In FMCG there’s fairly robust secular growth in demand, whereas the feed business would have relatively more variation, don’t you think?
Discl.: Not invested, no intentions.
Demand is not a problem at all.
World is moving to a healthier tastier non veg food which shrimps/fish are from death causing cholesterol heavy Mutton/Chicken/Beef .
Go through this wonderful thread itself to clear all misgivings and create huge wealth in time to come by investing in such wonderful co.
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The reason for not investing is different - I am vegan.
I agree that world is moving towards food like shrimp. What I mean is that wouldn’t there be cyclicality in feed demand in India, e.g. if there is a disease outbreak.
Chintan Dont take Mr Vivek’s enthusiasm literally. 
The only way the likes of Avanti can get anywhere close to 20x or above consistently is if it diversifies into other related products like fish feeds and start selling processed products directly to customers(like CP foods/TUF does).Till then it will remain a quasi commodity play which is benefiting from growing demand for shrimp with the help of hardworking management/promoter.
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“Isnt its feed business akin to a FMCG business?if so what PE will you assign to it?”
- Feed business has always been a commodity driven business (in my personal opinion). The way how i interpret the business its more or less a proxy to what Venky’s have been doing for poultry industry and hence maybe the PE valuations could be like 20-30 x (even more if the ethics of promoters remain intact)
Demand is not a problem at all.World is moving to a healthier tastier non veg food which shrimps/fish are from death causing cholesterol heavy Mutton/Chicken/Beef
- Couldn’t agree more. if you look it more as of a consumption theme the demand is only bound to increase further and player like Avanti is bound to get benefitted. But the problem has never been demand for marine industry. Headwinds have always been government regulations (which of-late is expected to be lot more friendly assuming the economic incentives that lies ahead) and supply, supply and supply!
Supply side constraints through diseases and price realizations have always affected this industry and will continue to do so… (think of Venky’s/Suguna when the birdflu disease had spread which led to mass culling!)
On a finishing note the company has posted robust numbers… It would be very interesting to see what lies ahead especially when CP and Thai union production forces comes into effect…
Regards
Sreekanth
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Feed may not really be a commodity business. The farmers care about the conversion ratio, ie how much of feed is translated into weight gain of shrimps. Here quality products make a key difference. Also, Avanti has deep relations with farmers and have educated them about shrimp farming. This hand holding creates a mind share with the farmers.
Apart from adding capacities for feed business, a big plus for Avanti can come from hatchery segment. There is a severe shortage of quality seeds and demand will be huge. Their plans of hatchery have been delayed somehow. Apart from this, as previously mentioned by others, retail processed shrimp launches will make it a truly FMCG business. A blue sky scenario would be if the state/central govt gives tax breaks for aquaculture.
Drop in shrimp prices can be a worry but the important question is, what are the other alternatives for farmers? At what shrimp prices will they switch to the other alternatives? As mentioned by @Donald few days back, if anyone has contacts in Bhimavaram area, we can try to get more info. I am trying to get some leads but no luck yet.
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I was checking commodity prices of energy, cereals, etc and somehow landed on prices for Shrimp (No.1 shell-on headless, 26-30 count per pound, Mexican origin, New York port, US cents per pound)
Below is the graph showing the prices of the standard variety(I’m assuming) of Shrimp for the last 30 years:-
Assuming if the data is correct, a couple of inferences according to me:-
- Over the last 30 years, there have been 2 major cycles:-
a. Upwards for 8 Years - July 1989 to July 1997
b. Downwards for 8 Years - July 2001 to Dec 2009
Current Cycle - Upwards for 4.5 Years - Jan 2010 to Apr 2014 (This cycle may still be playing out or we may have started the downward trend) - The difference between lowest (Dec - 2009) and highest price of shrimp (April - 2014) is ~2.5x which is extremely low deviation/volatility over a period of 30 years. Therefore, prices of shrimp generally remain in a particular range +/- 20-70% range for most time periods. However, I have not taken the effects of currency movement in this.
- It has taken 12.5 years for the prices from the high of July 1997 to come to the lowest point in Dec 2009. And it’s taken 4.5 years for the prices to go to the new highest point in April 2014.
- Currently prices of shrimp are near their historical highs over the last 30 years.
During times of stress, points 2 & 3 is what we may want to rely on for comfort. Prices of shrimp have never really dropped like a stone like some of the other commodities (oil, iron ore, etc)
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UC Hit today, any word on AGM highlights?
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Excellent series containing lot of useful data related to worldwide shrimp market.
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Hi all,
New to the forum & this is my 1st post.Excited to be here 
I think kaveri is a great company to invest in even at these levels.But one thing bothers me is - from the annual report 2014-15.On pg no: 76 (under strengths topic of management discussion & analysis) it says
"Presently company’s shrimp feed plants are operating at 100% capacity utilization. In view of future increase in growth of shrimp culture, it is planned to set up shrimp feed manufacturing plant with 1,10,000 MT per annum capacity in Andhra Pradesh. Company is searching for suitable land for the purpose."
Point 1 - means that the plants are already at full capacity meaning no further production growth can be expected.
Point 2 - They are still searching for land means it might take some time for the new plant to set up & production to kick start.
Correct me if I am wrong please…
All though I treat this as a temporary set back still its a worry which can halt the good right.
I think Market has quietly started taking not of this high growth machine esp the consistency part of it.
After Q1 numbers Mr M. may be in a mood to trust the FY16 and 17 guidance of 200 and 300 cr.
Time may be ripe for a perception change and PE re rating
I think Ajanta was at this stage 1 yr back always trading at 15 -20 PE and now went to 45 PE and is seen in the league of Page, Eicher i. e high consistent growth machines. Although it is still far away, but process may have started.
