Corporate Announcement -
- The decline in shrimp price is only a temporary reaction and the consumption of shrimps in US has come back to normalcy and the demand started picking up and would be restored to normal level soon and even expected to go up, which is expected to trigger increase in prices.
- The farmers are in the process of realizing that the fall was a temporary phenomenon, as the farm gate price of the shrimps is gradually increasing now, which will make the shrimp culture much more profitable than other agricultural crops. Moreover, the farmer would have invested in developing the infrastructure for shrimp culture and would prefer to continue this activity.
- The Governments have focused their attention to this sector and considering to render support to the farmers and the industry
- The capacity utilization in feed should be able to achieve a growth rate of not less than 10% in FY19 over FY18 and in processing and export of shrimps 60 to 65% capacity utilisation should be possible to achieve.
- Sustainable margins (PBT} in feed at 10 to 15% and in shrimp processing and export 8 to 10%,
Source: https://www.bseindia.com/xml-data/corpfiling/AttachLive/a5eb7aeb-6fee-44b9-b7f4-ad6bb3b94225.pdf
If indeed the Management is holding a Conference Call with the investors in the next few days, then why does it issue a clarification immediately. This point is not clear to me.
However what I gather from this clarification is that management is not willing to reduce margins below 10% for Feed and 8% for processing business. Volume is dependent on multiple external variables which are not in the control of management. Therefore, management can at best provide an informed guesstimate of the expected demand.
Disc: Invested at avg price of rs 2200
Avanti used to give clarifications then and there several times in the past. To me, Itâs kind of good instead of waiting to clarify in a scheduled event.
If company gives a clarification,then we feel whats need to give , is something fishy. If company does not give clarification, we feel, the company does not care for investors. For an investor, whether the promoter is a good one or bad one is similar to soneone with blindfolded eyes who touches various parts of an animal , applies his mind, connects the dots and creates an image out of that calling it an elephant or jackal. Just touching a single point like head or tail and making conclusions may lead to both type 1 and type 2 errors in my opinion. Not specific to avanti but to all other businesses and promoters. This becomes more relevant under current circumbstances
All are not well versed with the English i think. The only issue with the filing was the way Subject line was drafted. Instead, if it was drafted like Business Outlook\Proposition, street would have welcomed with both the hands i think. But i dont scratch too much into this. I will give benefit of doubt too Mgmt in this aspect. I am building into it looking into EY+DY, which is more than the bank FD yield as i said earlier.
Dear Sir
We enclose herewith an Invitation in connection with conducting an Audio Conference Call for Investors on 4th June, 2018 at 4.00 PM to discuss he audited financial results for the quarter and year ended 31.3.2018.
This is for your information and record.
Thanking you
Yours faithfully
For Avanti Feeds Ltd
C Rmaachandra Rao
Jt. Managing Director
Company Secretary & CFO
Despite management clarification -prices are still down. One may keep arguing this is a knee jerk reaction from the market. But somewhere there is this truth that some big fish is bailing out. The prices never lie- something is not well which is what is bothering me.In hindsight may be these type of scrips/industry is not suitable for certain temperament.This is a very violent movement in one direction.
As per mgmt clarification, capacity utilization of minimum +10%/+60% over prev year for feeds/shrimps with margins of 10%/8% respâŚwill make for a 400cr Cash profit atleast, Value the co sitting on 500 cr cash, generating 400cr min every year. No matter what news say, what macros say, as co is confident for usual business & with all the hard cash being generated⌠stock looks cheap.
Also demand for quality food can never subdue for long on this planet & no matter supply there will never be lesser mouths to feed.
Also this is a sectoral problem, avanti, apex, waterbase all stocks down by more or less same percent. Avanti being sector leader will only benefit, as small players become unprofitable & quit business, as news channel are saying.
Maybe some big investor is exiting, or maybe its just retail shakedown⌠stock has had a dream run & someone who entered at 100-200 could just be booking profit.
I am no expert, but same thing happened with me on BajFinance(Market leader) after Demonitisation. Institution gave target of 550/600 & i exited⌠stock is at all time high of 2100 today.
Iâll let the management & numbers talk.
