UBS cuts Inghams price target by 23% amid 'worst case scenario'
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The news: UBS has slashed its price target on Australia's largest poultry producer Inghams Group, warning that the company's "worst case scenario" is now playing out.
The numbers: UBS retained its 'neutral' rating on Inghams but cut its 12-month price target from $3.65 to $2.80.
The stock last traded at $2.68 having retreated 11.6% over the last 12 months. It plunged 20.3% lower on the day of its full-year results last month.
The context: UBS analysts said Inghams appears to be losing market share, driving it to place excess volumes into the spot-based, wholesale market, and resulting in lower pricing.
What they said: "This has been a known risk for Inghams for the last 12 months since the [Woolworths] contract loss was announced," the analysts said.
"The worst case scenario of having to push volume to the market of last resort, being wholesale, at clearly very low margin, is now playing out."
The source: UBS research
