Target: ₹250

CMP: ₹213.35

Apex Frozen Foods Ltd (Apex) is a South India (Andhra Pradesh) based integrated producer and exporter of processed shrimps with a capacity of 29,240MT.

In Q3-FY23, revenue declined 1 per cent y-o-y due to muted demand in key export markets such as the US and EU along with supply shortage of specific-size raw materials, while realisation was flat y-o-y. Margins were impacted by higher raw material costs along with decline in export prices, but rupee depreciation aided stable realisation y-o-y. Rupee depreciation supported realisation though the export price in dollar declined.

The company will continue to benefit from the backward integration (hatchery). 

Future growth will be supported by an increase in the newly-added capacity as well as a greater contribution of value-added products, as Apex has expanded ready-to-eat (RTE) capacity to 10,000MT from 5,000MT and expects commercial productions in Q4-FY23. The company is awaiting the approval of RTE products from the new capacity for the European market. Currently, Europe contributes only 18 per cent of total revenue. .

Expect earnings to grow at 45 per cent CAGR over FY22-24. Apex currently trades at 9x 1Yr Fwd P/E. We value at 10x (3Yr Avg=10x) on FY24 EPS with a target price of ₹250, and maintain Accumulate rating.