Avanti Feeds Ltd is one of the leading manufacturers of prawn and fish feeds and shrimp processors. The company has prawn and fish feed units spread across Andhra Pradesh and Gujarat, producing nutritional high quality feeds with a total capacity of 90,000 MT per annum. While the company’s shrimp feed plants are operating at 100% capacity utilisation, in view of the future growth of shrimp culture, Avanti is looking to increase the plant capacity to 110,000 MT per annum. The company has come a long way since 1993 by bringing in the world’s largest seafood manufacturer, Thai Union Frozen Products, Thailand to collaborate with it. The fish feeds produce of the company are made from international raw materials, eco friendly water quality and superior balanced nutritional products, giving the Indian aquaculture export industry a big boost. According to recent news, Thai Union Group Thailand is buying a 40% equity stake in Avanti Frozen Food Pvt Ltd. The latter is a wholly owned subsidiary of Avanti Feeds Ltd and Thai Union is picking up an equity stake at a premium of Rs 303 per share on a preferential basis. Thai Union had earlier scrapped a deal to acquire a major seafood company in the US and now with this new joint venture it will change the entire seafood industry climate in the country. The Indian seafood industry is exporting a wide range of products to over 100 countries around the world. The major positive change in the seafood industry during the last decade is due to factors like increased global supply, bio terrorism, environmental reasons, diet diversification and international trade barriers. But our Indian factories have grown to have world class facilities and meet international norms, posing a threat to other global seafood companies operating in the region. Avanti is eyeing a larger revenue model in the near future on the back of increased volume export growth. With negligible debt on its balance sheet, Avanti Feeds has clocked a revenue of Rs 750 crores for Q1FY17, with a net profit of Rs 46 crore for the same quarter this year. On a tiny equity base of Rs 9.08 crore, the EPS works out to a whopping 15 times on an annualised basis, giving rise to prospects of a long awaited bonus issue of shares by the company. Avanti Feeds with state of art technology, excellent storage facilities, and commitment to clients has a proud list of loyal customers. Most analysts are predicting a CAGR of 50% and 35% in its top line and bottom line, respectively, for the next couple of years and we feel that the Avanti stock is a value buy for portfolio investors. The stock currently quoting at Rs 540 is a good buy for a 30% price appreciation in the next 6-9 months.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.