“The Lady with Midas touch” enters Avanti Feeds this quarter.
Dolly khanna!! more than 1% holding…
Good results.
Sales up 78%
PAT up 80%
EPS for Q1 at 28.21.
TTM EPS is now 89+.
Promoter pledging has reduced a bit as well.
The stock is trading at 11x TTM now.I expect it to sustain these levels or move down a bit,before rallying upwards again.The stock has gained healthy interest over the past 1 quarter & seeing the growth prospects of the industry,it should sustain(if not rise)
Disc.: A happy investor since an year. 
With current qtr at 470 cr post capacity expansion sales shud touch 2000 cr in FY 15 & market cap too imho.
Co has indicated its plan of more capex to increase its capcity further.
With MPEDA excellent work in controlling disease in India for last 5 years Avanti shud see its EPS & PE both increase.
I think the results are very good.
Has anyone attended AGM?
Some people in Moneycontrol messegeboard are posting management guidance for sales as 2K crores for FY14-15, which is 80% increase over FY13-14. Also a plan to set up hatchery unit and expansion of fee & processing capacities.
But no idea if its real or just a fake message.
Shrimp processing margins at 8.8%. May be because operating rate is low with the expansion, room for improvement as throughput rises?
The message is real Gaurav. whats your estimate for eps in that case?
Vivek,
The EBITDA margins have not been as impressive in last 2 quarters as it was in Q3. Assuming the current profitability is normal & is maintained this year, FY15 EPS should be about 120. Maybe slightly more if it can do better in Shrimp processing business. I think Q2 results would have more pointers about processing business.
The problem clearly apparent currently is that EBITDA margins don’t seem to improve. In fact, it is lower even compared to waterbase which is much smaller in scale. On one hand, It claims to have better product. Now, I would ike to know if it has higher raw material cost (any imported items or royalty?) or if this growth is largely by undercutting competition. Even with strong Shrimp prices worldwide, it is unable to take advantage of ‘near’ monopoly in the business. I would like to have some more understanding here, as I feel its necessary to have atleast 10%+ EBITA margin for it to decrease the perception of pure commodity or trading business.
Positive: The management is projecting another year of scorching growth. I cant think of any other industry or company where sales have grown as fast so predictably. With all the discussion about the downside risks in the business, the risks on higher side are no less. With shrimp production spreading across larger part of coastal India and with government’s focus on marine sector, the risk perception will decrease over time. Also from stock’s perspective, Dolly Khanna’s entry can help extracting significantly higher multiples and rallies could be very hard in near term.
Disclosure: Invested (20% of portfolio)
The ebidta margins may have been impacted due to surging soya prices which is the main RM.
Also competition is also there with names like CP,Grobest,Waterbase,Godrej,Cargill n others also in the fray. So maybe RM price increase may not be passed on so easily.
Your take please.U can get the no of the CS from BSE & speak to him as your stake is quite high.
AGM Notes of Avanti Feeds:
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Excerpts from the Chairman’s address.
Industry
Successful adoption of Vannamei shrimp culture in India, replacing traditional Black Tiger shrimp culture proved to be a boon to Indian shrimp culture industry.
As aquaculture farmer is finding Vannamei shrimp culture more profitable than black tiger, conversion took place from black tiger.
Indian marine product exports crossed USD 5bn in 2013-14 up 60% yoy. Shrimps constituted 64% of these exports in 2013-14, up 100% yoy. In volume terms shrimps exports grew by 33% yoy to 3.02 lakh MT. Export of Vanammei has shown growth to 1.75lakh MT from 0.91 lakh MT. In value terms to USD1.99bn in 2013-14 from USD731m in 2012-13.
Exports to US accounted for 44.59% of total Vanammei Shrimp followed by 17.07% to EU, 16.54% to South East Asian countries and 4% to Japan, all in USD.
Even after levy of anti dumping duty by US on India’s exports, USA continues to be a major export destination for Indian shrimps.
