300% rally in 6 months! There's a lot going for this ready-to-cook products maker
, ETMarkets.com|
Updated: Mar 07, 2018, 01.07 PM IST
NEW DELHI: It's the kind of start any market debutant can dream of. Apex Frozen Foods has just pulled it off -- the stock soared 300 per cent, or four times, in the first six months of the listing history.
The upcoming 20,000-mtpa shrimp processing facility in East Godavari district, strong demand for Vannamei (white) shrimp products, improved product mix and operational efficiencies are all acting as tailwinds.
But there are concerns too over the quality of shrimp exports from India and a rise in instances of rejection of consignments by the EU. But Apex Frozen maintains that none of its consignments have been rejected so far. The company's exports to the trading bloc in fact grew to 24 per cent of its revenues in the first nine months of FY18, compared with 18 per cent of FY17.
Experts believe that stock has room for further upside.
At a total capacity of 15,240 tonnes -- owned capacity at 9,240 tonnes and arrangements with Royale Marine Impex at 6,000 tonnes -- the new plant will more than double Apex’s metrics to 35,240 tonnes and is expected to achieve optimal utilisation within three to four quarters of operation. The company is looking to set aside 5,000 tonnes out of the 20,000 tonnes capacity for ready to eat products and the rest for ready to cook products. Trial production is expected by September.
Subrahmanya Chowdary, Executive Director, expects the facility to reach 50 per cent capacity utilisation in the first year and 75 per cent from FY20 onwards.
This is at a time when the country's shrimp export, which accounts for 13 per cent of $30 billion global shrimp market, is seen doubling to $7 billion in value terms by 2022, from the current $3.8 billion. While worries still persist over the EU stand, demand in the US market remains strong for the sector.
For 2017, India accounted for 32 per cent of US’ shrimp imports as against 25 per cent in 2016. Overall, the country’s shrimp export rose 47 per cent in value terms in April-December of FY18.
For Apex Frozen, the location of its facilities is a big positive. The Kakinada processing facility in Andhra Pradesh is at a 10-200 km distance from its shrimp sourcing ponds. The plant is situated at just 20 km from Kakinada port and 150 km from Vizag port. This helps the exporter of processed shrimp procure raw material at a reasonable cost and save on logistics, said brokerage firm Reliance Securities.
The company offers whiteleg shrimp and black tiger shrimp under the brands owned by its customers. Besides, it sells them through brands namely Bay fresh, Bay Harvest and BayPremium.
Further improvement in margins is likely as the company looks to ramp up shrimp procurement from owned-farms to 25 per cent, from the current 18-20 per cent.
“Average procurement cost for the company is Rs 350-380 per kg, which becomes cheaper by Rs 60-80 in the case of owned farms. The company is also adding a new hatchery that will increase the overall capacity to 1.4 billion seeds from 1 billion,” Reliance Securities stated.
Brokerage Equirus Capital values the stock at 35 and 28 times its FY18 and FY19 EPS estimates of Q3 FY19. It expects capacity utilisation at 75 per cent for the company in the March quarter (due to seasonality effect), taking the effective utilisation level to 92 per cent in FY18.
“We have updated our FY18/FY19 EPS estimates by 16 per cent/20 per cent, mainly factoring in the beat in Q3 and change in accounting policy of export incentives. Accordingly, we update our March 2019 target to Rs 700, from Rs 570,” the brokerage said.
The company has reported 48.66 per cent growth in net sales at Rs 795.50 crore for April-December. Net profit for the comparable period rose 263 per cent to Rs 59.20 crore, data available with Capitaline showed.
Reliance Securities has initiated coverage on this stock with a target of Rs 818 based on 18 times FY20E earnings, suggesting 23 per cent upside from the prevailing level. The scrip was listed on September 4 last year.
The upcoming 20,000-mtpa shrimp processing facility in East Godavari district, strong demand for Vannamei (white) shrimp products, improved product mix and operational efficiencies are all acting as tailwinds.
But there are concerns too over the quality of shrimp exports from India and a rise in instances of rejection of consignments by the EU. But Apex Frozen maintains that none of its consignments have been rejected so far. The company's exports to the trading bloc in fact grew to 24 per cent of its revenues in the first nine months of FY18, compared with 18 per cent of FY17.
Experts believe that stock has room for further upside.
At a total capacity of 15,240 tonnes -- owned capacity at 9,240 tonnes and arrangements with Royale Marine Impex at 6,000 tonnes -- the new plant will more than double Apex’s metrics to 35,240 tonnes and is expected to achieve optimal utilisation within three to four quarters of operation. The company is looking to set aside 5,000 tonnes out of the 20,000 tonnes capacity for ready to eat products and the rest for ready to cook products. Trial production is expected by September.
Subrahmanya Chowdary, Executive Director, expects the facility to reach 50 per cent capacity utilisation in the first year and 75 per cent from FY20 onwards.
This is at a time when the country's shrimp export, which accounts for 13 per cent of $30 billion global shrimp market, is seen doubling to $7 billion in value terms by 2022, from the current $3.8 billion. While worries still persist over the EU stand, demand in the US market remains strong for the sector.
For 2017, India accounted for 32 per cent of US’ shrimp imports as against 25 per cent in 2016. Overall, the country’s shrimp export rose 47 per cent in value terms in April-December of FY18.
For Apex Frozen, the location of its facilities is a big positive. The Kakinada processing facility in Andhra Pradesh is at a 10-200 km distance from its shrimp sourcing ponds. The plant is situated at just 20 km from Kakinada port and 150 km from Vizag port. This helps the exporter of processed shrimp procure raw material at a reasonable cost and save on logistics, said brokerage firm Reliance Securities.
The company offers whiteleg shrimp and black tiger shrimp under the brands owned by its customers. Besides, it sells them through brands namely Bay fresh, Bay Harvest and BayPremium.
Further improvement in margins is likely as the company looks to ramp up shrimp procurement from owned-farms to 25 per cent, from the current 18-20 per cent.
“Average procurement cost for the company is Rs 350-380 per kg, which becomes cheaper by Rs 60-80 in the case of owned farms. The company is also adding a new hatchery that will increase the overall capacity to 1.4 billion seeds from 1 billion,” Reliance Securities stated.
Brokerage Equirus Capital values the stock at 35 and 28 times its FY18 and FY19 EPS estimates of Q3 FY19. It expects capacity utilisation at 75 per cent for the company in the March quarter (due to seasonality effect), taking the effective utilisation level to 92 per cent in FY18.
“We have updated our FY18/FY19 EPS estimates by 16 per cent/20 per cent, mainly factoring in the beat in Q3 and change in accounting policy of export incentives. Accordingly, we update our March 2019 target to Rs 700, from Rs 570,” the brokerage said.
The company has reported 48.66 per cent growth in net sales at Rs 795.50 crore for April-December. Net profit for the comparable period rose 263 per cent to Rs 59.20 crore, data available with Capitaline showed.
Reliance Securities has initiated coverage on this stock with a target of Rs 818 based on 18 times FY20E earnings, suggesting 23 per cent upside from the prevailing level. The scrip was listed on September 4 last year.