Other thing Mr. M and several investors were always concerned about this being commodity play, high risk business but I think if the story play out for longer time, people may start believing the consistency of MOATand rerating can happen any time like a FMCG play with ready to eat business etc being on the table in future.
The longer the story is going, now the chances of rerating is increasing exponentially with time IMHO.
As @hitesh2710 has shared in his wisdon document, maximum money is created when perception changes by Mr. M and re rating happens.
Disc: not invested, but plan to take position bec of these above hypothesis
If management guidance comes true, and re rating also happens, this can still create huge wealth in 1/2 yrs time despite being 30 X for some seniors in this forum lime @ayushmit who spotted this so early.
Cheers
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Odisha focusing on Shrimp farming.
http://www.nyoooz.com/bhubaneswar/178055/rs46-cr-project-to-boost-vannamei-shrimp-farming-in-state
A high level meeting chaired by ACS Finance R Balakrishnan has approved
the project proposal to boost Vannamei farming with a cost of Rs46 crore. The project will definitely change the lives of shrimp farmers in the State, felt fisheries and Animal Resources Development (FARD) Secretary Bishnupada Sethi.
Department of FARD has in fact scaled up shrimp farming and export of
from marine and brakish water from the State, which registered growth of 250 per cent during last three years from Rs908 crore to Rs2,300 crore. With the new State fishery policy cleared by the State Cabinet recently, the State aims to enhance the export to Rs10, 000 crore in next five years.
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Reading the following made me nervous and reminded me Indra Kumar’s recent TV interview. May be it was a different world 13 years back.
“Be suspicious of companies that trumpet earnings projections and growth expectations. Businesses seldom operate in a tranquil, no-surprise environment, and earnings simply don’t advance smoothly (except, of course, in the offering books of investment bankers). Charlie and I not only don’t know today what our businesses will earn next year – we don’t even know what they will earn next quarter. We are suspicious of those CEO’s who regularly claim they do know the future – and we become downright incredulous if they consistently reach their declared targets. Managers that always promise to “make the numbers” will at some point be tempted to make up the numbers.”
Warren Buffett, BRK Letter 2002
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Production in Tamil Nadu is back on track after constant news of crop failing in last few months. Looks like MPEDA is actively regulating the hatcheries
In the Indian state of Tamil Nadu survival rates have been improving drastically, according to Durai Balasubramanian, secretary of the Pattukottai Shrimp Farmers Association, which has 4,000 members.
“The recent harvest has been so successful, including my own farm; we were able to produce 25, 24, and 30 count. “Credit goes to MPEDA [the Marine Products Exports Development Authority] and CAA [Coastal Aquaculture Authority] for putting so much effort into regulating hatcheries,” he told Undercurrent.
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An intersting article highlighting the big opp size in aquaculture and critical role played by feed.
Forget beef, bread, and beans. Growth from factory farming will
increasingly come not from the land, but from the sea. The latest sign
comes from a bid by Cargill, the agriculture giant, to buy a leading Norwegian salmon-feed supplier
for just shy of €1.4 billion ($1.5 billion). If successful, the deal
will make Cargill one of the top three aquaculture feed suppliers in the
world.
First, the good news about this Big Ag aquaculture shift: As sources of
protein, fish are way more efficient to raise than other leading sources
of protein. Cattle and pigs require huge amounts of grain and water to
grow big enough to eat. Producing a pound of beef, for instance, requires 15 times more feed than a pound of carp, a freshwater fish. The conserved food and water in theory could feed people instead.
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An interesting story about a biggie aqua player Siam Canadian group and how is the founder v confident on huge opp size for farmed shrimps.
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I read through the AR - I like the management’s candidness in highlighting issues that they faced last year. the two points that were disconcerting were
- auditors and registrar/share transfer agents are both karvy
- the consolidated cash flow and stand alone cash flow were the same - I think there was a clerical error here. they should have been marginally different.
otherwise, they had given detailed split of cash, liquid investments etc.
Invested and looking to add more at Rs. 2300 levels
Avanti Feeds to consider sub-division of equity shares
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=58f49e12-bea9-474f-96bc-01c66b6ba660
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AGM Highlights uploaded by Avanti
Some extracts
PERFORMANCE OF FEED DIVISION:
First crop of Shrimp culture in current year is progressing well. There is healthy growth of 10-15%
because of increase in the area of culture, stocking density and continued conversions.
PERFORMANCE OF SHRIMP PROCESSING & EXPORT DIVISION:
The division could not show much improvement in its performance during 2014-15 as the
exports to US in the 2nd half of the year were severely affected due to stringent checking of
each and every container of shrimp exported to that country for presence of antibiotic residues.
Because of this, there were inordinate delays in clearing of the consignments by USFDA with
additional expenditure to the exporters. As a result, exports to USA slowed down. Added to this,
as all of you know, the international prices of shrimps have been coming down almost
continuously.
As an alternative, your Company developed new markets in Middle East, Europe and China
which enabled Company to maintain at the level of previous year’s performance.
Current year, i.e. 2015-16 appears promising as the US Authorities reverted back to random
checking of the containers. Although the performance of this division in June’15 quarter is not
reflecting much of the positive development, in the coming quarter we believe, the exports will
gain momentum. The orders from new markets i.e. Middle East, Europe and China will also add
to the top line of this division and it is expected that this division will show improved performance
in the current year i.e. 2015-16.
OUTLOOK
The future of this industry is attuned to grow at a steady pace of 10-15% and stay for a long time to come. USA continues to be a major export destinationfor Indian shrimps while new markets are being developed in Middle East, Europe and China.
Source http://www.avantifeeds.com/Notices/Chairman%20Address%20to%20Shareholders%20at%2022nd%20AGM.pdf
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