Avanti Feeds (Buy)
We maintain Buy rating with a revised Target of ₹565 due to better-than-expected volumes amid challenges and strong fundamentals.
Q1-FY21 revenue de-grew by 12.6 per cent y-o-y impacted by decline in volumes (feed-19 per cent y-o-y, processing-7 per cent y-o-y,), due to Covid-19 led disruptions. However, EBITDA de-grew by 5.7 per cent, supported by improvement in EBITDA margin (by 100 bps to 13.5 pwe cent) due to reduction in costs.
Industry shrimp production is expected to drop by approximately 15-20 per cent in FY21 due to Covid-19 led disruptions but to improve in FY22. Relaxation in restrictions, improvement in export prices, regional diversification and increasing market share will support future volumes.
MEIS (export incentive scheme) changes will impact incentive receipts. The company has to adjust this gap with farm-gate & export prices without affecting competitiveness.
Expect Revenue/PAT to grow at 9 per cent/14 per cent CAGR over FY20-22. We value Avanti Feeds at FY22E P/E of 19x considering healthy growth & RoE and no debt.