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Accumulate Avanti Feeds Ltd For Target Rs.715 By Geojit Financial Services Ltd
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Input price declines aid margins amidst challenges
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 29,000 MT. AFL has a tie-up with Thai Union Group, Thailand.
* Q2FY25 revenue increased by 6% YoY with volumes of feed segment improving by ~6% YoY and volumes of shrimp exports growing by ~16% YoY despite adverse weather conditions in Andhra Pradesh.
* EBITDA rose by a ~44% YoY as EBITDA margin expanded by 260bps YoY to ~10%. This is primarily due to lower input prices. PAT increased by ~53% YoY.
* AFL’s shrimp exports increased by 8% in FY24. Company guides for a growth of 19% in FY25. Current positive climatic conditions from September are expected to support increased shrimp culture and feed volumes.
* The company is diversifying into pet food and pet care products (industry growth estimates at ~20% CAGR) through a joint venture with Bluefalo Company Limited, Thailand. The trading activity is planned to start by end of FY25. The company is also making efforts to enter Þsh feed market.
* US imposed a higher CVD of 5.77% (preliminary rate was 4.36%) on Indian shrimp exports, higher than Ecuador who is the main competitor for India. This will pose a competitive disadvantage for AFL, however, its focus on value added products (unlike Ecuador) will outweigh this disadvantage.
Outlook & Valuation
Global shrimp market is poised to grow from USD 72.16 billion in 2023 to USD 110.775 billion by 2031 growing at a CAGR of 5.5%. Higher ocean freight poses a challenge to shrimp exports which needs to be monitored. The company anticipates better margins due to softening raw material prices and favorable climatic conditions. AFL’s efforts to diversify product segments and markets will beneÞt in the long term. The GoI also has a strong focus on supporting the industry and targets to double exports to Rs. 1 lakh crore. We expect consolidated revenue/PAT to grow at 6%/23\2% CAGR over FY24-26E. We value AFL at 17x P/E (3Yr avg=17x) to arrive at a target price of Rs. 715 and maintain Accumulate rating.
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SEBI Registration Number: INH200000345
