Buy Avanti Feeds; target of Rs 535: Geojit

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Geojit's research report on Avanti Feeds

Avanti Feeds Ltd (AFL) is a leading manufacturer of Shrimp Feeds with a capacity of 6,00,000 MT, and Shrimp Processor & Exporter with a capacity of 22,000 MT. AFL has a tie-up with Thai Union Group, Thailand. We revised down our Target to Rs.535 (earlier Rs. 620) but upgrade to Buy (from Accumulate) factoring positive demand outlook and attractive valuation. Q3FY22 revenue grew by 17%YoY aided by growth in both Feed (18%YoY) & Processing segments (12%YoY). EBITDA de-grew by 27% YoY due to decline in EBITDA margin by 380bps YoY to 6.3% (3.5% in Q2FY22) on account of sharp surge in Feed raw material (RM) prices. Gross margin declined to 17% Vs 22.1% YoY. AFL has taken price hike Feed to reduce the impact of steep input price inflation. RM prices likely to ease when the supply issues normalize. Demand outlook has improved given better shrimp culture conditions, better farm-gate & export prices and re-opening of export markets. Revenue/PAT to grow at 11%/32% CAGR over FY22E-24E. We lower valuation to 16x (3Yr avg=20) on FY24E EPS to factor margin pressure.

Outlook

Demand outlook is improving given the re-opening of hotels & malls in export markets along with better export & farm gate prices and favourable shrimp culture conditions. Considering current high volatility in RM prices, we lower our valuation to 16x FY24EP/E (3Yr avg=20) factoring margin pressure to arrive at a Target of Rs.535, but upgrade to Buy considering positive demand outlook and attractive valuation.

More Info

At 17:30 Avanti Feeds was quoting at Rs 432.50, up Rs 3.40, or 0.79 percent.

It has touched an intraday high of Rs 462.25 and an intraday low of Rs 425.30.

It was trading with volumes of 64,726 shares, compared to its thirty day average of 25,844 shares, an increase of 150.44 percent.

In the previous trading session, the share closed up 0.86 percent or Rs 3.65 at Rs 429.10.

The share touched its 52-week high Rs 675.00 and 52-week low Rs 411.85 on 06 July, 2021 and 31 March, 2021, respectively.

Currently, it is trading 35.93 percent below its 52-week high and 5.01 percent above its 52-week low.

Market capitalisation stands at Rs 5,892.62 crore.

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