Nearly 15,000% return in 10 years: This stock turned Rs 1 lakh to over Rs 1.50 crore
The consolidated net profit of the company has grown at a CAGR of over 50% during the past 10 years.
Higher input cost and lower volume offtake hurt margins of multibagger Avanti Feeds for the latest quarter ended June 30. However, market analysts retained their bullish view on the company as they believe that Avanti will be a net beneficiary of the Remission of Duties and Taxes on Export Products (RoDTEP) scheme. The scheme will help boost India’s exports and competitiveness in global markets. Shares of the company have already delivered a robust return to investors in the long run.
Share price movement
The scrip has soared nearly 15,000% to an adjusted price of Rs 528.55 on August 23, 2021 from Rs 3.51 on the same day in 2011. In simple terms, the growth shows that an investment of Rs 1,00,000 in Avanti Feeds in 2011 would have now become over Rs 1.50 crore. Meanwhile, shares of the company got split in 2015 and 2018.
In the period starting from 2011, Avanti Feeds is one of the best-performing companies among all firms listed on the BSE. In contrast, the benchmark Sensex index has risen 235% in 10 years. Market watchers believe that the company is a key beneficiary of the shrimp aquaculture wave that started in India post 2009. India’s shrimp industry changed after the government allowed the cultivation of non-native Pacific white shrimp or King Prawn also known as P Vannamei species, whose global prices were much lower than the Black Tiger variety.
Financials
The consolidated net profit of the company has grown at a CAGR of over 50% during the past 10 years. The figure jumped to Rs 397 crore in FY21 from Rs 3.42 crore in FY11. On the other hand, it reported net sales of around Rs 4,100 crore for the financial year ended March 31, 2021 against sales of Rs 199.62 crore in FY11. Topline of the company has grown at a CAGR of over 35% during the period.
For the latest quarter ended June 30, the company posted over 47% year-on-year growth in revenue from operations at Rs 1,408 crore. On the other hand, the net profit of the company declined nearly 30% YoY to Rs 72.90 crore in Q1FY22.
Commenting on the latest quarterly results, ICICI Securities said that inflationary pressures in input prices impacted profitability. “We expect some impact on profitability as the company announced a recall of some products due to potential contamination. We believe Avanti will be a net beneficiary of the RoDTEP scheme and model Avanti to report PAT CAGR of 16.1% over FY21-23 and maintain a ‘Buy’ rating with a target price of Rs 639,” ICICI Securities said.
How RoDTEP benefits
ICICI Securities said that Avanti’s latest profitability was impacted due to the closure of MeIS (Merchandise Exports from India Scheme). The recommencement of exports benefits, under RoDTEP, will reduce pressure on margins. “RoDTEP benefits are 2.5% (subject to a cap Rs 16 per kg) and lower than MeIS benefits. The company believes the shortfall will be redistributed in the shrimp value chain (farmers, feed manufacturers, exporters) over a period of time,” the brokerage said.
The company believes that RoDTEP benefits in Q4FY21 (Rs 38.8 mn) and Q1FY22 (Rs 46.5 mn), will be reflected in Q2FY22 results of the company.