BUY CMP 469.40 Target Price 540.00 AVANTI FEEDS LIMITED Result Update (PARENT BASIS): Q2 FY16 DECEMBER 12 th 2015 ISIN: INE871C01012 Index Details Stock Data Sector Food products BSE Code 512573 Face Value 2.00 52wk. High / Low (Rs.) 690.00/282.00 Volume (2wk. Avg. Q.) 18000 Market Cap (Rs. in mn.) 21317.80 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 17762.56 21048.63 24837.39 EBITDA 1903.94 2568.56 3155.69 Net Profit 1165.79 1660.28 1989.65 EPS 128.35 36.56 43.81 P/E 3.66 12.84 10.71 Shareholding Pattern (%) (QUARTERLY) As on Sep-15 As on Jun-15 PROMOTER 43.95 44.21 FIIs 3.34 3.42 DIIs 2.83 2.81 OTHERS 49.88 49.56 1 Year Comparative Graph AVANTI FEEDS LIMITED S&P BSE SENSEX SYNOPSIS Avanti Feeds Ltd is the leading manufacturer of Prawn and Fish Feeds and Shrimp Processor and Exporter from India. The company s net profit jumps to Rs. 439.64 million in Q2 FY16 against Rs. 341.77 million in Q2 FY15, an increase of 28.64% y-o-y. Net sales stood at Rs. 5329.52 million for the 2 nd quarter of FY16 as against Rs. 5316.77 million for the corresponding quarter of the previous year. In Q2 FY16, EBIDTA is Rs. 679.46 million, an increased by 20.31% y-o-y when compared to Rs. 564.76 million in Q2 FY15. Profit before tax (PBT) stood at Rs. 654.67 million in Q2 FY16 compared to Rs. 538.67 million in Q2 FY15. Registered a growth of 21.53% y-o-y. Earnings per Share were Rs. 48.40 for 2 nd quarter of FY16 compared to Rs. 37.63 in 2 nd quarter of FY15. For Q2 FY16, Shrimp Feed segment grew up by 3% y- o-y of Rs. 4489.28 million against Rs. 4341.28 million for Q2 FY15. Domestic sales grew by 3.37% of Rs. 4497.58 million for Q2 FY16 against Rs. 4350.96 million for the corresponding quarter of pervious year. Net sales for the half year ended of FY16 stood at Rs. 11363.53 million, rose by 12.54% as compared to Rs. 10097.76 million for the half year ended of FY15. In H1 FY16, the company s net profit grew by 49.96% of Rs. 896.76 million as compared to Rs. 597.99 million in H1 FY15. Net Sales and PAT of the company are expected to grow at a CAGR of 40% and 60% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Avanti Feeds Ltd 469.40 21317.80 128.35 3.66 1.64 275.00 Foods & Inns Ltd 525.00 761.80 35.34 14.86 1.75 25.00 Waterbase Ltd 110.60 4269.50 5.74 19.27 4.35 15.00 Chordia Food Products Ltd 128.00 381.50 6.43 19.91 1.11 0.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY16, Avanti Feeds Ltd is the world's largest seafood processors and leading manufacturer of prawn and fish feeds in Thailand with integrated facilities from Hatchery to Shrimp & Fish processing and Exports. Reported its financial results for the quarter ended 30 th September, 2015. Months Sep-15 Sep-14 % Change Net Sales 5329.52 5316.77 0.24 PAT 439.64 341.77 28.64 EPS 48.40 37.63 28.64 EBITDA 679.46 564.76 20.31 The company s net profit jumps to Rs. 439.64 million in the 2 nd quarter of FY16 as against Rs. 341.77 million in the corresponding quarter ending of previous year, an increase of 28.64% y-o-y. Turnover rose by 0.24% y-o-y of Rs. 5329.52 million for the 2 nd quarter of the financial year 2015-16 as against Rs. 5316.77 million for the corresponding quarter of the previous year. Reported earnings per share of the company stood at Rs. 48.40 a share during the quarter, registering 28.64% increase over previous year period. Profit before interest, depreciation and tax is Rs. 679.46 million as against Rs. 564.76 million in the corresponding period of the previous year. The Company has fixed November 27, 2015 as the Record Date for the purpose of sub-division of equity share of Rs. 10/- each into 5 equity shares of Rs. 2/- each. Break up of Expenditure Break up of Expenditure Dep & Amortization Expenses (Values in Rs. millions) Q2 FY16 Q2 FY15 CHNG % 25.33 21.88 16% Other Expenditure 510.76 542.34-6% Cost of Material Consumed 4048.88 4288.88-6% Employee Benefit Expenses 150.94 129.7 16%
Segment Revenue COMPANY PROFILE Avanti Feeds Ltd is the leading manufacturer of Prawn and Fish Feeds and Shrimp Processor and Exporter from India. Avanti Feeds Limited has established joint venture with Thai Union Frozen Products PCL, the world's largest seafood processors and leading manufacturer of prawn and fish feeds in Thailand with integrated facilities from Hatchery to Shrimp & Fish processing and Exports. Avanti has started its commercial operations in 1993 under the able leadership of Late Sri Alluri Venkateswara Rao in technical collaboration with Pingtai Enterpries, Taiwan. Later his son Sri Alluri Indra Kumar expanded the capacity and enhanced technical and marketing capabilities by bringing on board Thai Union Frozen Products PCL., Thailand. The world's largest seafood manufacturers and also having Feed Mill and Prawn Hatchery in Thailand. Thai Union is closely associated with Avanti Feeds with equity participation, technical collaboration and marketing tie-up in India. Products Avanti produces the following international quality feeds for Prawn and fish in collaboration with worlds renowned Prawn & Fish feed manufacturers Thai Union Feed Mill Co. Ltd., Thailand and Pingtai Enterprises Co. Ltd Prawn Feed Profeed Manamei Titan Champ.
