AvantiFeeds CEO has said they will do 10-12% PAT margins this year and topline will increase by 10%. If we extrapolate the numbers, their FY18 topline was 3392 Cr. So approx topline would be 3731 and net profit would be in the range of: (373 to 448 Cr). FY18 was 465 Cr.
Fy18 was an exceptional year for the company, those margins are just one-off. Going forward the stock would not be given growth valuations in my opinion as profits would be lesser as compared to FY18.
Longer term prospects (3+ years) look good though.
he did not mention anything on Topline. PAT Margin, will be maintained on 10-12 %. He mentioned 10% in crease in utilization
Hot off the press (April 2018 US shrimp import volume data). Good set of numbers again. No sign of temporary slowdown in volume till April 2018.
For Jan-Apr 2018 v/s Jan-Apr 2017
- US shrimp consumption up 13%
- US shrimp import from India up 31%
- India market share up from 28% to 32%
That said, focusing on raw material (i.e. soybean, fishmeal & wheat) price chart makes more sense at this point in time than the US import data.
Not fair to expect Avanti to repeat FY18 GPM, OPM and NPM performance in FY19. FY18 was a glorious exception; it is past now. Investment thesis from hereon should be based on i) normalized margin, ii) current valuation and iii) return on incremental invested capital.
Very interesting data. Thanks for promptly putting it up all the time. It has been very helpful
Data gives more credence to claims of the managements in this industry that probably things are not affected and as bad as reported in media. Or may be we need to see the data of may also. But what a panic it was!
Like rightly mentioned by you, the evaluation from here has to be based on normalized margins, growth prospects and valuations.
Disc: I don’t like to discuss my trades but just because I have been very active on this thread thought of mentioning…have reduced a bit of my position today given the high allocation i had. It was very uneasy to go through such wild swings
Please take your own call or consult an investment advisor
Even if volume growth continues , prices are down by 15-20 % , both will offset each other, and we may not see good revenue growth and due to higher RM prices , net profit margins may come down (approx 10 %). So obviously the EPS would be down 10-20% from current year EPS of 98. If we consider EPS of next year around 80-90 , stock is trading at 20 PE @ 1800 rs. which seems fairly valued ,considering no growth.
Please correct me if you find any flaws in my understanding. Thanks
I must say well played Ayush Mittal …u were a guiding force throughout the journey… hats off to ur courage & conviction…
The only flaw is that you are assuming a few variables only and assuming they would stay constant for the rest of the yr/beyond. Some people say that after a sharp correction things usually revert to mean and if that happens then RM prices can fall and end user pdt prices can rise and the extent of both can vary. I have heard people say incl the management that last year was an exception but can anyone say with a high conviction that it won’t be repeated in future!!! Apart from prices there are many other variables which can also play a key role in future in deciding what happens to the performance of the industry and its key constituents. This thread has captured almost all at various points. If your investment horizon is short term then estimating Avanti’s performance can be quite risky like you have mentioned based on a few variables but if it is long term then the probability of going wrong is less even with a flawed analysis…just like it happens in the case of any strong company bought at reasonable valuations. And Avanti is a very strong company. Rarely do you find a company as an indisputable leader in its industry with such phenomenal ratios and an ideal combination of quality parameters. Yes, these could change in case of a structural disruption but are we seeing one!!
PS: It’s interesting to see existing long terms holders getting rattled some have sold a bit, some completely (means superinvestors are also human ) and some others using the bright light of hindsight saying it was wrong to see Avanti as an FMCG company. But I am glad that they all know just like I do that we can all be wrong and in such forums it is always good to share a balanced view.
Disc: Biased, invested and added more
Of-course! I agree with your thoughts. I still maintain that its an excellent and rare company with a superior product which has a good recall and market share of over 45% (and they continue to gain market share) and superb leadership, execution etc. In a span of just 7-8 years or so, the company has scaled up from 100 Cr turnover to 3300 Cr turnover with net cash on balance sheet of 500 Cr+. For FY18 they are paying out a dividend of 80 Cr+ and yet people often call it a commodity etc.
My action has been more from the perspective of high allocation and the underlying risks of the industry. And I continue to remain invested
Avanti is seeing huge volumes in last 2 days, which are highest in last one year.
“PS: It’s interesting to see existing long terms holders getting rattled some have sold a bit, some completely (means superinvestors are also human ) and some others using the bright light of hindsight saying it was wrong to see Avanti as an FMCG company. But I am glad that they all know just like I do that we can all be wrong and in such forums it is always good to share a balanced view”
You have summed up thread’s recent replies very well.
I feel one thing to keep in mind is “Rarely do you find a company as an indisputable leader in its industry with such phenomenal ratios and an ideal combination of quality parameters. Yes, these could change in case of a structural disruption but are we seeing one!!”
Avanti has always seen extremes of valuations on either side. Important is to stick to great business at reasonable prices. Yday it gave excellent opportunity to enter for long term.
Disc- major part of PF, invested and added more in recent fall.
I think that a fall like what we witnessed in Avanti is not just a panic selling and a “V” shaped recovery. Usually, fall like this lingers on for quite sometime and it takes considerable amount of time for price to stabilize and come back to its sustainable growth rate. It is like getting bed ridden after an accident. Recovery takes time. Hence, I think that this is the time to look at portfolio weight of Avanti & take advantage of price rise to reduce percentage allocation of Avanti in portfolio to single digit.
Disc: No holding, held in past but sold fully last year, intend to buy again but not in near future.
Novice question (not related to the business activities of the company): I am thinking of attending the company’s AGM. Would be travelling from Bangalore. It would be great if anyone can tell what specific info I need to provide at the venue for attending the AGM, how long does it run for (approx) etc?
Record date for Split and Bonus : 27th June, 2018.
Thanks Ayush sir , your article is amazing … Can I please request you or someone else to throw some light or start a new topic on oceanaa biotek … Disclosure : exited at 147 , current quarter results were kind of rocking and currently valuations seem to be damn attractive … So did some trading( btst) in it lately …