Investors that are on the lookout for big gains and a generous dividend yield may want to check out the ASX 200 stock in this article.
That's because analysts at Bell Potter think this dividend-payer could be undervalued by the market.
Which ASX 200 stock?
The stock in question is Inghams Group Ltd (ASX: ING). It is the largest integrated poultry producer across Australia and New Zealand.
According to the note, the broker has been looking at industry data and feels it is supportive of its forecasts and its bullish view.
In respect to feed cost indicators, the broker said:
Since our Mar'24 update feed pricing indicators have been volatile, with a 7-9% firming. In light of ING's forward purchasing arrangements, we see FY25e feed cost indicators (CY24TD pricing flows into FY25e assumptions) down an implied -12% relative FY24e levels. Note that the spot feed index is broadly consistent with the CY24TD average. With ABARE and CSIRO Wheatcast models favouring an above average yield outcome for the 2024-25 harvest, we would see the reversion to negative basis as a potential tailwind for ING in 2H25-1H26e.
Together with other factors, Bell Potter has trimmed its profit forecast for this year but boosted its medium term estimates. It explains:
We have reviewed our forecasts and updated them for channel mix, feed cost indicators, FX, interest rate movements and inflation data in ING core markets. The net impact is NPATL changes of -3% in FY24e, unchanged in FY25e and +4% in FY26e.
Big returns
In light of the above, Bell Potter has retained its buy rating and $4.35 price target on the ASX 200 stock.
Based on its current share price of $3.62, this implies potential upside of 20% for investors over the next 12 months.
In addition, the broker is forecasting fully franked dividends per share of 23 cents in FY 2024 and 24 cents in FY 2025. This equates to 6.35% and 6.6% dividend yields, respectively.
Bell Potter believes recent avian flu related share price weakness has created a buying opportunity. It said:
The ING share price has retraced ~10% following the discovery of avian flu in the Golden Plains and in NSW. While it may serve as a reminder of the inherent agricultural risks facing free range operations it has at this time had no impact on the ING business. We see the current weakness as a buying opportunity, noting similar bio risks in the almond industry (varroa mite) has had limited lasting impact on SHV. Feed cost indicators remain lower than a year ago and if 2024-25 crops develop as projected then this will likely emerge as a key earnings driver in 2H25-1H26e.
