Apex Frozen Foods Limited (AFFL) is one of the integrated producer and exporter of shelf stable quality aquaculture products. It supplies ready-to-cook products to a diversified customer base. The output majorly comprises of variants of processed Vannamei shrimp (White shrimp) and is sold under the brands owned by the customers and also through their own brands namely Bay fresh, Bay Harvest and BayPremium. The company strategically focuses on the market of USA, which is the largest importer of aquaculture products in the world. AFFL operates out of Andhra Pradesh, which is the most favourable state in India for aquaculture business. The integrated operations span across the hatchery and farming on 1,337.69 acres of land and currently processing of ~ 9,240 MTPA of finished products at the facility located at Kakinada. In addition AFFL has leased 6,000 MTPA processing facility.
Valuation and Recommendation
AFFL has shown consistent growth in sales as well as profitability. Sales have grown at 28.6% CAGR between FY13-17 while PAT grew by 27.6% during the same period with consistently higher RoE of over 25%. Shrimp business in India is growing and the company has vast opportunities for exports as well. With the expansion the company is likely to maintain the sales and profitability momentum in coming years. Though there is no direct comparable listed company, we have taken Avanti Feeds (engaged in Shrimp feeding), Waterbase (Shrimp feeding) and Zeal Aqua (Shrimp farming) as peers. We like the business model of the company given its high asset turnover, customer stickiness and integrated business operations. At upper price band of Rs 175, the stock looks attractive and hence recommends investors to subscribe the issue for listing as well as long term gains.
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