Inghams Group: Chicken Is Cheap and So Are Shares

We think the market's concerns about Inghams are overdone. Granted, input costs—principally labour and feed—are elevated at Inghams, and commensurate price increases are notoriously difficult to achieve. Poultry is highly commoditised, and Inghams is effectively a price-taker, leading to our no-moat rating. Margin pressure has been exacerbated by unfavourable product mix as consumption shifted from restaurants to supermarkets since the pandemic. But we expect headwinds to prove transitory and forecast profitability improving further from fiscal 2024 as more price increases are won and mix shift continues to normalise. At current prices, shares in Inghams screen as attractive compared with our unchanged AUD 3.50 fair value estimate.