ICRA-Poultry.pdf

7/27/2019 ICRA-Poultry.pdf

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ICRA LIMITED May 2013

Indian Poultry Industry Broiler Meat and Table Egg

Long term industry volume growth prospects continue to remain favorable though high feed prices and volatile

realizations resulted in depressed profitability in 2012; Improved profitability expectations in 2013 on back of co-

ordinated efforts to control supply

ICRA RATING FEATURE

Corporate RatingsAnjan Deb Ghosh

+91 22 3047 [email protected]

Analyst Contacts:

Subrata Ray

+91 22 3047 0027

[email protected]

Ravi Kabra

+91 20 2556 1194

[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Summary

Indian poultry sector has been growing at around 8-10% annually over the last decade with broiler meat volumes growing at more than 10% while table egg at

5-6% driven by increased domestic consumption. The production capacity has responded with increased integration and large scale implementation of contract

poultry farming. Farmers in India have moved from rearing country birds in the past to rearing hybrids which ensure faster growth of chicks, higher eggs per

bird, increased hatchability, low mortality rates, excellent feed conversion and consequently sustainable profits to the poultry farmers. The industry has beensupported by indigenous advancements in genetic capabilities, veterinary health, poultry feed, poultry equipment, and poultry processing sectors. The

productivity gains of poultry industry are reflected in relatively lower price increases in poultry meat over last five years compared to other meat products -

Poultry WPI (wholesale price index) has grown at 12% y-o-y over 2008-2013 as against 21% for overall meat products basket providing an affordable

alternative for meeting protein requirements in Indian diet.

Domestic poultry meat production (broiler - carcass weight) is estimated to have increased from less than 1.0 million tons in 2000 to 3.4 million tons in 2012

with per capita consumption increasing from 0.8 kg to 2.8 kg p.a during same period. Table egg production is estimated to have increased from 30 billion eggs

in 2000 to 66 billion eggs in 2012 with per capita egg consumption increasing from 28 to 55 eggs during that period. The healthy growth in poultry output over

last decade makes India one of the fastest growing major world market in the segment with future growth potential remaining strong on back of wide gap

against global per capital consumption norms and favorable socio economic factors.

CY 2012, particularly second half, was a tough year for the industry on back of considerable increase in production costs with feed ingredients (Maize and

Soymeal) touching record highs and realizations suffering on back of oversupply in industry. For instance average production costs for a typical commercial

broiler farm which was in the range of Rs. 45-50/kg in 2011 increased to more than Rs. 62-65/kg in H2CY2012 (moderating slightly since new maize/soya crop

arrival) while broiler realization growth remaining muted. To make things worse, broiler realizations nosedived in last quarter of 2012 on back of oversupply

and sporadic instances of bird flu in certain geographies. Strong 2010 and 2011 had resulted in sizeable investments in capacity expansion especially in broiler

segment and same resulted in oversupply. This significantly affected profitability of poultry farms and integrators in 2012 with all the poultry players recording

losses in broiler business in second half of 2012 and shutting down of sizeable number of independent poultry farms.

The efforts of key integrators in poultry industry to control supply through measures like hatching holidays initiated towards fag end of 2012 has resulted in

improved realizations in 2013 and industry is expected to register much better profitability compared to last calendar year. The deliberate attempts to control

supply will result in lower volumes (in terms of broiler chick placements) though industry is projected to register healthy growth in value terms. The continuedindustry wide co-ordination will be critical to maintain sustainable margins in the business considering increased production costs and seasonal volatility

associated with the poultry products though long term solution lies in developing processed chicken industry with value added offerings to protect against

regional and seasonal variations in prices.

Large integrators as well as Government bodies are investing and promoting increased processing of poultry products (in form of frozen/chilled chicken and

further processing in form of ready to cook/eat) given increased acceptability of processed chicken in domestic market though 92-93% of domestic purchases

are still through wet market due to traditional preferences. Increasing penetration of QSRs (Quick Service Restaurants), continued increase in proportion of

working women, changing lifestyles with preference towards convenience food and higher purchasing power are expected to provide strong growth push for

processed poultry industry in long term.


