Riding on vannamei shrimps, seafood exports surge
Interesting article.
Simply outstanding results.
http://www.bseindia.com/xml-data/corpfiling/AttachLive/Avanti_Feeds_Ltd_070214_Rst.pdf
9M EPS ends at Rs.61 and FY14E EPS looks on track for Rs.65-70 maybe even Rs.75/-. Looks set for Rs.350/- in the near term then.
Excellent result by the company!! Much higher than Donaldās projections for Q3ā¦ I think they can easily do EPS of around 70 - 75ā¦
Disclosure: Was invested. Sold after studying about lot of variables which affect the business with minor profit. Scratching my head now!!
Extraordinary quarter for AF: Sales up 100% to 278.6cr. with the big kicker coming from over 100%+ growth in Sales in the Domestic market.NP has jumped almost 5X to 22.44cr & inspite of that they have managed a 60% drop in Finance costs.No extraordinaries involved.EPS for Q3 at 24.71.TTM EPS=68.3.
Very happy to see the company doing so well.Moreover,the uptick in Domestic sales maybe more sustainable than the Export growth/ 
Hereās a look at Actuals vs Donaldās estimates. Amazing foresight and business reading
Only sales were spread over Q2 and Q3.
9MFY14 Estimastes vs Actuals (Deviation from Estimates)
**
**
Sales: 794.39 vs 854.34 (+7.5%)
Ebit: 91.01 vs 85.74 (-6%)
PAT: 56.77 vs 55.24 (-3%)
EPS: 62.51 vs 60.83 (-3%)
Great many people are on the same boat No worries, other core stocks in Valuepickr portfolio havenāt done too badly 
Ya agree with you that other stocks are really doing pretty well. Next week is going to be an action packed week with Shilpa, JB Chemicals, VST Tillers & PI Industries coming up with the results.
So its trading at 360 odd level now. Where should one look to exit, if at all? As per the historical PE range, it looks fairly valued now. Also, next quarter numbers might be muted because of no/low production in Jan-Feb. That makes me itchy to book profits But should one look at it as a long term business and hold? Or even in that case should one exit at CMP and enter post next Q results?
Great job by āTeam ValuePickrā on Avanti!!
While some of us continue to be victims of our own pre-conceived notions n mindset!!!
Avanti Feeds is very interestingly poised now.
If you look at the segment results, the Shrimp processing side has continued to languish as expected. Company may not able to process more than ~5000 MT in the year.Whereas the Feeds segment has much exceeded expectations - Interestingly Feed segment notched up almost identical sales level in all the Qtrs. Feed Segment Margins at 11.56% is the highest ever achieved by the company - almost double that in Q2!
It seems pretty clear that as long as International prices remain at near about prevailing levels, more & more farmers are going to try a hand at shrimp culture (disease threat notwithstanding). Which means the dominant Feed supplier is having things nice & easy:)?
Have asked Team Hyderabad to do a brief poll - on understanding the Industry dynamics first and then check out Avantiās results in that context.
Letās wait for that.
Meanwhile I see no reason why Avanti Feeds cannot do a 30%+ Sales growth in FY15. And if thatās a reasonable case, the business is at similar levels to when we recommended (Sep 2013) ~3-4x 1yr forward!
Letās do some diligence again and establish the base case.
Cheers.
What would be the fair valuation in terms of P/E for stocks like Avanti (canned food, marine product, etc.). I did a quick check on _Thai Union Frozen Products, _it is commanding 25+ times multiples at Thai exchange. Though this is not a FMCG kind of business, consumer staples businesses command premium valuation. With ROE over 25%, ROCE close to 40%; P/E of around 6 seems to be a tad undervalued.
Risks:
1). What would happen once EMS treat is not an issue in Thailand, Vietnam and China? Will Indian exports go down significantly? What if we get hit by EMS or other disease?
2). I understand US currently doesnāt impose CVD. What would be the impact, if CVD is slapped again?
3). Does Shrimp price behave like commodity? What if the price falls below a point where is not lucrative for the farmer?
4). Export concentrated business. And that too mainly to the USA.
I bought some before the Q3 results were announced and now waiting for some correction to add on to my position. 33% upside in the last 5 trading session and still I feel it is undervalued.
Completely agree. The performance of the company continues to beat the expectations for over 3-5 yearsā¦many often we get too much focused on the near term things and miss out the great growth the co has been going through - this co has grown its sales from less than 75 Cr in 2009 to 1000 Cr+ (expected) in 2014ā¦without any significant debt. Look at Sept, 13 balance sheet, the company has repaid almost 40 Cr of debt and has almost 35 of free cash.
