Analysis of a multibagger

Today I want to highlight a company which is well known for its frozen foods in USA, Europe, Japan, Australia & Middle East. But wait there is something special about this company that why it is very popular among market analysts and investors.

Avanti Feeds has given whopping 7000% returns to its faithful investors in last 5 years (compared on 10/2017). Yeah, that is massive return a company could give to its investors in such a short duration.

Have a look at its 5yr market performance.

Lets us analyze the company?

Company business

  1. The primary export business of frozen seafood( shrimps).
  2. Secondary business of power generation (wind-based power plants)
  3. Investment in 2 power generation companies with a stake of 25.88 % and 49.99 %.

 Market opportunities 

The company brags its primary source of revenue from exporting frozen foods in USA, Europe, Japan, Australia & Middle East. The seafood consumption is increasing all over the world as compared to other forms of meat. With the long coastline, India is ideally suited for the development of seafood industry. Avanti Feeds has grabbed this opportunity and in 2016-17 their exports sum to 11.35 lakh MT.

Company Financials

Avanti Feeds has indeed very healthy financial figures and the same is reflected in it endless returns of last 5 years. If we look cost of goods sold numbers those also shown a 32.8% CAGR. That is marvellous for a company.

Even the company has grown its net profit to 214.3 Cr in mar 2017 from 70.4 Cr in mar 2014, which gives a CAGR of 44.9%, wonderful.

See that company has maintained its net profit margin which helped in generating stellar profits.

Now coming to borrowing taken by the company. As a company is not involved in capital-intensive business we can see debt level as low. Besides company is decreasing its debt levels YoY.

In the last year, they have taken long borrowing of Rs 14.89 cr for implementation of shrimp processing project at Yerravaram, East Godavari (Dt.) by M/s. Avanti Frozen Foods Pvt. Ltd.

The company is beautifully maintaining its EBITDA margins.

Have a look at company’s ROE. The company has maintained a double-digit return on equity. The share capital of the company is Rs 9.08 crores.

 

Business expansion & Growth Opportunities

Avanti Feeds as always tried to be at par in terms of industry standards. In order to secure global recognition for shrimp processing and export business, the Company during the year 2015-16 transferred this division to its own new subsidiary ‘Avanti Frozen Foods Private Limited’ (AFFPL). Thai Union Group joined this Company with a 40% stake in July’16 to extend support in this business. The subsidiary Company (AFFPL), which is continuing the operation of existing plant took up implementation of a new state of the art shrimp processing facility at Yerravaram in East Godavari District of Andhra Pradesh in December’15. The project work of this factory is complete and it is waiting for statutory and regulatory approvals to commence operations and we expect that all the approvals will be received and it will commence commercial operations shortly.

Read: A potential multibagger touching the sky

Valuations

Given the fact that Avanti Feeds maintain such a healthy financials, such a business could not come at a low valuation. As of now (02/10/17) Avanti Feeds shares trades around 2000 with a P/E of around 27.

Now the share is trading at par but still has a scope of expansions of profits. For a value investor, there seems to be hardly any gap of a margin of safety which makes it an expensive deal.

Read: Learn Fundamental analysis

Source: Company’s Annual Report’s

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