Buy Venky's India:: GEPL

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Summary

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We have reduced our FY13E EPS estimates by 34% as a result of the fourth quarterly loss reported by the company. We believe these numbers reflect a conservative approach with high raw material cost and sharp rise in other expenditures priced in. 

Venky's is currently trading at 6.1x FY13E EPS, a 12% discount to its historical one-year forward P/E band. We value the company at 7.3x its FY13E EPS of `70.8 with the assumption that the worst is behind the company as far as raw material prices are concerned, resulting in a target price of Rs515 per share, a 5% reduction from our earlier target. 

We maintain a BUY rating on the stock with expectations of a strong growth potential in the poultry industry which we believe Venky's is best poised to capture.