Geojit's research report on Avanti Feeds
Avanti Feeds Ltd. (AFL) is a leading manufacturer of shrimp feeds with a capacity of 7,75,000 MT and a shrimp processor & exporter with a capacity of 22,000 MT. AFL has a tie-up with Thai Union Group, Thailand. We revise our target price to Rs. 420 (Rs. 548) due to current demand slowdown and higher input prices but upgrade to BUY rating factoring gradual improvement in margins and attractive valuation. Revenue grew by 3%YoY, mainly due to higher realisation (+6%YoY) in the feed segment while volumes were flat. However, processing segment revenue declined by ~7%YoY due to de-growth volumes (-18%YoY). EBITDA grew by 19%YoY as EBITDA margin improved by 100bps to 7.3%. Soyabean meal prices have come down by ~30% from its peak, but wheat & fish meal prices are still on the higher side. AFL has added new capacity of 1.75 lakh MT in feed and is adding 7,000MT in processing segment by FY24. Q3FY23 witnessed sluggishness in shrimp culture activity due to demand slowdown in export markets. However, shrimp culture is expected to pick up in the subsequent months as farm-gate prices rise. Revenue/PAT to grow at 11%/37% CAGR over FY23E-25E. We value AFL at 12x FY25E PE (3Yr avg=15) factoring current slowdown in demand.
Outlook
Despite the current slowdown in demand in export markets, an improvement in farmgate prices suggests that shrimp culture activities are expected to improve. AFL is prepared for the next stage of growth with new capacity. We value AFL at 12x FY25EP/E (3Yr avg=15x) to arrive at a Target of Rs. 420, upgrade to Buy rating due to correction in valuation.
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