Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

Ridley Corporation Limited (ASX: RIC) is an Australia-based company engaged in the production of quality animal nutrition solutions. The company operates through two segments: Packaged Feeds and Ingredients and Bulk Stockfeeds.

 1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~57.68% of the total shareholding. Insitor Holdings, L.L.C. and Tattarang Pty. Ltd. are holding a maximum stake in the Company at ~19.01% and ~6.53%, respectively.

1.4 Key Metrics: The company has reported an improvement in return on equity to 14.1% in FY22 compared to 12.8% in FY21. Further, RIC reported a low debt-to-equity ratio in FY22, around 0.20x, compared to 0.47x in FY21. Below is captured the trend of the gross margin and asset turnover ratio:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Results Highlights of FY22 (for the period ended 30 June 2022): During FY22, the receipts from customers rose to AUD 1,141.7mn compared to AUD 1,014.1mn in FY21, driven by increased market share and efficiency that led to improvement in sales volumes.

2.3 Growth Plan: The growth strategy revolves around a few aspects, like increasing the utilization and market with the aim to improve the customer experience and increase demand.

2.4 Dividend History: The company paid 100% franked dividend of around AU 7.4cps in FY22 and it has also increased its dividend pay-out guidance to 50%-70%.   

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 6, 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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