Analysts at the investment company RMG Securities began their analysis of Cherkizovo shares by giving them a “buy” recommendation and assessing their target price at $15.30/GDR.
A report published on RMG Securities’ official website mentions that the Group’s financial indicators being recovered after Russia’s accession to the World Trade Organization (WTO) and the shocks felt in the company’s most profitable business — the pork segment.
However, the analysts note that, due to Cherkizovo Group’s diversified business, Government-imposed restrictions on imports, reduced market supply, and grain price adjustments in expectation of a good harvest, the company had already improved its financial performance in Q2 2013.
According to the experts’ forecasts, gross margin in the Group’s Pork Division will be 10% in 2013, and will hold steady at 22% from 2014 on, due to the company’s effective cost control.
The analysts at RMG Securities point out steady growth in the Poultry Division, moderate average annual revenue growth in the Meat Processing Division, and recommend using a correction for buying a high-quality asset at a low price.
About Cherkizovo Group
Cherkizovo Group (LSE:CHE) is the largest meat manufacturer in Russia and one of the top three companies serving Russia’s poultry, pork, and meat processing markets. The company is also Russia’s largest producer of fodder.
The Group includes 7 full cycle poultry production facilities, with a total capacity of 425,000 tonnes live weight p.a.; 14 modern pork production facilities with a total capacity of 180,000 tonnes live weight p.a.; 6 meat processing plants with a total capacity of 158,000 tonnes p.a.; 6 fodder plants with a total capacity of 1.4 million tonnes p.a.; grain storage facilities with an overall storage capacity exceeding 500,000 tonnes; and a land bank exceeding 100,000 hectares. In 2013, Cherkizovo produced more than half a million tonnes of meat products.
Due to its vertically integrated structure, which includes agricultural land, grain storage facilities, feed production, livestock breeding, growing and slaughtering, as well as meat processing and integrated distribution, Cherkizovo has consistently delivered sustainable revenue and profit growth. In 2012, Cherkizovo’s consolidated revenue was more than USD 1.5 billion, with net profit of USD 225 million.
Within the last five years alone, Cherkizovo Group has invested more than USD 1 billion into the development of Russia’s agriculture sector. In addition to its existing production facilities, the company is constructing a hi-technology agro-industrial production complex in Elets, Lipetsk region.
Cherkizovo Group’s strategy includes organic growth and investment in new projects, driving the consolidation of the Russian meat market. Cherkizovo shares are quoted on LSE and RTS/MICEX.