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Avanti Feeds: Vannamei culture to propel growth - Views on News from Equitymaster
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Avanti Feeds: Vannamei culture to propel growth
May 13, 2015

Avanti Feeds Ltd has announced the fourth quarter results of financial year 2014-2015 (4QFY15). The company has reported around 37.6% YoY growth in sales while net profits have surged by 53.6% YoY during the quarter.

Performance summary
  • Sales increase by 37.6% YoY during 4QFY15. Revenues from the shrimp feed division increased 51.8% YoY. However, revenues from shrimp processing and wind power segments declined by 22.5% YoY and 7.2% YoY respectively.
  • Operating profits increase 61.6% YoY during the quarter due to strong top-line growth.
  • Net profits increased 53.6% YoY. Strong performance at the operating level was partly offset by 1.4% YoY fall in other income and 56.9% YoY increase in depreciation expenses.
  • The company declared a final dividend of Rs 27.5 per share.
  • The standalone D/E ratio stood at 0.21x at the end of the year.

Standalone financials: A snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Income from operations  2,773 3,814 37.6% 11,316 17,763 57.0%
Expenditure  2,544 3,446 35.4% 10,211 15,949 56.2%
Operating profit (EBDITA) 228 369 61.6% 1,105 1,814 64.1%
Operating profit margin (%) 8.2% 9.7%   9.8% 10.2%  
Other income 15 15 -1.4% 37 90 145.1%
Interest 6 5 -18.5% 35 18 -50.0%
Depreciation 14 22 56.9% 55 88 58.9%
Profit before tax 223 357 59.7% 1,052 1,798 71.0%
Tax 78 134 70.9% 354 633 78.6%
Profit after tax/(loss) 145 223 53.6% 697 1,166 67.1%
Net profit margin (%) 5.2% 5.8%   6.2% 6.6%  
No. of shares (m)         9.1  
Basic earnings per share (Rs)          128.4  
P/E ratio (x) *         13.0  
* On trailing 12 month basis

What has driven performance in 4QFY15?
  • Topline increased by 37.6% YoY in 4QFY15 driven by strong growth from the shrimp feed division. Revenues from domestic sales increased by 51.8% YoY while that from export sales declined by 23.5% YoY.

  • Operating profits increased 61.6% YoY during the quarter. Margins improved by 150 bps as healthy top-line growth more than offset a 35.4% YoY rise in expenditure cost.

  • The net profits increased 53.6% YoY on the back of strong operating performance. However, a 56.9% YoY and 70.9% YoY rise in depreciation and tax expenses curtailed profitability growth to an extent.
What to expect?
At the current price of Rs 1,668, the stock is trading at a multiple of 13x its trailing 12 month (TTM) earnings. As stated in our report dated February 2015, a shift towards vannamei shrimp culture has increased the output and thus the demand for fish feed. In fact, the surge in demand is so huge that the shrimp feed production volumes of the company have increased 13 times in the last 4 years! And even going by conservative estimates, volume growth in excess of 20% per annum would be sustainable over the next 3 to 5 years as the vannamei culture has government backing in terms of technology with huge export potential. Based on these factors and in light of correction in price since our last The India Letter report, we recommend that investors those who have still not bought the stock can BUY at current prices.

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