Hi mahesh,
Views on this,the performance continues,what could be a right price to enter this,is ther anything that has changed fundamentally since the thred was started,
regards
biju
Hi biju,
Although the business and company’s positioning in its operational segment is promising, the rate at which it is currently trading at at present is not the right price to enter…Its sort of 60;40 situation in terms of risk reward…
Rgds.
Bumping this thread.
After rediscovering this stock through the Screener.in with the fundamentals still looking good, could fellow investors provide their inputs if fresh positions can be taken here?
I haveinitiationa starter position, but would like further inputs before i dip further.
Moreover i am posting the latest quarter results:
Period Sep 12 Dec 12
Sales 61.48 63.40
Expenses )- )-
Operating Profit 21.07 20.26
Other Income 0.03 )-
EBIDT 21.10 20.26
Depreciation 1.00 1.01
EBIT 20.10 19.25
Interest 1.36 1.29
Profit before tax 18.74 17.96
Tax 6.28 5.92
Net profit 12.46 12.04
Views Invited
Hi
Any views on AVT Natural Products? Looks like it has come down to 28-29 Rs levels.
Thanks
Sudheendra
Company is good with decent management…its main business is likely to face margin pressures in the medium term because of patent expiry of FloraGlo in 2014 for which AVT is the exclusive supplier…
Rgds.
Any new developments here look like margin is coming down. Any news…the share is hovering around 30 for long now
Anyone still tracking this stock? Seems stuck around 20? Whats the latest view on fundamentals?
I had recently started tracking this stock. Did my analysis based on last year annual report
Extracts from 2012-2013 Annual report
- Increased volumes of Marigold Food Grade Oleoresin (usedin Eye Health segment), Spice Oils & Oleoresins (used inFood flavoring & coloring) and Decaffeinated Teascontributed to 17% increase in sales from Rs.219 Crores in2011-12 to Rs.256 Crores in 2012-13
- Profit AfterTax was flat at Rs.50.57 Crores due to softening of MarigoldFeed Grade Oleoresin (used for Poultry Pigmentation) pricesin the global market (thanks to over production in China).
- Company registered at five time growth on PAT as compared to 2010-2011
- Marigold crop was record high due to a very favourable monsoon season
- Term loan would of amount 1.49 crores will be closed by March 2014 and there by making it a zero debt company
- Subsidary AVT Natural Singapore-> sales declined from 25 crore in 2011 to 10.82 crore in 2012. There by subsidary incurred a loss of 2.09 crores in 2012 vs 4.36 crore profit in 2011
- AVT Tea Services Ltd ,London was setup in 2012 which reported income of 0.22 crore and loss of 0.68 crore due to administrative over heads
- R &D ->
-
* Marigold Seed development - Superior seeds are key to remain competetive- New Product Lines - New product lines will reduce dependancy on marigold revenue. This thrust opened new product lines like spiceoleoresins and decaffeinated teas which contribute to 35% of revenue
- Expenditure on R & D is 2.17 crore in 2012
- Opportunities:The age-related eye disease study 2 (AREDS2) results were published very recently. Details can be seen athttp://www.areds2.org/. AREDS2 is the largest trial done by National Eye Institute (NEI) of USA to date testing theeffectiveness of Lutein and Zeaxanthin in adults with Age related Macular Degeneration (AMD). NEI recommends improvingthe safety and efficacy of the AREDS supplement by removing beta carotene and replacing it with 10 mg of Lutein and 2 mgof Zeaxanthin. Your company is well entrenched in the Eye Health segment with Kemin as partner for both Lutein andZeaxanthin. AREDS2 study results should boost the demand for Marigold Oleoresins in future as your company’s long termpartner Kemin Human Nutrition & Health Division has a strong market presence.
- Risks
-
* Monsoon failure affecting Marigold crop output:We have 3 growing areas and 3 cropping seasons. On top of it both our partner Kemin and we carry sufficient inventory tomitigate the risk of crop failure. Though this strategy burdens our working capital outlay, this is part of our overall businessstrategy.- Foreign Currency risk:We take appropriate FOREX hedges depending on the Rupee movement as soon as customer contracts are finalized.
