Poultry giant ING fell -4.7% yesterday although it’s still up +3.5% year to date, this remains a billion-dollar business even after major underperformance over the last 2 years. In March the company delivered its FY’23 half-year result which showed NPAT was down 13.1% over the year primarily due to operational challenges such as supply chain disruptions and broad inflationary pressures. However, the company has said things are improving and it’s starting to enjoy a healthy growth in poultry demand as a cheaper alternative to the likes of beef – a beneficiary of tough economic times.
The stock is already priced for a recovery trading on a 1 year forward P/E of 16.38x versus its 5-year average of 13.7x, but we believe this is justified as the business is in a turnaround phase and higher earnings in FY24 &25 should justify the current valuation, plus its forecast to yield more than 3.5% over the next 12 months. We like ING’s defensive qualities because if we see a deep recession it will drive an even larger migration towards poultry as the consumer’s choice for protein.
- We aren’t excited by the risk/reward around $2.80 but a further ~10% downside would spark our interest.
MM likes ING in the $2.50 region
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