With stabilisation in industry and with checks in place by regulatory agencies, company expects Industry to grow at 10-15% for a long time to come.
Company:
Feed division
After the recent capacity addition, the current installed capacity is at 2,10,000 tons per annum. In current year all the feed manufacturing units are operating at 100% utilization.
Shrimp processing & export:
Modernised processing plant by replacing old block freezing machines with new ones and also adding 5MT per day capacity from existing 15MT per day.
Power projects:
Holds 50% in Srivathsa Power projects ltd, 17.2 MW gas based plant is facing cut in supply from Gail since Feb 2012, receiving only 28,869 SCMD vs allocated 1,00,00 SCMD (65,000 on firm allotment and 35,000 on fall back basis) resulting in fall in power gen to 399 lakh units in 2013-14 vs 1027 lakh units in 2011-12. However, they have tied up with ONGC for 10,500 SCMD which they have started receiving from 17 Jun 2014. It made net profit of Rs 95 lakhs in 2013-14.
Hold 26% in Patikari power private limited, 16MW hydel project in HP. The company made profit of Rs53.36 lakhs in 2013-14. It recorded highest annual generation at 756 lakh units due to favourable rains.
Has 4 wind mills in Karnataka with a total capacity of 3.2MW, and reported a net profit of Rs1.26cr
NOW THE MOST INTERESTING PART:
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Future expansion plans:
1). New shrimp hatchery at Gudivada in Visakhapatnam
In order to provide good quality Vannamei seeds, the company was planning to set up a hatchery and has finally acquired land after a few hassels in past. The work would be speeded up to implement the project in a year’s time. The detailed project report is under preparation.
Management said, over last 1 year the price per unit of seed has increased from Rs0.50 to Rs1.10.
2). Expansion of shrimp feed plant by another 75,000 MT per annum in near future, in order to cater to growth in shrimp culture (culture expected to grow at 15% per annum) and consequently demand for company’s feed (due to its high reputation). Plans are being drawn for this.
3). New/ expansion of processing facility
Considering the growth in production of shrimps in India in coming years, processing facilities of international standards are inadequate in India. Therefore company is planning to to set up a state of art facility with value added products. The plans are afoot to undertake a feasibility study for this, in association with Thai Union in near future.
For all the above mentioned projects the company plans to finalise the capex budget in a month. Request VP team to check on this when they meet the management next.
Summary of reply to other QnA from investors:
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April to July is the peak season for aquaculture.
Company is expecting tax incentive in new Andhra Pradesh, that is why shifted office to new Andhra Pradesh. Moreover, they sounded optimistic on getting Agri status for this industry and hence tax incentive from Central govt. in light of recent comments by PM where he talked about Blue revolution.
Company is the only feed manufacturer which undertakes extensive education program for farmers to educate best practices and how to avoid EMS. They have close to 150 fisheries professionals/ graduates who regularly educate farmers.
Feed in Shrimp culture plays very important part and is different from feed used in other animal breeding industries. Feed in Shrimp cultutre forms 40-45% of over all production cost.
Current cost of Shrimp production for a farmer varies from Rs 200 (for good farming practice) per 30-40 counts to Rs400 (for inferior farming practise) per 30-40 counts.
Market for aquaculture is very buoyant this year with farmers taking land on lease for upto 2.5 lakh per acre.
Market share of Avanti in shrimp feed has increased to 45%, with another 75,000MT capacity addition planned, they will be equal in feed capacity to CP foods (their main competitor, this MNC used to command 70% market share a few years back).
Management believes their feed quality is better than CP food.
Company has taken price hike in last qtr (1QFY15) in light of increased raw material costs, highlight pricing power company enjoys.
Shrimp culture is witnessing growth all over the country, benefiting from India’s big coastline. States include WB, TN, Orissa, Guj apart from AP. Due to the long coastline and widely spread farming geographically, company expect the damage if any due to any EMS incident can be contained to a geographic area and may not spread to entire country.