Scampi Feed Classic Scampro Fish Feed Mermaid Shrimp Processing and Exports Unit The Shrimp Processing and Exports Unit, certified ISO 22000: 2005 is located in Gopalapuram near Ravulapalem, East Godavari District Andhra Pradesh, India and confirms to HACCP, USFDA, EU & BRC Global standards. It is also an ACC Certified for best aquaculture practices. The state of art technology coupled with quality consciousness, excellent storage facilities, logistics capabilities, timely deliveries and commitment to customer satisfaction has made Avanti to be proud of a long list of loyal customers from USA, Europe, Japan, Australia and Middle East. Manufacturing Units Avanti has Three Prawn and a Fish Feed Manufacturing Units, certified ISO 9001:2008, in Kovvur, Vemuluru in West Godavari District, Andhra Pradesh and Pardi in Valsad District, Gujarat, in India with a capacity of 90,000 MT per annum.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2014-2017E FY14A FY15A FY16E FY17E SOURCES OF FUNDS Shareholder's Funds a) Share Capital 90.83 90.83 90.83 90.83 b) Reserves and Surplus 1645.88 2509.65 3613.90 4698.06 1. Sub Total - Net worth 1736.71 2600.48 3704.73 4788.89 Non Current Liabilities a) Long term borrowings 109.52 41.81 38.88 34.22 b) Deferred Tax Liabilities 14.35 59.91 65.90 73.81 c) Other Long term liabilities 27.45 37.45 41.94 46.14 d) Long term Provisions 29.24 30.37 38.87 44.70 2. Sub Total - Non Current Liabilities 180.55 169.54 185.60 198.87 Current Liabilities a) Short Term Borrowings 421.16 505.86 0.00 0.00 b) Trade Payables 1211.28 911.77 1759.72 1953.28 c) Other Current Liabilities 185.10 242.71 160.19 124.95 d) Short Term Provisions 189.57 322.89 242.17 193.73 3. Sub Total - Current Liabilities 2007.11 1983.23 2162.07 2271.97 Total Liabilities (1+2+3) 3924.37 4753.25 6052.40 7259.73 APPLICATION OF FUNDS Non-Current Assets Fixed Assets I. Tangible Assets 773.64 894.80 984.28 1102.39 II. Intangible assets 1.44 0.86 0.95 1.06 III. Capital Work in Progress 48.12 0.00 0.00 0.00 a) Sub Total Fixed Assets 823.20 895.66 985.23 1103.45 b) Non-current investments 284.85 284.85 284.85 284.85 c) Long Term loans and advances 42.64 55.97 123.13 145.30 d) Other non-current assets 8.65 9.73 8.76 9.81 1. Sub Total - Non Current Assets 1159.34 1246.21 1401.97 1543.41 a) Current Investment 50.21 764.59 1209.67 1518.30 b) Inventories 1991.47 2220.16 1998.14 2158.00 c) Trade receivables 450.19 335.60 912.83 1296.22 d) Cash and Bank Balances 128.46 61.61 146.63 202.35 e) Short-terms loans & advances 55.32 55.75 305.51 452.15 f) Other current assets 89.38 69.33 77.65 89.30 2. Sub Total - Current Assets 2765.03 3507.04 4650.44 5716.32 Total Assets (1+2) 3924.37 4753.25 6052.40 7259.73
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 11316.07 17762.56 21048.63 24837.39 Other Income 36.81 90.22 185.85 224.88 Total Income 11352.88 17852.78 21234.49 25062.27 Expenditure -10210.72-15948.84-18665.93-21906.58 Operating Profit 1142.16 1903.94 2568.56 3155.69 Interest -35.00-17.50-13.13-15.09 Gross profit 1107.16 1886.44 2555.43 3140.60 Depreciation -55.37-87.97-105.56-121.40 Exceptional Items 0.00 0.00 46.79 0.00 Profit Before Tax 1051.79 1798.47 2496.66 3019.20 Tax -354.29-632.68-836.38-1029.55 Net Profit 697.50 1165.79 1660.28 1989.65 Equity capital 90.83 90.83 90.83 90.83 Reserves 1645.88 2509.65 3613.90 4698.06 Face value 10.00 10.00 2.00 2.00 EPS 76.79 128.35 36.56 43.81 Quarterly Profit & Loss Statement for the period of 31 st Mar, 2015 to 31 st Dec, 2015E Value(Rs.in.mn) 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15E Description 3m 3m 3m 3m Net sales 3814.47 6034.01 5329.52 4796.57 Other income 15.25 32.06 54.90 76.86 Total Income 3829.72 6066.07 5384.42 4873.43 Expenditure -3445.71-5392.51-4704.96-4173.01 Operating profit 384.01 673.56 679.46 700.41 Interest -4.88-2.93-2.99-1.94 Gross profit 379.13 670.63 676.47 698.47 Depreciation -22.44-25.99-25.33-26.60 Exceptional Items 0.00 43.26 3.53 0.00 Profit Before Tax 356.69 687.90 654.67 671.87 Tax -133.95-230.78-215.03-218.36 Net Profit 222.74 457.12 439.64 453.51 Equity capital 90.83 90.83 90.83 90.83 Face value 10.00 10.00 10.00 2.00 EPS 24.52 50.33 48.40 9.99
