Hello Sir,

Hope you are doing well.

I am sure you must be aware of Avanti Feeds, one of the largest Shrimps feed producer in India.

10 years back in Dec 2013 the stock was quoting around 15-20 odd levels; it then rose to record high of 950-970 odd levels in Oct-Nov 2017. Since then, the stock has performed poorly and currently languishing around 400 odd levels.

The question is, has the Shrimps industry bottomed out? As per the management, an upturn in the US shrimps import market is beginning to look more real.

Further, if the US ends up levying both countervailing and anti-dumping duties on Ecuador and only countervailing on India, then it can be another positive for Indian shrimps exporters.

Below, we have shared interesting insights from the Q2 FY 24 con-call of Avanti Feeds to understand the current situation and the outlook for the company.

 

Before that, if you ever find a good stock in an ignored sector with promoter buying from market and increasing his stake, you should sit up and study the company in greater detail…something good might be brewing.

We recently released our new stock recommendation for Alpha/Alpha + members based on the same framework – for details click HERE

 

Avanti Feeds – Insights from Q2 FY 24 con-call of the company

  • The PBT in H1 FY24 increased to Rs 270 crores from Rs 197 crores in the corresponding period of the previous year, mainly due to decrease in the raw material costs and increase in other income

– Feed Division

  • The gross income in Q2 FY24 increased to Rs 1,064 crores from Rs 1,040 crores in the corresponding quarter of Q2 FY23, an increase by Rs 24 crores, representing 2% due to increase in sales quantity by 1,830 metric tons and decrease in raw material costs
  • Average raw material cost in terms of percentage over feed sale price was 85.72% in Q2 FY24 and 88.11% in Q2 FY23
  • The Q2 FY24 rates of fishmeal, soyabean meal and wheat flour are Rs 127 per kg, Rs 54 per kg soyabean meal and Rs 29 per kg wheat flour respectively
  • The prices of fishmeal, soyabean meal and wheat flour were at Rs 138 per kg, Rs 54 per kg and Rs 33 per kg respectively as on date, that is, 18th November 2023
  • The company’s estimated production in sale of shrimp feed in the calendar year 2023 is about 4.9 lakh metric tons at the same level as in the previous year, when the total Indian feed consumption is down by 15%

– Shrimps processing division

  • The gross income in Q2 FY24 decreased to Rs 253 crores from Rs 310 crores during Q2 FY23, a decrease of Rs 57 crores, representing 19% YoY
  • Sales volume during Q2 FY24 decreased to 2,950 metric tons from 3,492 metric tons in Q2 FY23, decreased by 542 metric tons
  • The PBT in Q2 FY24 is Rs 31 crores, decreased from Rs 39 crores in the corresponding quarter Q2 FY23, there is decrease in sales quantity by 542 metric tons, a decrease in average sales realization by Rs 37.70 per kg in Q2 FY24
  • The company’s shrimp exports during the FY23 was about 12,497 metric tons as compared to 12,836 metric tons in the FY22
  • It is estimated that the export during the FY24 would be around 12,000 metric tons

– Industry details

  • On the basis of estimated shrimp production in 2023, the estimated feed consumption is about 10.5-11 lakh metric tons
  • The country’s Vannamei shrimp exports in terms of value declined in FY23 compared to FY22 by 8.11% from $5,234.36 million to $4,809.99 million
  • The country’s overall exports of frozen shrimp in quantitative tons for FY23 was 7,11,099 metric tons as compared to 7,28,123 metric tons in FY22
  • An upturn in the US shrimp import market is beginning to look more real on the basis of the latest update by National Oceanic and Atmospheric Administration of Seafood Trade Database
  • The upturn is being witnessed for the past three months after a 13 consecutive months
  • However, the price continues to be down by about 10-15% on the earlier average price
  • India continues to lead all source nations sending 28,992 metric tons of shrimps worth $226.3 million in September 2023, 6% more volume and 5% less revenue than September 2022
  • However, the average price is down by 11% to $7.81 per kg from $8.7 per kg seen earlier

– Diversification

  • Company has incorporated a subsidiary with the name Avanti Pet Care Private Limited as a special purpose vehicle for manufacturer of pet food, mainly dogs and cats and other pet care products
  • The company will be investing 51% of the equity capital of the joint venture company and the balance will be invested by Bluefalo Pet Care Limited and other investors
  • Coming to the fish feed, a senior executive has been appointed to undertake survey and evaluate the demand and supply of fish feed of various species in India with the objective to set up fish feed manufacturing facility by the company

– Capacity expansion

  • The 7,000 tons capacity, which is already we have undertaken for the shrimp processing, which will commence in end of this year or financial year
  • Coming to the feed, we already have sufficient capacity

– Countervailing and Anti-dumping duty by US

  • The CVD or Countervailing Duty that’s being put by the US on shrimp from India, Ecuador, Indonesia, Vietnam, so all the major shrimp processing countries
  • And in addition to the Countervailing Duty, I see that Indonesia and Ecuador might will be subject to, even Antidumping Duty

– Guidance

  • We are expecting that the things will be much better and more optimistic in the rest of this year and also 2024
  • As it stands today, the field report is that the farmers are enthusiastic about the next year

(End)

 

Disclaimer: This is not a recommendation to buy/sell Avanti Feeds. The securities quoted are for illustration only and are not recommendatory.

 

Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/

 

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