Our market is still suffering from selling pressure coming from FIIs. But despite of this fact, few stock in last few days have shown opposite reaction. One of them is Venkys Stock which has rallied from Rs 3,000 to Rs 4,500 in just few days. Venky’s (India) operates three business segments, namely poultry and poultry products, animal health products and oilseed.
One year ago, stock price of Venkys was trading around just Rs 400 which means stock has seen almost 10 times rise in its value now. However, behind this rise there is a core reason why it happend. One is that Implementation of GST has opened a gate of big opportunities for company. And second is that entry of BJP government last year in Uttar Pradesh Proved to be beneficial for Organised Non-veg food producers.
Better realisation and improved margins are both helping the company to grow much faster. Also, Financial statement of the company is getting improved with a great speed.
In last few quarters, company has also registered a profit growth of over 60 percent as compare to previous quarters. For the first nine months of FY18 (April-December), company has reported a net profit of Rs 150 crore as compare to Rs 83 crore during the same period of previous Financial year i.e FY17.
Currently, PE ratio of Stock is around 30 level which is lower than Industry PE of 45. Quarterly sales of Rs 680 crores would also be considered as favourable for the investors as compare to current stock price of Venkys.
However, the stock has already given more than 10 times return in last one year and more than 15 times return in last two years. Therefore, It becomes very difficult now to see any further buying in stock in short-term. I believe around Rs 4,500 , it would be considered as a fairly valued stock in our markets.
Investors who are holding this stock from very lower levels still have option to continue their holding because I think stock would continue its growth in next 3-5 years. From current levels, it still has potential to grow with over 40 percent CAGR in next few years.
For traders or short-term investors, the situation is something different. In higher side, stock may even touch Rs 5,000. But in lower side, stock may easily slide up to Rs 2,500 level in short-term. So overall, risk is not much higher in stock but potential upside is also not in a large amount. And therefore, Risk-Reward ratio is not favourable at present. So, at current levels, it is better for only long-term investors to buy and hold it. But for short-term investors and traders, level of opportunity is very low now.
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