Abating Oversupply Should Improve Inghams' Second-Half Margins

We maintain our AUD 3.60 fair value estimate for shares in Inghams following the release of interim fiscal 2021 results. Net profit after tax, or NPAT, was up 28% over the previous corresponding period to AUD 38 million as demand recovered, oversupply abated, and trading volumes broadly returned to pre-COVID levels. Our long-term forecasts remain broadly intact, and we maintain our fiscal 2021 NPAT forecast of AUD 87 million. The firm declared an interim fully franked dividend of AUD 7.5 cents per share, tracking our unchanged full-year forecast of AUD 16 cents per share. We expect free cash flows to strengthen, supporting our forecast for dividends at the midpoint of the firm's target payout ratio range of 60% to 80% of net profit.