After a few years of underperformance, Avanti Feeds stock is again buzzing on Dalal Street due to a couple of positive views by analysts. Of late, shares of the company have gained 14 per cent in the ongoing financial year till September 22, taking its total gains for the past 15 years to 14,734 per cent. At the current market price, shares of Avanti Feeds are still down 50 per cent from its closing all-time high of Rs 961.68 scaled on November 10, 2017.
Avanti Feeds dominates shrimp feed manufacturing in India with around 48 per cent market share. It has been a key beneficiary of the shrimp aquaculture wave that swept the country post-2009. Avanti Feeds has clocked a revenue and EBITDA CAGR of 34 per cent and 40 per cent, respectively, during FY11-FY22. Indian shrimp exports have recovered sharply in FY22, growing 26 per cent year-on-year (YoY).
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Given the current supply-demand scenario, management has guided to 13 per cent YoY growth in FY23 shrimp processing volumes. In the feed segment, management foresees a 6 per cent YoY increase in CY22 volumes.
According to Equirus Securities, with the 3 per cent YoY volume decline in the first half of 2022, the growth for July-December works out to over 18 per cent YoY-helped by the new 1.75 lakh MTPA feed capacity expected to commission in September. The brokerage is bullish on Avanti Feeds with a target price of Rs 720, indicating an upside of nearly 52 per cent from the current market price of Rs 474.70.
High prices of soymeal–a key raw material–had impacted the margins of all feed companies in FY22. However, since August, soymeal prices have cooled off to Rs 47-50 per kg (Hi-Pro) from an average of Rs 61 per kg in 1QFY23. Wheat prices remain elevated at Rs 24-25 per kg.
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“Margins from Q2 are expected to improve given the decline in soymeal prices and a price hike of Rs 2.15 per kg taken by the feed industry from Sep 1, 2022,” Equirus Securities said in a report.
Apart from shrimp, Avanti Feeds is also looking at expanding into other fish feed categories. Unlike shrimp feed, fish feed is largely unorganised in India with the total market size estimated at around Rs 2,100 crore (FY17).
On the other hand, Geojit Financial Services added that the demand outlook has improved for Avanti Feeds given the re-opening of hotels and malls in export markets along with better export and farm gate prices. “We expect revenue CAGR of around 14 per cent over FY22-24,” the brokerage said.
Geojit Financial Services believes that Avanti Feeds is prepared for the next stage of growth with new capacity. It has set a target price of Rs 548 but downgraded to an ‘Accumulate’ rating due to margin pressure and limited upside from the current price.