CMP 137.50

Target Price 151.00

ISIN: INE871C01012

June 20th

, 2013

AVANTI FEEDS LTD Result Update: Q4 FY 13

BUYBUYBUYBUY

Stock Data

Sector Food Products

BSE Code 512573

Face Value 10.00

52wk. High / Low (Rs.) 210.90/83.50

Volume (2wk. Avg ) 2309.00

Market Cap ( Rs in mn ) 1248.91

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY13A FY14E FY15E

Net Sales 6480.38 9396.55 11557.76

EBITDA 525.07 732.67 979.05

Net Profit 301.93 446.02 600.12

EPS 33.24 49.10 66.07

P/E 4.14 2.80 2.08

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX AVANTI FEEDS LTD

SYNOPSIS

Avanti Feeds Ltd is the leading

manufacturer of Prawn and Fish Feeds and

Shrimp Processor and Exporter from India.

In addition, Avanti has a 3.2 MW wind farm

in Karnataka, India.

The company exports its products to the

US, Europe, Japan, Australia, and the Middle

East. Headquartered in Hyderabad, Andhra

Pradesh, India.

Avanti Feeds Ltd has recommended a

dividend of Rs. 6.50 per each equity share

of Rs. 10/- fully financial year 2012-13

aggregating to Rs.690.74 lakhs.

The company’s net profit jumps to Rs.66.16

million against Rs.31.81 million in the

corresponding quarter ending of previous

year, an increase of 107.98 %

Avanti Feeds Ltd of the power projects of

3.2 MW Wind Mill Project, 17.2 MW gas

based power project, 16 MW Hydel Power

Projects are 6.47, 105.77, 60.25 millions are

invested during the year.

Avanti Feeds Ltd of shrimp processing &

export division recorded export of 2,102

MT, an increase of 775 MT as compared to

previous financial year.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Avanti Feeds Ltd 137.50 1248.91 49.10 2.80 0.76 65.00

Hatsun Agro Product Ltd 130.00 1400.53 4.15 31.34 9.19 130.00

Heritage Foods (India) Ltd 421.40 4888.00 43.07 9.78 3.41 20.00

Britannia Industries Ltd 666.00 79654.10 19.55 34.07 15.32 425.00

Investment Highlights - Standalone

Results updates- Q4 FY13,

Avanti Feeds Ltd is the leading manufacturer of

Prawn and Fish Feeds and Shrimp Processor and

Exporter from India, reported its financial results

for the quarter ended 31st March, 2013. The fourth

quarter witnesses a healthy increase in overall

sales as well as profitability of the company.

Months Mar-13 Mar-12 % Change

Net Sales 1584.33 712.54 122.35%

PAT 66.16 31.81 107.98%

EPS 7.28 3.98 83.19%

EBITDA 134.74 66.81 101.68%

The company’s net profit jumps to Rs.66.16 million against Rs.31.81 million in the corresponding quarter ending

of previous year, an increase of 107.98 %. Revenue for the quarter increase 122.35 % to Rs. 1584.33 million from

Rs. 712.54 million, when compared with the prior year period. Reported earnings per share of the company

stood at Rs. 7.28 a share during the quarter, registering 83.19 % increase over previous year period. Profit before

interest, depreciation and tax is Rs. 134.74 millions as against Rs. 66.81 millions in the corresponding period of

the previous year.

Expenditure :

During the quarter Total Expenditure rose by 101

per cent mainly on account of Increase in Other

Expenses along with consideration of Cost of

Material Consumed. Total expenditure in Q4 FY13

was at 1455.96 million as against Rs.722.59 million

in Q4 FY12. Other Expenditure Rs.200.81 against

Rs.85.36 millions in the corresponding period of the

previous year. Employee Benefit Expenses was at Rs.

55.87 million and Depreciation is Rs. 14.01 million

in Q4FY13. Material cost rose by 146% for Q4FY13

Rs.1278.03 and Other Expenditure by 135% is the

primarily attributable to growth of expenditure.

Segment Revenue

Latest Updates

• Recommend Dividend

Avanti Feeds Ltd has recommended a dividend of Rs. 6.50 per each equity share of Rs. 10/- fully financial

year 2012-13 aggregating to Rs.690.74 lakhs on 90,83,042 equity shares and Books of the Company will

remain closed from July 22, 2013 to July 27, 2013 (both days inclusive) for the purpose of Payment of

Dividend

Highlights

The four windmills of company located in Karnataka State with total capacity of 3.2 MW have generated 64.65 lac

units and power generated was sold to Bangalore Electricity Supply Company Ltd under PPA.

