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Avanti Feeds Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Avanti Feeds Ltd (AVANTIFEED) Q2 FY24 Earnings Concall

  • Raw Material Cost Trends
    • Fish meal prices are high due to export demand.
    • Soybean meal prices have fluctuated but remain around 54 Rs/kg.
    • Wheat flour prices increased from 29 to 33 Rs/kg.
    • Overall raw material costs increased 1% compared to previous quarter but decreased 2.5% compared to same quarter last year.
    • Raw material prices fluctuate based on seasonality, production, and global trends.
  • Production and Sales Trends
    • Feed sales volume decreased 30% quarter-over-quarter due to seasonal changes.
    • Feed sales increased 2% in first half of current year compared to previous year.
    • Export shrimp sales volume decreased 5% in first half of current year.
    • Company maintained feed production and sales despite 15% decrease in overall Indian feed consumption.
    • Company’s export shrimp sales decreased slightly compared to 2.34% decrease in overall country’s shrimp exports.
  • Government Incentive Schemes
    • Company qualified for Production Linked Incentive scheme, eligible for up to 79.44 crore incentive over 7 years.
    • Received 6.84 crore incentive in FY22 under this scheme.
    • Also received grant under Operation Greens scheme for new shrimp plant.
    • Submitted documents for first installment of grant.
  • Industry Growth Forecasts
    • Global shrimp production forecasted to increase 4.8% in 2024 after slight 0.4% decline in 2023.
    • Early signs of recovery in U.S. shrimp import market after over a year of declines.
    • India remains top shrimp exporter to U.S. but at lower prices.
    • Recent increase in India’s palm shrimp exports of 17% year-over-year.
    • Trends indicate potential increase in shrimp exports going forward.
  • Shrimp Feed Sales Outlook
    • Shrimp feed sales increased marginally in first half of FY2024 vs previous year.
    • Field reports indicate similar shrimp feed sales likely in calendar year 2024 vs 2023.
    • Despite 10-15% forecasted decline in total Indian shrimp feed market.
    • Rest of current year appears optimistic for shrimp industry.
  • Diversification
    • Subsidiary incorporated to manufacture pet food and products.
    • Partnering with Thai company for technical expertise.
    • Company to invest 51% equity, Thai company and others remaining.
    • Market research commissioned to evaluate demand.
  • Expansion Plans
    • Adding 7,000 tonne shrimp processing capacity by end of FY2024.
    • Focusing on maximizing value-added shrimp products.
    • Expects higher sales volume from new capacity.
    • Also diversifying into pet food manufacturing, to commence end of CY2024.
    • Expects pet food sales to start in Jan 2025.
    • Anticipates higher revenues from processing expansion and pet food in FY2025.
  • Exports to US Market
    • Recent increase due to seasonal demand around holidays and not related to issues in other exporting countries.
    • However, high Indian fishmeal exports concerning, impacting availability and inflation for processors.
    • Representations made to government for export regulations.
  • Ecuador Competitiveness
    • Ecuador’s farmgate shrimp prices lower than India due to vertical integration of processors who are also large farmers.
    • Ecuador focused on commodity products like headless shell-on.
    • India competitive on value-added products like breaded shrimp.
    • But Ecuador expanding production rapidly, now largest global producer.
    • On basic processed shrimp, costs comparable between countries.
  • Protein Inflation Impact
    • Beef and pork prices rising in US and China respectively.
    • Many other factors affect shrimp demand like disposable income.
    • No observable change in shrimp demand forecasts yet.
    • Hard to attribute any shifts solely to other protein prices.
  • Seasonality and Inventory
    • Shrimp business sees seasonal sales fluctuations.
    • End of year sees seasonal uptick in demand.
    • Single digit inventory days maintained through seasons.
    • No issues liquidating inventory.
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