In last 6 months, fancy for companies in Agrochem, Agri Commodities, Food Sector has been growing due to better prospects. Reason is demand for same is growing due to rising population and better life styles. On the other hand, sufficient land not easily available for agricultural purposes. In such a scenaio, Srinivasa Hatcheries Ltd. appears undervalued Hyderabad based Srinivasa Hatcheries Ltd. is one of the leading producers of poultry (chicken). Last year, its performance had been affected due to sharp rise in Raw Material prices as well as swine flu. However, now, Company has bounced back sharply and has reported best ever quarterly results. Company has reported fabulous results so far in Current Year. For 9 month ended, it has achieved PAT of 7.90 cr. as against loss of 68 lakhs in corresponding year of previous year. It means, there is turnaround of about 8.60 cr. In fact,EPS for Q3 alone is Rs. 8/-.Book Value as on March 2009 stood at Rs. 120/-. In view of buoyant market, poultry manufacturers are able to pass on increased Raw Material costs and SHL will continue to do extremely well.
Valuations:- · SHL has been paying dividend regularly (even in adverse market conditions). Future Outlook
· SHL has also invested surplus funds in treasury operations which give regular income.
· Company has announced 1:1 bonus. CMP is cum-bonus. Instead of waiting for year end, bonus is announced after 9 monthly results which indicates that much better days are ahead.
· Companies like SHL will continue to do well as poultry business needs vast tracts of land. For new ventures, expensive
land will render the project unviable. On the other hand, SHL has huge huge surplus land which can be used for expanding its capacities.
· Stock is available at 6.30 x FY10E EPS.
· Stock is available at 9.58 x FY11E EPS (on enhanced Equity post bonus) which means, on pre-bonus basis, PE Ratio is less than 5.
When sensex is almost touching 18,000 levels, Srinivasa Hatcheries is a good pick which should deliver atleast 50% appreciation in 6 months and more than 100% appreciation in 12-18 months.
Related posts: