Avanti Feeds

This is a seasonal busines. Given that there were floods and news of disease outbreaks( waterbase put out a ppt), I think numbers are decent. It can only get better next quater.

If the capacity ramp up happens in timely fashion before the peak season, upside surprise cannot be ruled out.

Disc: invested

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@vivek_mashrani

Yoy comparison is fair for avanti given the seasonal nature of business.

Thanks vaibhv my views also in line with u…
Regards

One of the tricks to make money in the markets is to figure out what is priced in at current prices and what are the expectations built into the prices.

Avanti corrected from around 678 to a low of around 330 from where it recovered to close last week around 390 odd levels.

At levels close to 650 plus there seemed to be a lot of optimism built into stock price and there was management guidance of net profit of 200 crores for fy 16 and 300 crores for fy 17. With the TN floods affecting nellore in andhra the fear was that q3 might be a washout quarter for avanti. Coupled with that was the sort of profit warning by Waterbase about problems in their operations. This probably led to a lot of selling and along with markets being jittery, it aggravated into panic selling.

I feel q3 has come as a massive positive surprise and shows how a strong company is able to withstand difficult times. Personally I was expecting around 15-20% decline in topline and similar effect on bottomline. Hence for me this kind of growth in topline and bottomline has come as a very pelasant surprise.

Some of the attributes of the company are that it is a dominant market leader, with great net cash balance sheet and high return ratios, with a good jockey at the helm.

Company seems to have weathered the TN storm quite well.

disc: invested.

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I too was expecting a decline due to floods and reports of combination of disease and prices convincing farmers to reduce shrimp farming. The reduction in annual shrimp production for the first time in many years convinced me to brace up for bad results. Surprised that they actually managed to grow in this period!

I believe it’s a human psychology of risk aversion that we tend to magnify the negatives! I

Disc: Took a small position in recent decline. Planning to accumulate more.

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Hitesh bhai as usual very exceptional note & Analysis. This is again proved by Avanti that great leader company have ability to withstand in any adverse conditions. Really encouraging results by Avanti in tough situation.
Discl.invested

Its good to see some growth in Q3 nos despite a very adverse situation in key shrimp farming districts due to floods and I was also expecting a 20-25% decline in earnings. This shows the strength of the company and the leadership it enjoys.

Regards,
Ayush

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“Production may recover only marginally in the current year from the damages caused last year by flooding and prevalence of microsporidian EHP. Higher cost of production and a sharp decline in prices during the last quarter of 2015 have affected farmers,” Muthukaruppan said.

He said that higher input cost and saturation in Andhra Pradesh is unlikely to boost production in the near-term. Andhra Pradesh farms produces nearly 70 % of vannamei shrimp for export.

Anwar Hashim, managing director of Abad Fisheries, and former president of the Seafood Exporters Association of India, confirmed that the cost of production has moved up and new diseases like ‘slow mortality disease’ are affecting production.

“It is true that prices dropped during the June-August period but it has recovered in January. Seed costs have moved up and the production cost per kg has increased to Rs 225 from Rs 150,” he added.

However Hashim is optimistic that production of Vanammei can be boosted with new areas in West Bengal, Odisha and Gujarat.

Waterbase results out.

Decrease in Sales, Losses at bottomline - Clearly this tough quarter separates the leader (Avanti) from the non-leader (Waterbase).

However, Waterbase was much closer to floods, so we may have to give them the benefit of doubt.

On positive side, commentary on Outlook looks positive -

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/E9C34CEE_6FA0_455B_A5EC_C94A6008C3DF_085255.pdf

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If you factor OTS with Canara bank and assuming that they get the insurance claim, waterbase results will be far better then what they look right now…however i do agree AF is the clear leader in the pack.

hi,
any update on the hatchery plant?? will be it up and running by Apr2016?? wat kind of top line and margins can be expected from the hatchery plant??

i think we will have to awake to the fact tht the dream run tht we saw in volume growth over the past few years…will be challenged in the prevailing scenario
in fy15, avanti feed volume growth was outstanding 54%…fy16 growth will be nowhere close to tht…
all other countries (especially thailand) is trying to push up their volume growth. remember thailand before the the ems break out had a volume of close to 6 lac tonne, which has now come down to 2.7 lac tonnes.
imagin thailand going back to 6 lac tonnes…then what will happen to shrimp price??

i think the next phase of growth will come from the hatchery business. hiteshbhai any new updates on tht segment…you may hav will be useful.
feed business will grow…but predominently through eating into market share of other feed suppliers in india…i dont think thai union will allow avanti to export feed…or can they??

dis: invested

I went through the recent dalal street magazine where they recommend avanti as an investment bet and cite the management projections for the business.

