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Geojit Financial
Apex Frozen Foods (Buy)
Target: ₹355
CMP: ₹287.95
Apex Frozen Foods Ltd (Apex) is an integrated producer and exporter of processed shrimp in Andhra Pradesh, with own capacity of 29,240 tonnes.
We maintain Buy rating with a revised Target price of ₹355, factoring recovery in profitability, improving outlook and attractive valuation.
Q2FY22 revenue grew by 2 per cent y-o-y (+20 per cent q-o-q) supported by improvement in shrimp export prices. Volumes de-grew by 3.5 per cent y-o-y due to current issues in sea transport but grew by 9 per cent q-o-q. EBITDA de-grew by 14 per cent y-o-y and EBITDA margin declined by 250 bps y-o-y to 13.7 per cent due to higher export expenses and drop in export incentive but grew by 970 bps q-o-q from 4.1 per cent.
Margin impact is temporary and likely to recover when the container shortage issue gets normalised and will improve further with higher contribution from ready-to-eat products.
Industry outlook has improved given the re-opening of restaurants in export markets, along with stable demand from retail customers and strong shrimp export prices.
Currently, the stock trades at 11x 1Yr Fwd P/E (3 year average=16x). We value the stock at 11X FY23 EPS, factoring the current logistics issues.
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