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ICRA expect domestic broiler meat demand to continue to grow at 8-10% and table egg demand to grow at 4-5% in long term on back of favourable socio

economic factors like rising purchasing power, changing food habits, and increasing urbanization. Key challenges faced by industry include high feed costs,

inadequate cold chain and transportation infrastructure, high vulnerability to disease outbreaks and highly volatile realizations affecting cash flows. Transition

from a predominantly live bird/wet market to a chilled/frozen market is crucial for the future expansion of domestic poultry industry as well as to increase

presence in international trade where India has negligible presence. Developing efficient distribution system with large investments required in cold chain

infrastructure and increasing market acceptability of frozen chicken are going to be the key industry drivers in long term.


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Please contact ICRA to get a copy of the full report

CORPORATE OFFICE

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Ph: +91-124-4545300, 4545800

Fax; +91-124-4545350

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Floor,

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CHENNAI

Mr. Jayanta Chatterjee

Mobile: 9845022459

Mr. Leander Rayen

Mobile: 9940648006

5th Floor, Karumuttu Centre,

498 Anna Salai, Nandanam,

Chennai-600035.

Tel: +91-44-45964300,

24340043/9659/8080

Fax:91-44-24343663

E-mail:[email protected]

[email protected]

HYDERABAD

Mr. M.S.K. Aditya

Mobile: 9963253777

301, CONCOURSE, 3rd Floor,

No. 7-1-58, Ameerpet,

Hyderabad 500 016.

Tel: +91-40-23735061, 23737251

Fax: +91-40- 2373 5152


MUMBAI

Mr. L. ShivakumarMobile: 9821086490

3rd Floor, Electric Mansion,

Appasaheb Marathe Marg, Prabhadevi,

Mumbai - 400 025

Ph : +91-22-30470000,

24331046/53/62/74/86/87

Fax : +91-22-2433 1390


KOLKATA

Ms. Vinita BaidMobile: 9007884229

A-10 & 11, 3rd Floor, FMC Fortuna,

234/ 3A, A.J.C. Bose Road,

Kolkata-700020.

Tel: +91-33-22876617/ 8839,

22800008, 22831411

Fax: +91-33-2287 0728


PUNE

Mr. L. ShivakumarMobile: 9821086490

5A, 5th Floor, Symphony,

S. No. 210, CTS 3202,

Range Hills Road, Shivajinagar,

Pune-411 020

Tel : +91- 20- 25561194,

25560195/196,

Fax : +91- 20- 2553 9231


GURGAONMr. Vivek Mathur

Mobile: 9871221122

Building No. 8, 2nd Floor,

Tower A, DLF Cyber City, Phase II,

Gurgaon 122002

Ph: +91-124-4545300, 4545800

Fax; +91-124-4545350


AHMEDABADMr. Animesh Bhabhalia

Mobile: 9824029432

907 & 908 Sakar -II, Ellisbridge,

Ahmedabad- 380006

Tel: +91-79-26585049/2008/5494,

Fax:+91-79- 2648 4924


BANGALOREMr. Jayanta Chatterjee

Mobile: 9845022459

'The Millenia', Tower B,

Unit No. 1004, 10th Floor,

Level 2, 12-14, 1 & 2, Murphy Road,

Bangalore - 560 008

Tel: +91-80-43326400,

Fax: +91-80-43326409

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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ICRA Limited

An Associate of Moody's Investors Service

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Fax + (91 44) 2434 3663 Kolkata: Tel + (91 33) 2287 8839 /2287 6617/ 2283 1411/ 2280 0008, Fax + (91 33) 2287 0728 Bangalore: Tel + (91 80) 25597401/4049 Fax + (91 80) 559 4065Ahmedabad: Tel + (91 79) 2658 4924/5049/2008, Fax + (91 79) 2658 4924 Hyderabad: Tel +(91 40) 2373 5061/7251, Fax +

(91 40) 2373 5152 Pune: Tel + (91 20) 2552 0194/95/96, Fax + (91 20) 553 9231

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ICRA-Poultry.pdf