Avanti Feeds

[Nabendu]

My very first post on ValuePickr. Avanti Feeds growth trajectory has been great no doubts about that for sure.While i am bullish on its feeds division the shrimp processing and export division is seen as the next big wave for this company. While I was initially quite bullish on this company I have opted staying away from any shrimp based company primarily because of the following reason

1. The indian industry has boomed due to the vannamei shrimp variety and avanti feeds and others have benefited leaps and bounds due to this variety which has higher yields that a tiger shrimp can . While all looks rosy for the time being but somethings not right. Chinas shrimp production has fallen 20% to 30% and thailand production is also taking a hit . Did anyone do a thorough research why ?

Well technically vannamei shrimps are much more resistant to diseases was one of the reasons why it was preferred over its counterpart tiger shrimps. With poor feed which does not meet the internantional standards, lack of soil and water preservation techniques followed by farmers and other larger producers, to excessive shrimps density in ponds has resulted in declining outputs and increase in different diseases. Check the below links for details

http://www.fareasternagriculture.com/live-stock/aquaculture/disease-costs-asia-shrimp-sector-over-us-20bn

‘Deadliest’ shrimp disease raises fear - SUNSTAR

The issue is that india is not immune to the disease phenomenon. While bigger companies like Avanti might have some action plans to mitigate and minimize their produce to catch the diseases , but one cannot bet that Avanti is immune . To raise the issue under consideration check the research documents available on public domain on how widespread the problem with shrimp and disease is catching to India

http://www.iajpr.com/archive/volume-6/oct-2016/16oct06.html

4-2-70.pdf

the second document highlights how rms ( running mortality syndrome and other diseases are catching up in India . And more alarming is the number of farms which are currently affected by it . Attaching a screenshot for the reference of fellow members

So out of the 287 ponds studied in the 3 regions more than 80% of the ponds had one of the diseases is an alarming sign for me. While I do believe the growth may continue inspite of increasing disease outbreak but unless you are an hawk eyed investor glancing through the smallest of news affecting the shrimp production in India , the investment in Avanti or any other shrimp producing company can be a highly risky bet .

[ayushmit]

Avanti Feeds to hold its first concall on 15th Feb at 4.30 pm. Here are the details and investor presentation - http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/5BF2701E_38D6_4A82_8A8D_DE6DF4E77310_150811.pdf

[Mridul]

Great! Looks like the mgmt is maturing quickly as far as divesting information to the investors in concerned by holding conference call, submitting presentations and mgmt interviews. Always a welcome step! Probably they are realizing they are getting into the bigger league!

[rvetri]

Thanks @ayushmit…
I am eagerly awaiting what the management will say about its future…and
its prospects

[Tolaha]

Highlighting Avanti’s Vision 2022 from their corp filing:

• To strengthen and maximize the existing capacities of feed and processing and exports of
  shrimps. The revenue break up between Shrimp Exports and Shrimp Feed is currently at 15:85,
  efforts are on to improve the ratio to 40:60.

• Plans to diversify into fish feed manufacture is under study

• To emerge as a Billion Dollar Company

[nil_71]

He mentioned in a recent CNBC interview , Avanti to be a 6500 crs cos by 2020. Need to see…

[Sandeepg]

Does anybody have the transcript of yesterday’ call? Please post if anybody has the gist of the call

Thanks

[yogansh]

Hi,

Sharing my notes of Avanti’s Q3Fy17 Concall.
@Sandeepg Hope this helps!

Notes from Q3Fy17 Concall:

-Aim to be 1Bn$ Co by 2022.

-Shrimp exports and Shrimp Feed is currently at 15:85, efforts on to improve the ratio to 40:60.

-Increase in sales volume of feed & shrimp.

-Stocking have started in some region.

-Prices of shrimp are expected to remain at the same level.

-Overall year look promising with a growth expectation of 15-20%
80-90% of culture area will be of Vannamei this season.

-3 ways in front of Avanti to increase revenue:
1)India has huge coast line and the potential to have more area under cultivation.
2)Shifting of more farmers from tiger to vannamei.
3)Upcoming 15,000 TPA capacity for shrimp processing.