Yes, the business has risks and is volatile in natureā¦but valuations provide a lot of comfort. There is a possibility that 2014-15 may again be good for industry and if so then Avanti should do well.
Regards,
Ayush
Disc: Invested. Had reduced exposure cpl of months back but buying again since last 1 month.
easy?
Avanti surprised us on fronts . They have posted amazing results that too in lean season . In that view i spoke to couple of players who involved in industry and got feedback .
The reason behind the good performance is that farmers haveāt given any gap between seasons this year as prices are at historical highs .Usually farmers maintain some gap between seasons in November , December and January months . In management meet also they indicated us that there will even sales in all quarters . Here seasonality is reducing due to constant demand from farmers which is again due to higher prices in international markets ( Feed division ) .
In a question to sustainability of prices going forward as on February first 40 count vannamie was at 620 and as on date it is 520 , buyers are expecting soft prices going ahead . Vietnam completely revived and half of Thai production restored . Even if prices settle around Rs 400 farmers will continue farming as it is remunerative .
About prices :
year.Whereas easy?
International Prices including Asian shrimp wholesale prices are still very high. Not sure where you got the info on prices coming down?
1). Wholesale prices on shrimp for many sizes are at record highs according to Urner Barry, defying common theories last year that the market had to have reached its tip already.
Asia fragmented, with large sizes high
Larger sizes out of Asia, however, are not reasonable in any stretch of the imagination. The UB HLSO price for 26-30 count shrimp as of Tuesday was $6.95 to $7.05, which is the highest that spec has gone since January of 2001. Thatas a huge jump from just two months ago, when many were already speculating prices had reached their limits. On Dec. 1, the price was $6.64.
The 26-30 count size has become particularly popular as an alternative to even larger sizes, said a US shrimp importer, wishing to remain unnamed.
Another good link here- http://goo.gl/C4TGkx
Asia
At the moment, the best market of shrimp is the ASEAN because of the Chinese New Year, where the consumption is significantly higher in the whole area.
But with the low production of producing countries, prices of whiteleg shrimp (vannamei) are still increasing.
The situation of black tiger is very difficult. Vietnam is offering most but at very high prices: USD 18.00/kg FOB for benchmark count 16/20.
We could say that Chinese and Indian shrimp are still firm but increasing.
Table 1: Prices of farmed black tiger HLSO in boxes,
through 20 January, in USD/kg EXW Tokyo
|
HLSOCount(pc/lb) |
Black tiger (farmed) |
||
|
Vietnam |
India |
Indonesia |
|
|
In 1.8 kg |
In 1.8 kg |
In 1.8 kg |
|
|
8/12 |
unquoted |
unquoted |
24.54 |
|
13/15 |
19.74 |
19.74 |
22.41 |
|
16/20 |
18.14 |
17.61 |
20.27 |
|
21/25 |
17.07 |
16.53 |
19.21 |
|
26/30 |
16.00 |
16.00 |
17.07 |
|
31/35 |
n/a |
n/a |
n/a |
|
31/40 |
12.27 |
12.27 |
13.33 |
|
36/40 |
n/a |
n/a |
n/a |
|
41/50 |
n/a |
n/a |
11.73 |
Omprakash,
Thanks a lot for the prompt enquiries and feedback
1). Also please enquire - what are the chances of disease/low yield for those who have not given much gap between the 2 seasons - I would assume the Ponds could not have fully dried up - so bacteria and other stuff disease virus - may continue to be present?
Since this is the Summer season ahead - this may be okay? But later may lead to problems?
2). Letās try and patch up with some Feed distributors - why company margins were so high last Qr (double of Q2) - was it crazy demand which Feed manufacturers exploited. What is likely for next 2 Qrs.
3). Avanti Feeds - Feeds/Supplements - have they consolidated on their position as the main Vannamei Feed suppliers. Are they marginally ahead of CP (as in our last survey) or have they forged ahead decisively.
4). This may be key as AVanti new Feed Plant ~50000 MT capacity likely to go onstream by Feb - augmenting capacity by 40%+
I will also start making my enquiries. Your help is much appreciated.
Does any one have any info on Girish Gulati whose HUF owns more than 1% stake in Avanti Feeds?
What are his other picks n track record as he seems to be the only major Indian having 1% stake in AFL?
TUF gung ho on business propspects of AFL in particular .
India is now the largest contributor to USās shrimp imports-
http://www.shrimpnews.com/FreeReportsFolder/NewsReportsFolder/USAimoirtsVandV12and13.html