SKM / Venky’s are commodity dependent companies.
The problem with any commodity company is lack of earning predictability. There is no guarantee that the performance of the last 2 years will sustain going forward. In fact, growth was led by Qatar world cup, bird flu in Europe, etc.
Looking at PE of a commodity based company is probably not right. Commodities work in cycles. When demand outsizes supply, companies with excess capacity benefit. Seeing this, all global players put up capacity. However, this is a losing scenario for all players as again supply outsizes demand.
The company doesn’t provide much investor guidance hence difficult to assess the future. The present TTM PE of 5.5 is irrelevant. If company repeats performance of last quarter going ahead, the PE becomes 12 (600/ 50).
However, company is super genuine with TN govt. body stake of 8%. No doubt on that aspect. But this is pure commodity play.
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