The shrimp processing and export division sales recorded export of 2,102 MT, an increase of 775 MT as

compared to previous financial year.

Power Projects

The Company has investment in the following power projects

• The 3.2 MW Wind Mill Project in Chitradurg, Karnataka State is operational has generated 6.47 million units

during the year.

• Srivathsa Power Projects Pvt Ltd, a 17.2 MW gas based independent power project in which Company holds

50% shares, is operational and has generated positive cash flows and generated 105.77mn units.

• Patikari Power Private Ltd, the 16 MW Hydel Power Project in Himachal Pradesh with investment of 25.88%

as a joint venture project was commissioned in Feb 2008. During 2011-12 this project generated 60.25

million salable energy units. The project achieved capacity utilization of 78.81% to DPR during the year.

Company Profile

Avanti Feeds is the leading manufacturer of Prawn and Fish Feeds and Shrimp Processor and Exporter from

India. Avanti Feeds Limited has established joint venture with Thai Union Frozen Products PCL, the world's

largest seafood processors and leading manufacturer of prawn and fish feeds in Thailand with integrated

facilities from Hatchery to Shrimp & Fish processing and Exports.

Avanti has started its commercial operations in the year 1993 under able leadership of Late Sri Alluri

Venkateswara Rao in technical collaboration with Pingtai Enterpries, Taiwan. Later his son Sri Alluri Indra

Kumar expanded the capacity and enhanced technical and marketing capabilities by bringing on board Thai

Union Frozen Products PCL., Thailand, the world's largest seafood manufacturers and also having Feed Mill and

Prawn Hatchery in Thailand. Thai Union is closely associated with Avanti Feeds with equity participation,

technical collaboration and marketing tie-up in India.

Products

Avanti produces the following international quality feeds for Prawn and fish in collaboration with worlds

renowned Prawn & Fish feed manufacturers Thai Union Feed Mill Co. Ltd., Thailand and Pingtai Enterprises Co.

Ltd.

Prawn Feed

• Profeed

• Titan

• Manamei

• Champ.

Scampi Feed

• Classic

• Scampro

Fish Feed

• Mermaid.

� Subsidiary Companies

• Avanti Thai Aqua Feeds Private Ltd

• Svimsan Imports & Exports Ltd

� Manufacturing Units

Avanti has two Prawns and a Fish Feed Manufacturing Units, certified ISO 9001:2008, in Kovvur and

Vemuluru, West Godavari District, Andhra Pradesh, India with a capacity of 70,000 MT per annum.

� Shrimp Processing and Exports Unit

The Shrimp Processing and Exports Unit, certified ISO 22000: 2005 is located in Gopalapuram near

Ravulapalem, East Godavari District Andhra Pradesh, India and confirms to HACCP, USFDA, EU & BRC Global

standards. It is also an ACC Certified for best aquaculture practices.

The state of art technology coupled with quality consciousness, excellent storage facilities, logistics

capabilities, timely deliveries and commitment to customer satisfaction has made Avanti to be proud of a

long list of loyal customers from USA, Europe, Japan, and Australia, Middle East.

• Range of products

� HEAD ON

� EASY PEEL

� RAW HEADLESS SHELL-ON

� RAW PEELED AND DEVEINED TAIL-ON

� RAW PEELED AND DEVEINED TAIL-OFF

� BUTTERFLY CUT PEELED AND DEVEINED TAIL-ON

� SKEWERS.

Infrastructure & Production Facilities

The Plant, certified ISO 22000: 2005, has capacity of 1800 MT per annum comply with HACCP and has

accreditation from USFDA, European Union and BRC Global Standards and Certified BY ACC for best aquaculture

practices. The major facilities include:

• Plate Freezers

• Blast Freezer

• IQF

• State-of-Art Cold Storage Facility

• Flake Ice Manufacturing facility

• Block Ice Manufacturing facility.