-We expect to have 30% capacity utilization in the 1st yr of commencement of new processing plant,
Which will go up to 70-75% in the 2nd year.

-Overhead exp will not be high, even at low utilization in processing business as the cost is variable in nature. (labour intensive work).

-Co. is looking to enter Fish feed manufacturing as well.
Plan is on the board.
No CAPEX numbers to share as of now.
Pre mature to make any comments on this front at this moment.

-Cash & Cash equivalent: 200 Cr.

-Hatchery Plan, phase 1 will be implemented in FY17 and expecting commencement in Mid 2018.

-Avanti needs fund in the month of Apr, May, June as it is the peak season.

-In Shrimp processing business we are not selling to TUF rather we are leveraging them in marketing our products in US market.

-Processing has 2 ways of sales:
1)Short-term contracts of 2-3 months. (It forms small portion of our sale) (High risk of price volatility)
2)Spot market transactions. (Major portion of sale) (Low Risk in terms of volatility)

-In Feed sector pricing is a sensitive area for farmers.

-Avanti has 45-50% market share in feed business.
Our feed is at a premium in the market.
It is preferred by the farmers. Due to superior quality.
Quality of feed and technical assistance to farmers is our secret of success.
We don’t export feed.

-US market offers better margins in Shrimp processing segment.

-Expected Revenue and margin at peak utilizations:
Feed: 2800 Cr & 8-9% margin. (700Cr. For 1Lac tonne capacity.)
Shrimp Processing: 1000 Cr & 6% Margin. (investment: 100Cr)
Hatchery: 15 Cr and 6.6% margin (investment: 25Cr)

-Management works day and night to run the business and So the managerial remuneration is justified.
It is in line with the regulation.

-Distribution Channel:
Dealers: 180-200
Geographical Presence: AP, Karntaka, WB, Orrisa, TN i.e all major aquaculture states.

Regards,
Yogansh Jeswani
Disclosure: Invested (I have tried to cover major points and it is possible that I might have missed some detail. Please consider the same and do your own due-diligence).

[Sandeepg]

Thank you very much for such a quick response. What do you think are the triggers for next 1-2 years from an investment perspective?

Disc: Already invested, looking to add more

[tbhavesh]

Thanks Yogansh - very helpful…

Disc : Invested and no transactions in the last 12 months…

[rvetri]

Hi Sandeep and yogansh

Avanti expects to grow 15 - 20% in the coming few years… It is beginning
the shrimp processing and exports business in FY18 from Apr…The biggest
trigger in my opinion is that Avanti does not need any new capital to grow
and it does not have to take debt. It can grow comfortably with internal
accruals even for a growth of above 30 - 40%.

Disc: invested. Views will be biased.

[nil_71]

Will the rising Soyameal price affect this Qtr’s margin or they source at cheaper rate and sign longterm contract?

http://www.indexmundi.com/commodities/?commodity=soybean-meal&currency=inr

[rvetri]

This year, the global shrimp prices are at a high. So the farmers will get
a good price for the shrimps. So, Avanti can pass on the cost increase to
them this year.

[raj1968]

If you look for a year chart they are much lower compared to last year high.

[valuseek]

I wish to add that 3month back Mr.A.Jayathiak, Chairman of MPEDA talked(Nov Business Today)about their target of $ 10 billion by 2020(now $ 5.6 billion) and he stressed on not only Pacific white but tiger shrimp which give higher yield for distinctive test n niche market.Demand is there but supply is low n once the nucleus breeding center at Andaman is ready soon production of black tiger will go up.Hope this is executed well not just plain talk.
(invested in this stock)

[Tolaha]

Do you have any links for the above info? Googling on the launch of the nucleus breeding center in Andaman just gives me results from 2014. I guess the Business Today article isn’t available online.

[valuseek]

I read it in Nov`6,2016 issue of BT which I bought.You can try full
interview : businesstoday.in/A.Jayathilak as it is given in the
article.Dont know if link is still working…

[Vivek_6954]

http://www.feednavigator.com/Markets/Indian-shrimp-production-to-benefit-from-rebalancing-of-global-seafood-supply-and-demand-Rabobank

[ayushmit]

The Big Fish Of Sea Food Export

[rvetri]

Thanks Ayush…Good article…