bottomline," said Quantum's Gupta.
