Inghams Group Limited

Stellar growth in top line, however, seems a bit overpriced at this point: Inghams Group Limited (ASX: ING) is in the business of offering production, processing, and distribution of chickens, turkeys, stock feed, and other meat products. ING serves retailers throughout Australia and New Zealand. The company posted an underlying EBITDA of $208.9 Mn for the FY 2018 which implies a growth of 7.1% on a Y-O-Y basis driven by the increase in the volume of core chicken and turkey sale, and the underlying NPAT for the same period stood at $112.5 Mn exhibiting a growth of 10.3% on a Y-o-Y basis. Resultantly, EPS grew by 12.4% to 30.8 cps in FY18 over the prior year. Further, the Board declared a fully franked dividend of 11.6 cents per share with dividend ex-date of 11 September 2018 and payment date of October 04, 2018. This summarized a total dividend payment of 21.1 cents per share for the full year, representing a payout ratio of 70% of NPAT.
 
On the other hand, the company has seen continued improvements in working capital through tight inventory, receivables, and payables management. The firm has an operating cash conversion of 122.9% with Net Debt to EBITDA ratio of 0.7x in FY18 which is down by 0.8x from the previous year.
 
Additionally, for FY19, the company expects that the demand for poultry products will continue to grow on the back of support from consumer preference for great value, healthy and versatile poultry products. Moreover, the company also expects a continuation of market price rise due to the rise in energy and feed costs. New Zealand market dynamic remains challenging, and this is likely to continue in 1HFY19.  

 
Key Financial Metrics (Source: Company Reports)
 
Recently, the company has released 485,714 shares to the shareholders of the Inghams Group Limited from voluntary escrow on November 07, 2018 as per the appropriate Listing Rule. Meanwhile, the stock price has marginally risen over the past one month by 8.18%, however over the period of past six months the stock has given a modest rise of 12.80%. If we look at the YTD performance, the stock has given substantial returns of 25.15 %, which shows a robust performance on the exchange. The stock experienced a short interest of 13.12 percent (as per the ASIC report of 7 November 2018). Also, the stock has reached its 52 weeks high and is hovering nearby. Thus, we maintain our “Expensive” rating on the stock at the current market price of $4.270.
 

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