Checkout Budget Highlights 2023Geojit's research report on Apex Frozen Foods
Apex Frozen Foods Ltd. (Apex) is a South India (Andhra Pradesh) based integrated producer and exporter of processed shrimps with a capacity of 29,240MT. We revise our target price to Rs. 250 (from Rs. 364 earlier) to account for weak demand and higher cost but maintain an Accumulate rating due to recent sharp correction in stock price. In Q3FY23, revenue growth was flat YoY due to muted volumes and a lack of specific size raw materials. Margins were impacted by higher raw material costs along with decline in export prices, but rupee depreciation aided stable realization YoY. Margins are expected to improve with more value-added products, as Apex has expanded Ready-to-Eat (RTE) capacity to 10,000MT from 5,000MT and expects commercial productions in Q4FY23. Stable farm gate prices support supply, while easing inflationary pressure will improve demand. Apex is currently waiting for the approval of the RTE products for the European market. We reduce our volume assumptions and expect Revenue/PAT to grow at 15%/45% respectively over FY22-24E. We value Apex at 10X (3yr. Avg) FY24E EPS.
Outlook
We expect the demand in key export markets to normalise as the inflationary pressure eases and the supply side concerns on raw materials are expected to be taken care of by the upcoming harvest season given stable farm-gate prices for farmers. Expect earnings to grow at 45% CAGR over FY22-24E. Apex currently trades at 9x 1Yr Fwd P/E. We value at 10x (3Yr Avg=10x) on FY24E EPS with a target price of Rs. 250, and maintain Accumulate rating
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