Industrias Bachoco
Mexico’s biggest poultry producer is expanding into new markets, including pork production. The spread of avian flu and a trade spat over corn between Mexican and American lawmakers threaten...
Thesis
Mexico’s biggest poultry producer is expanding into new markets, including pork production. The spread of avian flu and a trade spat over corn between Mexican and American lawmakers threaten to hurt the business in the short term. Still, the firm’s economies of scale and efficient operations will help them serve the growing demand for chicken. I rate the shares a Buy as they offer an 89% upside, 16% IRR, and have over half the market capitalisation in cash.
Summary
Company name: Industrias Bachoco
Ticker: BMV: BACHOCOB
52-week range: Ps65-88
Market cap: Ps49bn
Price: Ps82
Target: Ps145–163
Upside: +89%
Recommendation: Buy
I) Story
Business model
Industrias Bachoco (Bachoco) is a vertically integrated Mexican chicken and pig company. The firm owns and manages 1,212 farms, 22 hatcheries, 23 feed mills, 20 processing plants, and 80 distribution centres across Mexico and the US. Bachoco is the biggest chicken producer in Mexico, accounting for 35% of the Mexican market, and the sixth largest in…