Financial Highlight - Standalone

Balance sheet as at March 31st, 2012

AVANTI FEEDS LTD. Note: A*- Actual, E* -Estimations & Rs. In Millions

Balance Sheet as at 31st March, 2012 to 2015E

FY-12A FY-13A FY-14E FY-15E

SOURCES OF FUNDS

Shareholder's Funds

a) Capital 90.83 90.83 90.83 90.83

b) Reserves and Surplus 874.94 1107.78 1553.80 2153.92

Sub- Total- Shareholder Funds (a) 965.77 1198.61 1644.63 2244.75

Non- current liabilities

a) Long term borrowings 146.23 119.30 107.37 102.00

b) Deferred tax liabilities (net) 9.91 10.00 10.10 10.20

c) Other long term liabilities 11.95 15.45 17.77 19.19

d) Long term provisions 15.63 14.59 14.01 13.73

Sub-Total-Non Current Liabilities(b) 183.72 159.34 149.24 145.12

Current Liabilities

a) Short term borrowings 327.84 462.84 555.41 610.95

b) Trade payables 122.46 197.90 257.27 295.86

c) Other current liabilities 164.46 295.30 413.42 496.10

d) Short term provisions 70.77 105.70 132.13 151.94

Sub-Total-Current Liabilities( c) 685.53 1061.74 1358.22 1554.86

Total Liabilities (a + b+ c) 1835.02 2419.69 3152.10 3944.72

APPLICATION OF FUNDS

Asset

a) Fixed assets 447.61 524.34 566.29 600.26

b) Non-current investments 284.85 284.85 284.85 284.85

c) Long term loans & advances 18.05 49.83 89.69 134.54

d) Other non current assets 7.21 9.41 10.82 11.69

Sub-Total-Assets (d) 757.72 868.43 951.65 1031.34

Current Assets

a) Current Investments 172.76 2.51 2.64 2.77

b) Inventories 421.53 971.62 1723.16 2312.88

c) Trade receivables 155.05 397.26 323.60 453.91

d) Cash and Bank Balances 220.42 85.81 56.63 48.14

e) Short term loans & advances 52.22 31.19 26.51 24.39

f) Other Current assets 55.32 62.87 67.90 71.29

Sub-Total- Current Assets(e) 1077.30 1551.26 2200.44 2913.38

Total Assets (d+e) 1835.02 2419.69 3152.10 3944.72

Annual Profit & Loss Statement for the period of 2012 to 2015E.

Value(Rs.in.mn) FY12 FY13 FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 3861.61 6480.38 9396.55 11557.76

Other Income 33.67 25.81 23.23 22.07

Total Income 3895.28 6506.19 9419.78 11579.83

Expenditure -3426.19 -5981.12 -8687.11 -10600.78

Operating Profit 469.09 525.07 732.67 979.05

Interest -30.79 -33.73 -35.42 -36.48

Gross profit 438.30 491.34 697.25 942.57

Depreciation -35.67 -49.84 -59.81 -68.78

Profit Before Tax 402.63 441.50 637.44 873.79

Tax -127.84 -139.57 -191.42 -273.67

Net Profit 274.79 301.93 446.02 600.12

Equity capital 90.83 90.83 90.83 90.83

Reserves 874.90 1107.78 1553.80 2153.92

Face value 10.00 10.00 10.00 10.00

EPS 30.25 33.24 49.10 66.07

Quarterly Profit & Loss Statement for the period of 30th

September, 2012 to 30th

June, 2013E

Value(Rs.in.mn) 30-Sep-12 31-Dec-12 31-Mar-13 30-Jun-13E

Description 3m 3m 3m 3m

Net sales 1908.33 1393.00 1584.33 3249.46

Other income 15.66 2.94 3.51 5.55

Total Income 1923.99 1395.94 1587.84 3255.01

Expenditure -1754.49 -1310.33 -1453.10 -2991.13

Operating profit 169.50 85.61 134.74 263.88

Interest -9.90 -11.00 -12.82 -13.46

Gross profit 159.60 74.61 121.92 250.42

Depreciation -11.28 -12.55 -14.01 -17.23

Profit Before Tax 148.32 62.06 107.91 233.18

Tax -37.05 -14.74 -41.75 -72.57

Net Profit 111.27 47.32 66.16 160.62

Equity capital 90.83 90.83 90.83 90.83

Face value 10.00 10.00 10.00 10.00

EPS 12.25 5.21 7.28 17.68

Ratio Analysis

Particulars FY12 FY13 FY14E FY15E

EPS (Rs.) 30.25 33.24 49.10 66.07

EBITDA Margin (%) 12.15% 8.10% 7.80% 8.47%

PBT Margin (%) 10.43% 6.81% 6.78% 7.56%

PAT Margin (%) 7.12% 4.66% 4.75% 5.19%

P/E Ratio (x) 4.54 4.14 2.80 2.08

ROE (%) 28.45% 25.19% 27.12% 26.73%

ROCE (%) 35.06% 32.28% 34.34% 35.43%

Debt Equity Ratio 0.49 0.49 0.40 0.32

EV/EBITDA (x) 2.66 2.38 1.70 1.28

Book Value (Rs.) 106.32 131.96 181.07 247.14

P/BV 1.29 1.04 0.76 0.56

Charts

Outlook and Conclusion

� At the current market price of Rs.137.50, the stock P/E ratio is at 2.80 x FY14E and 2.08 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.49.10 and

Rs.66.07 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 44% and 30% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 1.70 x for FY14E and 1.28 x for FY15E.