- Commodity risk :As far as Marigold flowers are concerned, under the Contract Farming model, we have agreements written with eachfarmer outliningthe rights and obligations on both sides (Farmers and us) including flower prices. In the case of raw materialfor SpiceOils andOleo resins, our policy is to have back to back position as soon as orders are finalized.
- The company’ssubsidiaryin London will give returns from end of 2014 and the demand for tea has been addressed by adding capacity to Instant tea plant
- Cost of materials went up by 13%,employee expenses went by 17% which had offset sales increase of 16%
- On a trailing basis company is expected to gross over 280 to 290 crores. The EPS is expected to be around between 8 to 9
At CMP of 29 it had a run up in last few days from Rs 20. I would like to wait and watch for annual report of 2013-14 and then like to initiate a position
Hi Venkata,
Before few days, soham from valuepickr had mailed me some queries on AVT…posting below those queries and my replies on the same in case they are of any use to you…
Hello Mr Shah,
Good evening,
Following are some of the questions, they are very generic ones and I wanted to know your views as well about the quality of the business:
- Given that Kemin and Chrysanthis together form the bulk of marigold oleoresin demand (not only for AVT but globally), can AVT command any pricing power? If any, then how has been the per unit economics?
- Can you comment about the volume growth of AVT?
- There is a huge fragmentation in this particular vertical. How much market share does AVT command?
Can it adversely change ?
- Do you have any reports or anything like that on AVT which you can share with me?
Hi Soham,
Please find my replies below :
1.- Kemin is the crucial customer for AVT contributing more than 50 % to the revenues…there is an exclusive contract inplace till 2020 with this customer…so revenue will continue to flow from it as long as its FloraGlo product sales are robust…rgdg. pricing power, it is mainly market driven wherein in case of crop failure in other regions in a particular year, prices may be higher and therefore margins might be higher and vice versa…So far, since last 2 years, especially in FY12, the situation has been extremely favourable for AVT as prices of both Food Drade and Feed Grade marigold oleoresin were on a rise with feedgrade oleoresin prices shooting up by 200 % + in FY12…The price rise has moderated and one can expect moderation in margins of AVT going forward.
2.- Volume growth, especially from Kemin seems to be good but from spice oleoresin segment it seems excellent…this i am telling based on the results reported and its rating report…
3.- At the time I researched this stock, AVT commanded significant marketshare of food grade oleoresin segment…I don’t think its dominance in food grade oleoresin segment would have challenged so far as Florglo products are going off patent only in current year…post this margin pressure might be evident for AVT as its key customer will itself face pricing pressures…
4.- On valuepickr you will find link to my note on AVT…rgdg. other reports, actually it was on a different workstation which had crashed…I will check up with the back-up stored data once result season is over and send you if anything I can find…
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Thanks Mahesh…
AVT Natural is continuously hitting 52w high since last few days.
Importantly it has higher delivery volume 46%. Last 8 days avg delivery % is 48. Strong handshake should have resulted this.
Annual General Meeting at Chennai on July 25, 2014. The meet was preside over by Ajit Thomas, Chairman of the company. Key takeaways of the meet by Capital Mkt;
Expiry of Lutein patent of strategic partner Kemin has increased the competition and prices have come down significantly eroding margins in the supply chain. Given its supply dependability both in-terms of time and quality, the company along with its partner Kemin is working on retaining and growing market share. In this regard the company is trying to contain costs especially the fixed cost.
Zeaxanthin though received well in the market that will not totally compensate the loss in revenue and profits at Lutein. The market demand for Zeaxanthin and Lutein is in the ratio of 5:1.
Lutein prices have come down to about USD 1/kg compared to a peak of USD 3 during good time two year ago. The price may range about USD 0.75-1 unless there is a crop failure in China and resultant push up in prices.
Feed grade marigold oleoresins prices came down to levels of 10 cents now. And the prices of it also depends on Chinese crop.
Given difficult times in marigold oleoresins the company has invested in future growth areas i.e., Spice Oleoresins, Instant/Decaff Tea and Health supplements. The new stream accounts for about 35% of the revenue of the company in FY14.
Instant Tea â The company has invested Rs 13.5 crore for a state of the art instant Tea plant with a capacity of 700 tonnes per annum in the Cochin Extraction plant. The company is in the process of overcoming the initial learning curve of âInstant Tea’ production and marketing. With strong technical and marketing team at London based AVT Tea Services, the company expects to have a significant Instant Tea business by March 2016. Recently, the company has also recruited a sales manager in USA with relevant industry experience in Instant Tea vertical for handling America’s Sales Zone. The company expects to clock a sales volume of 400 tonnes in FY15.
