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Today, we would like to bring to your notice Apex Frozen foods and share notes from its Q1 FY 23 con-call. Since the last few years the Shrimp industry hasn't done very well and the stocks are down 50-60% from their 2017 highs.
In general, we like looking at companies which have done well in the past but currently going through a tough phase as a lot of times one can get good companies at cheaper valuations in such scenarios.
Hope you find the details useful for your own investments or to add the stock to your watch list:
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Apex Frozen Q1 FY 23 concall
General Points -
- As we have been updating you over the past few quarters, Apex is done with its Capex cycle and with the 29,240 metric tons of own capacity, we are ready for the next phase of growth
- The COVID pandemic, followed by the equipment crisis regarding the logistics container issues and then the war in Ukraine had a mellowing effect on our business. We are happy to report that most of these challenges now seem to be behind us
Q1 performance -
- The total shrimp sales in Q1 FY'23 grew by 16% year-on-year to 3,761 metric tons
- Our total processing during the Q1 was 4,611 metric tons to be precise
- Average realization stood at Rs 813 per kilo (CIF - includes freight also), which was higher by 20% year-on-year, backed by improved product mix and the firm shrimp prices globally. And of course, the depreciating Indian rupee, which has helped us to a certain extent
- The average realization for the quarter was $10.44, compared to last year, full year, it was $9.81 FY'22, average. This is average for all products including Ready-to-Cook as well as Ready-to-Eat
- The share of our higher-value Ready-to-Eat products increased to 25% of the Q1 FY'23 sales as against almost 21% of Q1 FY'22 sales
- Other expenses, which were led by increased freight costs, continue to pressurize the margins, but were partially offset by the improvement in our product mix
- The freight costs for the Q1 was almost Rs 25.33 crore vis-a-vis Q1 of last year, it was Rs 11.4 crore
- However, in the present quarter, there are some supply-related challenges as some of the producers had to make some premature distressed harvests and also some rains, which have been affecting to a certain extent
- On the demand side, there was a bit of correction in the early part of this financial year. There was a certain extent of inventory pile-up also, which had happened because of all of last year's shipments reaching to the destinations because of various logistical issues. So that means there was kind of more supply at the destination consuming end than the demand which was prevailing at that point
- It's just that there has been some accumulation or rather arrival of quite a large amount of product into the countries compared to the normal situation. So that is what looks like
- But as such, our customers have reported that their sales are all going in a very consistent manner
Shrimps prices in general -
- Currently, it is corrected from its high of last year. It is definitely corrected by almost like a $1 or $1.25 comparatively. I mean taking on a $10 item basis
- It went up from $8 to $10 example. I gave you on that numbers just to take on an example basis, it went up from $8 to $10, and it has again corrected and came down to $8.5 to $9
Capacity -
- Our capacity utilization is also improving, but we still have the potential for much higher revenue from our existing facility
- Additional 5,000 metric tons Ready-to-Eat, the value add - We will see the benefits of the expansion by the end of the current financial year
- As far as capacity utilization is concerned, it is more driven by the supply situation
- We are definitely on that path of doing that 18,000 metric tons plus for the year. But as I had also mentioned in the opening remarks, it is also subject to supply conditions and the situation, how they keep changing
Export benefits -
- We would like to point out that the export benefits that were earlier reported, as part of net revenue, have been reclassified, regrouped under other income
- The increase in export benefits, which stood at Rs 13.7 crore in Q1 FY'23 is on account of approximately around Rs 5 crore to Rs 6 crore of RoDTEP benefit, the replacement scheme which came in the place of MEIS
- On the RoDTEP precisely, it is 2.2% approximately is coming up on FOB value
Guidance -
- In the beginning of the year, we were looking at anything between around between 18,000 metric tons to 20,000 metric tons
- We may be looking at some corrections and maybe between 16,000 to 18,000 metric tons (for FY 23)
- We are looking forward to see how well we can do in the current quarter as well as Q3. Historically, Q2 is always the highest for us over the past years, but maybe this year, Q2 may not be that much as far as volumes are concerned. And as Q1 itself has taken the major part, we expect Q2 to be on similar lines
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Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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