Buy Avanti Feeds; target of Rs 565: Geojit

Geojit's research report on Avanti Feeds

Q1FY21 revenue de-grew by 12.6%YoY impacted by decline in volumes (Feed-19%YoY, Processing-7%YoY), due to Covid-19 led disruptions. However, EBITDA de-grew by 5.7% YoY, supported by improvement in EBITDA margin (by 100bps YoY to 13.5%) due to reduction in costs. Industry shrimp production is expected to drop by ~15%-20% in FY21 due to Covid-19 led disruptions but to improve in FY22. Relaxation in restrictions, improvement in export prices, regional diversification and increasing market share will support future volumes. MEIS (export incentive scheme) changes will impact incentive receipts.The company has to adjust this gap with farm-gate & export prices without affecting competitiveness. Expect Revenue/PAT to grow at 9%/14% CAGR over FY20-22E. We value AFL at FY22E P/E of 19x considering healthy growth & RoE and no debt.

Outlook

We maintain Buy rating with a revised Target of Rs.565 due to better than expected volumes amid challenges and strong fundamentals.