American tourists aren’t the only ones benefiting from the big drop in the Mexican peso this past year. Smart Mexican companies are, too. Case in point: Mexico’s largest poultry producer, Bachoco S.A.B. de C.V (NYSE: IBA).

By global standards, Bachoso is no small chicken; it’s the world’s 10^th largest producer and 23% of its sales are in the U.S. market. While Mexico’s lower wages and product costs have long been a tailwind for Bachoco’s exports to the U.S., this advantage has increased by about 25% in the past year—that’s how much the peso has devalued against the U.S. dollar.

The peso’s drop has mostly to do with the nearly 50% drop in the price of oil, on which Mexico depends heavily for export earnings. While cheap oil is bad news for Mexico’s economy, it’s good news for Bachoco, keeping general price inflation in Mexico under control, while lowering Bachoco’s energy and transportation costs even more. What’s more, not only can Bachoco produce from inexpensive Mexico for the U.S. market, it gets beneficial trade treatment under NAFTA (North American Free Trade Agreement).

Mexico’s economic growing is slowing, but this is not a threat to Bachoco for several reasons. First, it’s very strong financially and can bankroll its own expansion; at the end of June, it had $900 million in cash in its coffers. Second, the company might even be able to gain market share within Mexico. About 21% of poultry consumed in Mexico is imported, virtually all of it from the U.S., and American chicken exporters are now struggling to keep their pricing competitive, given the surge in the dollar.

Backing Bachoco

Founded in 1952 and publicly traded since 1997, Bachoco is based in central Mexico (Celaya, Guanajuato) and has more than 25,000 workers. It manages over 1,000 farms, 17 processing plants, 20 feed mills, 24 hatcheries and 64 distribution centers. In addition to poultry, it produces eggs, feed, pigs, turkey and beef value-added products.

Bachoco is gradually extending its production footprint into the U.S. In July 2015, it bought the Georgia operations of the hatchery Morris Breeders, adding 1 million laying hens to its capacity. This follows the 2013 purchase of Morris’ Alabama assets. The large Hispanic population within the U.S is another factor helping Bachoco’s U.S. business.

Bachoco faces stiff competition in the U.S. poultry market, a business where economies of scale are only moderately important and transportation costs prevent Bachoco from serving the entire U.S. market from a Mexican base.

Major U.S. competitors include giants like Tyson Foods (NASDAQ:TSN), with 115,000 employees, JBS (subsidiary of a Brazilian firm), Cargill Meat Solutions, Smithfield (now owned by Chinese interests) and Cal-Maine Foods (NASDAQ:CALM) in the egg business.

Nevertheless, while the Mexican peso remains weak, Bachoco’s competitive position is very strong indeed. And it should continue to gain market share while maintaining relatively high profit margins.

Flying High

The recent results speak for themselves. For the second quarter (ended in July), Bachoco’s sales were up 12% in peso terms and 11% in volume terms, while its operating margin rose 2 percentage points – from 14% to 16%. Net income for the first half of 2015 jumped by 52% in peso terms.

Yet Bachoco shares are still quite reasonably priced. The stock was recently trading at about 10 times earnings for the previous 12 months, and 11 times the earnings forecast for 2016. Given the recent improvement in Bachoco’s profit margin, the 2016 estimates could well prove conservative. The stock also offers a nice dividend yield (close to 2%), based on 2015 dividends of $1.17 per ADR (12 shares per ADR).

Poultry production isn’t glamorous. But Bachoco’s built-in cost advantage, coupled with a currency tailwind of 23% in its main export market, indicate head-turning profit growth in the years ahead. Bachoco should thus be a core element of your Eastern Pacific holdings.