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ICICI Securities
Avanti Feeds (Buy)
Target: ₹639
CMP: ₹565.75
Takeaways from Q1-FY22 result: Avanti Feeds has reported revenue growth of 47.5 per cent y-o-y, driven by strong growth of 59 per cent in its feed business; its processed shrimp business declined 5.2 per cent y-o-y, due to lower volume off-take; and inflationary pressures in input prices impacted profitability. We expect some impact on profitability as the company announced recall of some products due to potential contamination.
While HoReCa segment remained impacted during the quarter, we believe it to return to normalcy with economy opening up and large vaccination drives. We believe Avanti will be a net beneficiary of RoDTEP scheme and model. Avanti’s profitability was impacted due to closure of MeIS scheme. Recommencement of exports benefits, under RoDTEP will reduce pressure on margins.
We model Avanti to report revenue and PAT CAGRs of 13.5 per cent and 16.1 per cent over FY21-FY23 and also expect its RoE to be over 20 per cent in the same timeframe.
We maintain Buy rating with a DCF-based target price of ₹639 (implied P/E 18x FY23E EPS; Earlier TP-₹650).
Key risk: Higher than expected input inflation and lower than expected off-take of products.
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