100% agree with @ayushmit that improvement in shrimp prices (especially for new and levered shrimp farmers) would definitely be very beneficial for the entire value chain and long-term industry prospects.
I’m interested to learn Avanti’s business model regarding their Processing & Exports segment. I hope that they would maintain a spread/margin regardless of the underlying price volatility of shrimp. Like CCL Products, they take order first from their international coffee clients and then buy raw material coffee beans, maintaining the spread by keeping appropriate margin and not focus on what’s happening with coffee bean prices. If anyone has any insight into Avanti’s processing and exports segment, please share it or else I will try to ask this question on next quarter’s conf call.
If they try to maintain the margin and not focus on speculating prices (buy more shrimp when prices are low and then get butchered when prices fall further), then business model should be sound and long-term sustainable.
If they expect to increase the utilization in processing segment to 60% and post volume growth of over 50%, I would expect them to make decent money considering that their COGS would also go down with fallen shrimp prices. Good monsoons shall help them to maintain decent margins in feed segment keeping raw material prices in check, which is outside of their control.
Next 3-4 quarters very crucial for everyone part of the shrimp ecosystem. Expecting feed industry leader to come out stronger through this rough patch (hopefully its temporary) given that they have capacity to suffer thanks to healthy cash on b/s. And this stock is definitely not for faint hearted given cyclical nature of the industry. If I happen to own Avanti for next decade, I expect at least 3-4 more draw-downs that are north of 50%.
On a side note - I as an end consumer, here in the US, have so far not benefited from the fall in global export shrimp prices. Was paying $5 late last year for 12oz or 340gm of medium cooked shrimps from India (peeled, deveined, tail-off) at grocery store, and today I am paying $5.49 for the same packet. Losing on unrealized gain in stock price and also paying more for the same product. Living on double edge sword in this world of shrimp business.
Disc: invested in Avanti since 2014.