Venky's - The Juicy Legs

Today, I read a very interesting article in the Economic Times about how the import restrictions on the famous & delicious leg piece has led to a demand burgeoning and thus an increase in the prices of the chicken leg piece. What's more interesting is the fact that an imported leg piece from the US would cost 45% lower than what we get here from the domestic poultry farmers. The reasons are many and we would not be discussing poultry farming here. But what we are going to look at is how Venky's (India) Ltd. has benefited from this particular piece of news. Venky's is one of the biggest poultry breeding & farming company in the country.  It also produces Animal health products and S.P.F. Eggs (Specific Pathogen Free Eggs) used in the manufacture of Human, Animal & Poultry vaccines. In fact, it is the only commercial producer of SPF chicken embryos in India.
Venky’s is also the prominent supplier of chicken products to various International Quick Service Restaurant chains in India like Kentucky Fried Chicken (KFC), Pizza Hut, Domino’s, TGI Friday and Vista Foods etc.


A quick snapshot about the company:
Market Cap: 499.6 Cr (as per Aug 17 closing price of 532.95/share)
EPS: 54.08   P/E: 9.84  Book Value: 336.25


 




The two ovals show the spurt in the trading volumes of the stock along with a breakout in the prices of the stock. This is an indication of a bull trend for the stock. The stock is trading at its 52 week high at the back of good earnings from the quarter ended June 30,2012. The bull trend is to continue till the stock trades above the levels of 518. The levels around 578 have considerable resistance for the stock and trendline from the recent lows of 315 also intersect at the recent peak of 576 or so. Thus at levels of 530, the stock can be traded with a stoploss of 515 and for a target of 578 or higher.


Lets look at its MACD charts which reiterate the same story more or less:



 
The MACD is showing positive momentum for the stock and is trending firmly above the 0-signal line ensuring strength in the coming days. The stock is generally a low volume stock and if the previous breakout is anything to go by, the present high volumes will finally  peter out and the stock will consolidate before making the next move, up or down.


Now, after the Economic Times' article (Here), I think one should keep Venky's (and similar stocks) in one's radar as a potential investment candidate. One can always get such chances as and when any poultry related epidemic breaks out. No doubt the traders will start to short the stock on such news.
In fact, some other stocks which are engaged in similar fields can also be looked into for the same story. One such stock is Srinivasa Hatcheries which holds a franchise from the Venkateshwara Hatcheries Group, the parent company of Venky's.