Avanti Feeds share price has taken a hit in the stock markets. The BSE 500 Stock – is one of the leading suppliers of high quality shrimp feed with good production capabilities.
Year-over-year (yoy), Avanti Feeds share price is down 31%.
Shares of the company recently fell as much as 5%, the biggest drop in the past 15 weeks.
Read on to know why.
Bad quarterly results
For the quarter ended 30 September 2022, Avanti Feeds reported total revenue of Rs 1,247.2 crore (Rs 12,472 million). This is 15% lower than in the quarter of June 2022.
Net profit for the same period came in at Rs 665 million (m), which is 10% lower compared to the previous quarter.
The company’s quarterly results have deteriorated over the past two quarters. Several factors are responsible for this.
In 2021 and early 2022, there was a sharp increase in shrimp demand from the US and Europe. Lately, however, demand has cooled.
Even China was a major shrimp importer. However, the imposition of new lockdowns has hurt demand. The worldwide demand for shrimps is falling.
The same level of production with reduced demand has caused shrimp prices to fall. The price of 50 pieces of prawns has dropped to Rs 270. It was Rs 360 in the previous month. The price for 60 pieces of shrimp has dropped to Rs 250 per kilo, while it was Rs 345 in the previous month.
Traders have also bought products with low prices, which is the reason for the decline in exports.
Inflation has also affected the aquaculture industry. Hence, increased production costs, stagnant supply and falling demand have combined to impact Avanti Feeds’ financial performance.
A large part of Avanti Feeds’ income comes from the shrimp trade.
A delay in commissioning the new feed mill in Andhra Pradesh has also caused the company to lose market share. Meanwhile, industry experts believe that if the state government’s intervention in feed pricing continues, the same could affect profitability.
This has dampened sentiment and the near-term future of the company is uncertain.
Avanti Feeds – a debt-free company is currently facing headwinds. But this is not new. In 2018, the company went through a similar situation.
In 2018, India’s largest shrimp feed manufacturer lost nearly three-fifths of its market value as shrimp prices fell and raw material costs rose.
Shares of Avanti Feeds fell as much as 59% in 2018, the worst annual decline since listing in 2011, according to data from Bloomberg.
A decrease in shrimp production of 20-25% and higher prices for soybean meal and fishmeal were largely responsible for the decline in revenues.
However, it came out strong. The increasing demand for seafood and the government’s focus on seafood exports helped Avanti Feeds. Will history repeat itself? Will Avanti Feeds be one of the multi-bagger stocks for 2023? We will have to wait for the future.
About Avanti feeds
Avanti Feeds is an Indian company engaged in shrimp and fish feed production and shrimp processor. The company’s operating segments include shrimp feed, hatchery and windmills.
It generates maximum revenue from the shrimp feed segment. Geographically, it derives a majority of its revenue from India and also has a presence in the US and around the world. The product includes shrimp feed, scampi feed and fish feed. The dividend declared by Avanti Feeds for March 2022 is 625% or Rs 6.2 per share.
(Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.) This article is from Equitymaster.com
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