Target: ₹569

CMP: ₹510.75

Avanti Feeds Ltd is a leading manufacturer of shrimp feeds with a capacity of 7,75,000 tonne and a shrimp processor & exporter with a capacity of 22,000 tonne. AFL has a tie-up with Thai Union Group, Thailand.

We upgrade our rating to Accumulate (from Hold) with a revised target price of ₹569 considering improvement in volumes.

Revenue grew by nearly 14 per cent y-o-y, supported by revenue growth in both feed (+9 per cent y-o-y) and processing (+31 per cent) segments. EBITDA grew by nearly 20 per cent y-o-y due to better utilisation and EBITDA margin improved by 40 bps to 7.7 per cent, aided by stabilisation in raw material prices.

Shrimp production is expected to increase by 10-15 per cent in 2024, which will support feed volume growth.

AFL has formed a subsidiary, Avanti Pet Care (P) Ltd with the aim of diversifying into the production and trading of pet food and pet care products (expects to complete in two years). Furthermore, the company is also exploring opportunities to enter fish feed segment.

AFL has recently added a new capacity of 1.75 lakh MT in feed and is adding 7,000MT in the processing segment by the end of FY24. Revenue/PAT is expected to grow at 12/22 per cent CAGR over FY24-26. We roll forward to FY26E EPS and value AFL at 15x P/E (3 year avg=15).