� Price to Book Value of the stock is expected to be at 0.76 x and 0.56 x respectively for FY14E and FY15E.

� We expect that the company surplus scenario is likely to continue for the next years, will keep its growth

story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.151.00 for Medium to Long term investment.

Industry Overview

The food services sector in India is expected to witness a 50 per cent increase in investments in 2012 to about

US$ 750 million, as food suppliers and retail companies plan to scale up business and stay competitive by tapping

the large potential of the domestic market. Of the total investments of US$ 750 million in 2012, about US$ 165

million has gone into purely front-end retail, such as fast moving consumer goods (FMCG), food and beverage

firms.

India is the world's largest milk producer, accounting for around 17 per cent of the global milk production,

according to RNCOS research report titled, 'Indian Dairy Industry Analysis'. The study anticipates that the milk

production in India will grow at a compound annual growth rate (CAGR) of around 4 per cent during 2011-2015.

Further, India has emerged as one of the largest potential markets for organic food consumption globally. The

organic food is invariably catching up pace among the Indian retailers, especially with the niche retailers owing

to wide awakening among Indian consumers towards leading a healthy life, as per RNCOS research report titled,

'Indian Organic Food Market Analysis'. The sector will post significant growth during 2011-2013, growing at a

CAGR of 15 per cent.

Indians spend US$ 64 billion annually on eating out, which includes $13 billion on eating in quick-service

restaurants (QSRs) such as McDonald's and Costa Coffee, propelling the industry to grow at 25-30 per cent

annually, according to Euro monitor.

Key Players

The major players operating in the Indian food and beverages industry include Dabur India Ltd, Godrej

Industries Ltd, Hindustan Lever Ltd, Britannia Industries Ltd, ITC Ltd, Nestle` SA, PepsiCo, Inc, Cadbury

Schweppes PLC, Future Group, RPG Enterprise and Godrej Agro vet Ltd.

Among recent investments, World Bank arm IFC has reportedly put in US$ 6.5 million into food-supply chain firm

Snowman Logistics. Other similar investments include Swastik Road lines (India Equity Partners) and JICS

Logistics (IL&FS Private Equity) and Staragri Warehousing and Collateral Management Ltd (IDFC Private Equity).

The world's largest fast-food chain - Mc Donalds, is shedding its familiar red and yellow colours for more muted

tones as it goes for its biggest and costliest revamp in India, in line with its global strategy of attracting more

adults. The red and yellow company logo will be replaced with white across 240 restaurants.

Food Processing Industry

With a huge agriculture sector, abundant livestock, and cost competitiveness; India is fast emerging as a sourcing

hub of processed food. India's food processing sector covers fruit and vegetables; spices; meat and poultry; milk

and milk products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product

groups such as confectionery, chocolates and cocoa products, soya-based products, mineral water, high protein

foods etc.

India has emerged as world's top rice exporter overtaking traditional leaders, Vietnam and Thailand. India's total

rice export in 2011-12 is expected to be 6.5-7 million tonnes (MT), which is around 7 per cent of the country's

total production. However, with a bumper harvest in excess of 100 MT in 2011-12 and record stocks of a little

over 34 MT in state-run warehouses, India will continue to remain a major player in the global market till at least

June 2013.

The food processing industries attracted foreign direct investments (FDI) worth US$ 1,409.60 million between

April 2000 to March 2012, according to the latest data published by Department of Industrial Policy and

Promotion (DIPP).

Beverages

Food and beverage contributes a big portion to the revenues of hotels in India. "This is as much as 30-40 per cent

in some five-star hotels, compared to 15-20 per cent internationally," says Dilip Puri, Managing Director of

Starwood Hotels India.

According to a report titled 'Indian Non-Alcoholic Drinks Forecast to 2012' by research firm RNCOS, the Indian

non-alcoholic drinks market was estimated at around Rs 216 billion (US$ 3.88 billion approximately) in 2008

and is forecasted to grow at a CAGR of around 15 per cent during 2009-2012. The report covers numerous

factors driving the growth of non-alcoholic drinks market in India.