Basically they say management has targets of shrimp processing of 3500 crores by 2020 and growth in feeds targetted at 10-15% cagr. Avanti has announced that it has transferred its shrimp processing biz to the joint venture on a slump sale basis. That should help the JV start running quickly.

I think in the shorter term bcos of the TN floods there is favorable situation for next couple of quarters or more bcos price will remain strong atleast domestically due to lower production. And by a couple of quarters and beyond as management indicated shrimp processing should be the next growth driver.

For those interested in details of management talk with dalal street magazine, it would make sense to go through the article. It is quite detailed and provides lot of insights.

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thnx…will purchase tht magazine…
any info on the hatchery business??

i think avanti topline may grow from current 1800cr to 6500cr by 2020 (3500cr from processing), but profit growth may not be the same , for the following reasons: (1) avanti frozen foods (our 100% subsidiary) will be implementing processing plants in JV with Thai Union, therefore, from consolidated profits, we need to deduct minority interest,

(2) operating margin and ROCE for processing business are comparatively lower
(3) in feed business, avanti is the brand owner, farmers recognise avanti and not thai union, whereas in processing business, thai union will be the face in USA and Europe, and avanti will be backend outsourcing supplier. this i think will influence profit sharing between thai and avanti

dis: investor since 2013

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India shrimp imports in US rises 36% YoY in December and 24% for complete year
India’s imports in December increased from 8,734 metric tons in 2014 to 11,904t in 2015, a 36.3% y-o-y, bringing its total imports for 2015 up to 135,699t, a significant 24.8% increase from its 2014 total.

This put India far ahead of Indonesia, which was the largest US shrimp exporter to the US in December 2014 with 8,822t of shrimp exported. For the year, Indonesian shrimp exports increased from 103,329t in 2014 to 114,376t in 2015, solidifying Indonesia as the second largest US shrimp importer but dropping it much farther behind India.

In 2014, Indonesia produced 5,335t less than India, but in 2015 that disparity jumped to 21,323t.

Would be interesting to see value wise data that should come in a day or two

Source https://www.undercurrentnews.com/2016/02/05/india-vietnam-finish-year-with-strong-increase-in-us-shrimp-sales/

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Is there any means to know who is the cheapest supplier to US ? I am asking this because in the article Mexico’s rise was phenomenal and given the fact that Mexico is the neighboring country, won’t it be easy for American companies to get their Shrimp from Mexico ?

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Hi Nitin,

I think its wrong to expect a very high growth rate to continue just because it has happened in past. Given the leadership (40%+ market share in feed segment) the company has attained in the industry, it would be tough to grow too much in this segment. The growth should come from the processing segment, though. I would be more than happy if they can maintain the past numbers and grow at say 15-20% for next 2-3 years.

Yes, the processing segment is much more competitive and has lower margins and ROCE but given that Avanti is small when compared to other players, the TUF partnership may be helpful in scaling up. Also, another thing to note is that Avanti has a very strong balance sheet and has surplus funds unlike the competitors in this space.

Regards,
Ayush

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Please dont copy paste these articles bcos we might land up with copyright issues.

ITC explores venturing into frozen foods

Diversified conglomerate ITC Ltd is exploring a possible entry into the
branded frozen foods segment, its Chairman, YC Deveshwar said here on
Wednesday.

According to him, the foray might come at a later stage, and is also
subject to availability of land for setting up cold-chains.

At present, the company exports (frozen) shrimps, but may enter the
domestic branded segment. IFB Agro is one of the major players here.

“We are targeting a turnover of ₹1 lakh crore from the non-cigarette
segment in the next 15 years. Obviously, this cannot come from our
existing line. We have to enter new areas,” Deveshwar said responding to
a specific question on whether the company would enter the frozen food
segment or not.

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