Buy Avanti Feeds; target of Rs 469: Geojit

Geojit's research report on Avanti Feeds

Avanti Feeds Ltd. (AFL) is a leading manufacturer of shrimp feeds with a capacity of 7,75,000 MT and a shrimp processor & exporter with a capacity of 22,000 MT. AFL has a tie-up with Thai Union Group, Thailand. We revise our target price to Rs. 469 (from Rs. 420) and maintain BUY rating factoring in improvement in margins. Revenue declined by 18%YoY, mainly due to volume declines in both feed (-22%YoY) and processing (-19%YoY) segments. The shrimp production in the country is expected to come down by ~5- 6% in 2023, and the company has guided for flat to -7% YoY downside in feed volumes and flat growth for the processing segment. EBITDA grew by 14%YoY as EBITDA margin improved by 340bps YoY to 12.2% (7.3% QoQ) due to stabilization in raw material prices. AFL has added new capacity of 1.75 lakh MT in feed in Dec 2022 and is adding 7,000MT in the processing segment by the end of FY24. Revenue/PAT to grow at 5%/29% CAGR over FY23E-25E. Factoring in the current demand slowdown, we value AFL at 13x FY25E PE (3Yr avg=15).

Outlook

The weakness in shrimp production is likely to continue in FY24. However, the stability in the farm-gate prices suggests that shrimp culture activities are expected to gradually improve. Factoring in the current demand slowdown, we value AFL at 13x FY25E EPS (3Yr avg=15x) to arrive at a target price of Rs. 469, and maintain BUY rating due to improvement in margins.

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