The report highlights that the highest growth will be seen in the fruit/ vegetable juice market, which is estimated

to grow at a CAGR of around 30 per cent in value terms during 2009-2012, followed by the energy drinks

segment at a CAGR of around 29 per cent during the same period.

Green Mountain Coffee Roasters (GMCR) and Eight o' Clock Coffee Company, a Tata Global Beverages brand, have

announced a multi-year agreement to make Eight o' Clock Coffee, Tetley Tea, and Good Earth Tea available in

different formats throughout the US and Canada by next year.

Investments

• Britannia Industries Ltd is planning on a global expansion drive to continue with its growth story. The

company has registered 19 per cent growth in top line at Rs 5,400 crore (US$ 969.48 million), derives

around Rs 250 crore (US$ 44.88 million) from global operations and is considering all vectors to expand

its presence overseas

• Indian food catering firm Travel Food Services (TFS) has entered into a joint venture (JV) with Gate

Gourmet, a subsidiary of Swiss giant Gate group, to provide in-flight on-board catering services. The JV

has tied up with Jet Airways as a first move and will cater to 500 Jet flights a day

• The US-based foods chain Dunkin' Donuts has launched its first store in New Delhi. The company plans to

set up eight to 10 stores in Delhi during this financial year and around 100 stores in the country in the

next five years. The stores will be wholly-owned by Jubilant Food Works Ltd

• Himalaya Industries Ltd has launched India's biggest food processing plant set up at an investment of Rs

170 crore (US$ 30.52 million) at Vadnagar, Gujarat. The plant will process eatables such as mushroom,

yoghurt, milk cheese and potato chips, French Fries etc

• India Hospitality Corp has bought UK-based Adelie Food Holdings Ltd-which supplies quiches, salads,

sandwiches and assorted ready to eat food to retail-chains, for Rs 1,800 crore (US$ 323.16 million) from

PE firm Duke Street Capital.

Government Initiatives

According to the recently announced Union Budget 2012-13 following initiatives will be taken by the

Government under the National Mission on Food Processing:

• A new centrally sponsored scheme titled 'National Mission on Food Processing' to be started in 2012-13

in co-operation with State Governments

• Steps taken to create additional food grain storage capacity in the country

• Subsidies fully provided for effective administration of the proposed Food Security Legislation

• To promote private sector activity and invite foreign investments in the sector the Government allows

100 per cent FDI in the food processing & cold chain infrastructure

Some of the other initiatives include

• Canada wants to collaborate with Andhra Pradesh (AP) in the manufacturing sector. It has identified

chemical-based and food processing industries in particular, according to Steward Beck, Canadian High

Commissioner in India

• The Mexican 'King Avacado' (fruit) will be available in India. Buoyed by huge demand, Mexico is trying to

push avocado exports to India. "We are working on the logistics aspects with the Government of

Karnataka, and hope to use the State's knowledge or solution to reduce the transit time of shipments,"

said Aldo Ruiz, Investment and Trade Commissioner, Ministry of Economy, Mexico

• Coconut Development Board (CDB) and the Republic of Trinidad and Tobago have signed a memorandum

of understanding (MoU), to encourage and develop technical collaboration between the two countries for

the development of the coconut industry. This is the first time the Board is entering into an agreement

with a commonwealth country for transfer of technology

• Spice Board of India plans to promote exports of spices by establishing 25-30 spice parks in different

parts of the country. This will help in achieving export of spices worth Rs 30,000 crore (US$ 5.39 billion)

by 2020, as per Dr G K Vidyashankar, Deputy Director (Marketing), Spices Board. These parks would give

a common platform for farmers, traders and exporters.

Road Ahead

According to the latest trend it has been observed that more and more Indians spend a fortune on luxurious

items that includes food as well. "Indians today have an experimental palate. People want to be able to have

dining options they would choose in New York, Tokyo or London," as per Aishwarya Nair, Head of Corporate

Food and Beverage, Leela Hotels.

India is one of the fastest growing branded restaurants markets in the world, where the organized eating-out

market is estimated at US$ 2 billion and growing at a CAGR of 25 per cent.

With massive scope for value addition, growing trend in the consumption pattern of processed food products in

India and many fiscal incentives being planned by the Government, this sector is capable of maintaining the

growth momentum in the future.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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