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 76.79 128.35 36.56 43.81 EBITDA Margin (%) 10.09 10.72 12.20 12.71 PBT Margin (%) 9.29 10.13 11.86 12.16 PAT Margin (%) 6.16 6.56 7.89 8.01 P/E Ratio (x) 6.11 3.66 12.84 10.71 ROE (%) 40.16 44.83 44.82 41.55 ROCE (%) 52.82 63.27 71.43 67.95 Debt Equity Ratio 0.31 0.21 0.01 0.01 EV/EBITDA (x) 3.73 2.24 8.30 6.76 Book Value (Rs.) 191.20 286.30 81.57 105.45 P/BV 2.45 1.64 5.75 4.45 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs.469.40, the stock P/E ratio is at 12.84 x FY16E and 10.71 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY1 6E and FY17E is seen at Rs.36.56 and Rs.43.81 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 40% and 60% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 8.30 x for FY16E and 6.76 x for FY17E Price to Book Value of the stock is expected to be at 5.75 x and 4.45 x respectively for FY16E and FY17E. We recommend BUY in this particular scrip with a target price of Rs.540.00 for Medium to Long term investment.
INDUSTRY OVERVIEW Indian seafood product exports during 2014-15 recorded major jump of 16% in value terms as compared to 2013-14. The exports were Rs.35,100 crores as against Rs.30,213 crores in 2013-14. Shrimp exports accounted for 68% of the total exports in value terms, an increase of 4% as compared to previous year. In the year 2013-14 the shrimp exports were Rs.19,368 crores. In the current year the shrimp exports are Rs.24,000 crores. In volume terms the shrimp exports grew by 17% from 3.01 lac MT in 2013-14 to 3.50 lac MT in 2014-15. The major export market has been USA followed by Europe, Japan and South East Asia during 2014-15 for shrimp exports. It is heartening to note that for the fifth consecutive year the shrimp culture industry registered growth during 2014-15. The growth in shrimp culture is due to increase in area of cultivation and increase in stocking density supported by remunerative export prices during the year 2014-15. In order to ensure sustained growth of shrimp culture, with specific emphasis on Vannamei shrimp culture, the Government of India has been adopting stringent regulatory measures such as mandatory approvals for setting up hatcheries, import of brood stock from specified approved overseas suppliers and continuous surveillance of Vannamei hatchery operations, mandatory approval of farms etc., These measures would go a long way in long term success of Indian Shrimp Culture Industry. OPPORTUNITIES: The demand for sea food is increasing all over the world, particularly Indian Seafood exports as could be seen from the increase in exports during 2014-15. One of the reasons being, seafood is considered as healthier compared to other forms of meat. India is gifted with long coast line ideally suited for development of seafood industry. A planned development would provide abundant opportunities for seafood industry. The successful adoption of Vannamei Species shrimp culture is poised for a significant increase in the shrimp production and export. OUTLOOK: Feed Market: First crop of Shrimp culture in current year progressing well. Reports indicate there is 10-15% growth because of increase in the area of culture and density of culture. Although the shrimp prices in international market are less compared to previous year, still it is remunerative enough for the farmers to go ahead with the culture.
Processing & Export of Shrimp: During the first half of the year 2014-15 exports of shrimp showed healthy growth of 15-20% in tune with the growth in aqua culture. However, in the second half of the year US authorities started checking of each container of shrimp imported in to their country for antibiotic residues. This resulted in rejections of many containers from China, Indonesia, Vietnam and Ecuador. Rejections of supplies from our country are the least amongst. However, because of stringent checking, there were inordinate delays in clearing of the goods and additional costs increased to the suppliers. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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