In my interaction with Thai Union nominee director, they mentioned Thailand produced 6,40,000 MT Shrimps in 2012, which has bottomed out in 2013 to 2,60,000MT and is expected to increase to 3,00,000 MT in 2014 and consequently increase by 1 lakh MT every year.
CMD gave aguidanceof 1900-2000cr sales for fy 15.
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this notes is prepared by Mr A and additional inputs from Omprakash and Tirumala rao
2 Likes
Many thanks Tirumal, Omprakash n Mr A for the wonderful inputs on Avanti AGM.
So views are now invited for expected EPS in FY 15 and FY 16 for Avanti.
Does anyone know if it is possible to insure shrimps? Similar to farmers insuring crops? Is avanti doing that? If they get the agriculture status, can they do that?
Gaurav,you are right on the EBITDA part,however,my idea is:
- Continued expansion is aiding topline growth & thus,cannot lead to op. leverage.
- The exports are also sensitive to Forex fluctutations…I don’t know what kind of hedging policy AF has,so maybe the appreciation of Rupee in Q1,brought margins down.
- The company had itself guided for much lower EBITDA margins than they clocked,in Fy14.There is a good chance that atleast one of the coming quarters(of Fy15),will have the advantage of both,lower RM prices & high demand.On an average PAT margin should move towards 6.5-7%.
Overall pessimism about the company has aided the stock…greater the doubt,the higher it will go.Still,a fair bit seems to exist & I expect the Stock price to stay buoyant.I personally,never had any doubts about AF(& have been consistently posting at VP about it too) But now AF has started to gain attention,& returns maybe very high in the short-medium term.
Avanti up 18% to 1175.
Thanks to painstaking work done by Donald,Ayush & Team Hyd lot of VPers smiling today.
With addl capex of 75 k-1 lac ton in feed,existing processing capacity increase & more capex on processing ,hatchery all under TUG guidance Avanti is set to become Indias no 1 integrated aqua player.
With turnover of 2000 Crore in fy 15 EPS shud touch 120 on old capacity & 140-160 in fy 16 with increased capacity .
Opp size huge,3 year average ROCE of 50-60%, MPEDA quality practices visible over last 6 years controlling disease eversince Vannamei launch mkt cap n sales shud coincide in due course of time imho.
Views Invited
http://www.nytimes.com/2014/08/06/dining/going-wild-for-american-shrimp.html?_r=0
Shrimps have replaced Tuna as the most popular sea food in US.Also its the most tastiest & healthiest non veg food .People cant forget the taste .Opportunity size will remain huge fro long time to come for shrimp farm produce as shrimps availability is going down severely in natural sea mode.
http://www.nytimes.com/2014/08/06/dining/going-wild-for-american-shrimp.html?_r=0
Opp size remains huge as shrimps replace Tuna as the most popular sea food in US.Shrimp Taste is addictive for millions of US customers.
Prices remains firm. Seems future still bright for Indian shrimp farmers exporters & Feed manufacturers.
So PE which means Predictability of Earnings should go up for Avanti Foods.
Another bit of good news hopefully for Indian shrimp n seafood exporters
Link: http://www.undercurrentnews.com/2014/08/07/russia-bans-seafood-imports-from-eu-us-norway-canada-australia/ http://www.undercurrentnews.com/2014/08/07/russia-bans-seafood-imports-from-eu-us-norway-canada-australia/ Link: http://www.undercurrentnews.com/2014/08/07/russia-bans-seafood-imports-from-eu-us-norway-canada-australia/
Avanti Feeds 1378. Wow .Thanks VP Donald Ayush and every one else as well.
Seems Avanti is in a sweet spot due to Shrimp price remanining firm,RM Soya prices softening,Capex completed in March 14,further capex to be completed by March-15 hopefully,
Another example of entrepreneur owned n driven company with superb execution tack record,FIB,huge opp size,excellent ROCE of 50-70% since last 3-4 years,EPS could touch 140-150 in fy 15 so valuation still very cheap imho