Meet the multibagger: This company turned Rs 10,000 to over Rs 21 lakh in 10 years
The rise in share price indicates that an investment of Rs 10,000 in Avanti Feeds in 2011 would have now become over Rs 21.56 lakh.
Investing in equities requires skill, luck and patience. The third parameter is the most important one to get multibagger returns in the long run. Data available with Ace Equity shows that at least 162 stocks on the BSE rallied more than 1,000% in the past 10 years.
On the top, the manufacturer of prawn and fish feeds, and shrimp processor and exporter Avanti Feeds delivered a whopping return of 21,464%. The scrip has jumped to Rs 483.75 on February 24 from an adjusted price of Rs 2.24 on the same day in 2011.
The rise in share price indicates that an investment of Rs 10,000 in Avanti Feeds in 2011 would have now become over Rs 21.56 lakh. Of late, a lower tax rate and 44% growth in other income boosted the bottom line of the company to Rs 75 crore for the quarter ended December 31. It had posted a profit of Rs 47.80 crore in the corresponding quarter last year.
On the other hand, the company reported a 1% YoY and 19% QoQ fall in topline to Rs 915.40 crore on an account of de-growth in shrimp feed volumes (-4% YoY) and shrimp processing volumes (-18% YoY).
On a positive note, despite disruption due to Covid-19 led lockdown, the company managed to maintain its market share in the shrimp feed business to 45-48%. During the quarter, the share of USA to overall revenues increased to around 92% while the share of Asia increased to 2% which is in line with management’s guidance in Q3FY21.
However, management guided industry shrimp production is expected to drop by 15-20% in FY21 due to Covid-19 led disruption but to bounce back in FY22E.
Considering the present market condition, brokerage Way2Wealth advised investors to accumulate Avanti Feeds on dips. “Avanti Feeds reported subdued numbers in Q3FY21 due to lower sales volumes in its shrimp feeds and shrimp processing business. We believe, the company’s growth to be driven by both business segments, along with the government’s thrust on fisheries, improvement in export prices, regional diversification. At the current market price, Avanti Feeds trades at around 19x FY20 EPS and is in line with its peers thus we recommend investors to ‘Accumulate on dips’.” the brokerage said.
On the other hand, brokerage ICICI Securities has an ‘Add’ rating on Avanti Feeds with a price target of Rs 560. “We expect Avanti to report revenue and PAT CAGRs of 8% and 13.1% over FY20-FY23 and also expect its RoE to be stable over the same timeframe,” ICICIdirect said in a report on February 4.
Avanti is also in the process to reduce the dependence on USA and has started exports to other countries such as China and Europe. While the demand is impacted in USA, recovery in other markets such as China will help to improve volume off-take, according to market analysts.