Decaff Tea â The company has expanded the Decaff Tea capacity at Cochin to 7000 MT. The company expects the capacity utilization to improve and expects a volume of about 4000 MT in FY15 compared to about 2000 MT in FY14. In next 3 years the company is looking at a capacity utilization of 80% and sales volume of 6000 MT by FY17.
The company is increasing the distribution of health supplements and the product is now marketed in 6 cities and just has been launched in Delhi and Chennai. The distribution is primarily through chemist network and select modern trade channel.
The instant tea and Decaff Tea will bring in revenue of about Rs 45-50 crore in FY15.
The next two years are going to be tough. The margin will be under pressure due to change in revenue mix as well as lower realization in food grade marigold oleoresins. The company though feels it is too early to speak about the operating margin, it is hope full of sustaining or marginally improving the Q1FY15 margin levels for rest of the period. Parts of China is faced with floods and some other parts drought and the estimated damage to marigold crop is not yet known. If there is huge damage to marigold crop in China there will be positive impact as far as marigold oleoresin prices going forward auguring well for the company.
AVT Natural has fundamental elements and can provide multi beggar return over some years.
1 yr return : 198%
5 yr return : 1075% (10x)
10 yr return : 3919% (30x)
Such small cap business with fundamental elements can give pain for short duration but longer term return is encouraging, provided that business is expanding.
Nonetheless maximum 5% allocation is sufficient. In fact this is the perfect stock for 5% slot which has low PE, high ROE, Growing Topline and bottomline, high OPM, low debt.
My conviction ask me to stay invested long here.
Disc : Invested at 17 level last year.
Today results of AVT came out. Its highly disappointing. Net sales was just Rs.50 crore approx. compared to Rs.90 crores in previous quarter and Rs.63 crores during same quarter last year.
I feel the poor performance could be due to the poor Lutein prices. Since the break up is not given its difficult to measure the future impact. The company should diversify from the marigold business if it wants to sustain its profitability and financial strength. Moreover, since Kemin is the only client, any downside in orders from them will have a great impact. AVT should think of adding more clients so that they can supply to different clients at different prices and leverage on demand in various countries.
Its good to see their growth initiatives in Tea business which seem to be working and more expansion happening.
My comments above are not based on the results, but I’m trying to use the AGM takeways and trying to relate it with the result performance. Please feel free to correct me or add more points.
Disclosure: Have personal holding in AVT
1 Like
Hi,
Does anyone on the board still continue to track AVT Natural ? Sales have been stagnant since 2013 whereas profit has been falling since the last 2 years. The annual report doesn’t mention much about new development, are there any positives triggers for the company ?
AVT Natural Products has informed the exchanges around 19th Oct’15 regarding the capacity of the instant tea (continuous extractor) plant at its existing factory at South Vazhakulam, Aluva, Kerala, has been increased to 1,000 tonnes per annum from 600 tpa, at an investment of ₹4.60 crore.
Similarly, the capacity of the caffeine plant at the same unit was raised to 50 tpa from 14 tpa at an investment of ₹3.65 crore.
Need to see if the above translate into numbers over the next few quarters.
The “Purchases” in FY 2014-15 was about 47.64 lacs while “purchases” in FY 2015-16 is about 14.87 cr.
What justifies such high increase in purchase price ?
Can anybody put some light on this please ?
Discl - Invested.
Anyone in the forum currently following AVT Natural? I am following this company from past 3 yrs.
Latest news is that company is setting up a 100% wholly owned subsidiary Company in Mexico. The proposed Subsidiary will be the marketing arm of the AVT Natural Products Limited for developing its existing range of products and new value added products in Mexico.
Share price is at almost 50% from its 52 week high.
Disclosure: Invested.
Dear Sir’s, Was wondering if anyone still tracks this business. I had a small question. The company in its 9 month Balance sheet shows a debt of about 50crs. And there seems to be a capacity addition since Interest cost and depreciation have gone up. Can someone confirm which capacity has been expanded is it in spice oleoresins?