Copy Of Presentation On The Audited Financial Results
For The Quarter And Year Ended 31.03.2018
Y r they expanding into low margin business when they r yet to capture 50% Market share in high margin, ie feed business?
can someone share the avanti concall nos please scheduled at 4 pm today?
18001203450-concall#
1800 120 3450
044 2370 3115
Itâs going on. you can attend. will share after itâs over
I was able to take below notes during the call. I tried my best to properly capture the numbers, but requesting readers to compare below numbers with actual call transcript.
Q4FY18 Earnings Discussion Conf Call Notes:
⢠Soya prices to stabilize with good monsoon. Prices may even come down with good monsoon.
⢠Fish meal prices are based on ongoing fish catch. Very difficult to predict future fish meal prices.
⢠Average feed realization is around Rs. 63000-65000 per MT.
⢠As of now, Indian shrimp prices are more economical. Indian shrimps have price advantage and better quality than other competing countries. Hence exports are increasing from India. Shrimp price from Thailand is more than India.
⢠Confident in doing 65% growth in Shrimp processing and export & maintain FY18 profitability. See good demand for processed shrimps.
⢠Not going to increase any feed prices for farmers given current slowness in market in India.
⢠Soya raw material is domestically procured and keep 30-45 days of inventory. Average cost was Rs. 33 for Q4FY18.
⢠Maintain for 60-90 days of inventory for fish meal. Average cost was Rs 89 for Q4FY18.
⢠Farm gate prices have come down by 20% compared to last year May-June. Farm gate prices are stabilizing now. Normally price come down during the first harvest season as first harvest season has good volume of shrimp supply.
⢠Last year farmers made big profit. This year expenses have gone up like lease rental, etc. With recent increase in shrimp prices, farmers would be breaking even.
⢠Ready to cook and ready to eat (higher margin 7-15%) products. Already started these products from new plant.
⢠Produce 1) Raw 2) cooked but not ready to eat and 3) cooked and ready to eat. Margins increase as value is added to the product
⢠Getting a lot of long-term contracts. Sell based on spot prices as well.
⢠Whatever feed we are producing, we are able to sell it currently.
⢠FY17 â average raw material price was Rs. 53ish. Current soya and fish meal prices have been highest that the company has experienced. All raw materials are being domestically procured.
⢠Top 2 players in feed industry are Avanti and CP having combined market share of around 80%. Rest market share shared by other players.
⢠Because shrimp cultivating is considered as commercial activity it doesnât get consideration under agriculture income by government.
⢠There are many shrimp processors in India.
⢠Donât foresee any competition threats for feed business. Good chance will continue to gain market share.
⢠Q3 always good quarter for processing business because of Christmas and holidays in Q3. Q3 to Q4 comparison shouldnât be done. Q4 to Q4 comparison is better way to compare processing business.
Avanti Feed Q4 Concall Only Q & A available.
Posting my takeaways from todayâs call. Had earlier attended the Q2 call. Managementâs as optimistic in terms of volumes as they were then. Processing business has seen good growth. Feed business volumes will increase by 10-15%.
Both their major raw materials, ie. fish and soya have had higher prices, which will lower due to a good monsoon forecast. Shrimp global prices were another problem, but are increasing - coming USA summer season is already seeing increased demand. This quarter was unusual, because both problems donât occur together. Having said that, both are cyclical issues which the managementâs faced and handled well over the years.
Coming to the problems highlighted in the last few days - the agri community had benefited immensely from the shrimp demand & prices over the years. The profits have come down quite a bit from mid-2017 highs, but shrimp farming is still a profit making business for them at depressed levels. Govt has brought down electricity cost to Rs. 2 per unit for the farmers, which should benefit them. The managementâs not looking to increase shrimp feed prices for the next 9-12 months, as they want to support the increase theyâre seeing in the number of shrimp farmers. They will see increased volumes (due to increased capacity + increase in number of shrimp farmers), 60-70% growth in their processing business, plus addition of value added ready-to-cook and ready-to-eat products in their pipeline this year. Hence, the growth will not be at the levels weâre used to see in the last few years, but a sustainable growth of ~20% in FY 19 looks possible.
The bigger question now is with growth slowing down and keeping 20% growth for FY19, Is the current valuations justified?
Looking at the transcript, One can assume volume going to grow or slightly increase and if the prices of raw materials come down it might add something to bottom line.