Apex Frozen Foods spikes 46% in listing week! Will this rally continue or fizzle out

The vision of the company is to grow in a sustainable manner by taking care of the end customers requirements. NSEBSEAvanti FeedsLoading data…

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    ChartsValuation & Peer ComparisonCommunity BuzzPEER COMPANIES NEW DELHI: Shares of Apex Frozen Foods on Friday locked at upper circuit limit of 5 per cent for a fourth session in a row. The stock, which debuted on Monday at a 14 per cent premium, has jumped 46 per cent over its issue price so far.

    Brokerage Equirus Securities has initiated coverage on the stock with a target of Rs 290, ascribing 20 times multiple to the stock on the brokerage’s December 2018 EPS’ estimate.

    «Apex Frozen is trading at 23 times/14 times on our FY18/FY19 EPS estimates. We estimate a PAT growth of 45 per cent over FY17-FY20E. Our target multiple is at a 25 per cent discount to the trailing twelve month PE multiple of Avanti Feeds, as it derives 87 per cent of revenues from the feed business which is highly cash-generative,» the brokerage said.

    The company offers variants of processed white shrimp under brands like Bay Fresh, Bay Harvest and BayPremium. The proceeds from the issue will be utilised for setting up a new shrimp processing unit with a capacity of 20,000 tonnes per annum in Andhra Pradesh and for general corporate purposes.

    «The vision of the company is to grow in a sustainable manner by taking care of the end customers requirements. And in order to grow in a consistent manner in the future, we are adding up additional facility and also we are increasing our backward integration part of the business which is the farming and the hatchery operations. In the long term, we wish to become a leading sea food processing and exporting companies,» Subrahmanya Chowdary of Apex Frozen Foods told ET Now two weeks ago.

    Listed players such as Avanti Feeds, The Waterbase and Zeal Aqua are among key competitors of Apex Frozen. Return on net worth for Avanti Feeds stood at 34.78 per cent for FY17 on a standalone basis and 36.71 per cent on a consolidated basis. Smaller peers The Waterbase and Zeal Aqua have RoNW of 11.20 per cent and 4.83 per cent, respectively.

    In comparison, Apex Frozen reported an RoNW of 25.22 per cent. The size of the export market for shrimp stood at $ 3.1 billion in 2015-16.

    «The company’s new processing capacity of 20,000MTPA to be set up by April 2018) would include 5,000MTPA for high-value cooked products. This along with higher captive RM sourcing would serve as margin levers,» Equirus Securities said.

    Some estimates show shrimp exports grew at a CAGR of 33 per cent between FY10 and FY15. Volumes grew 22 per cent, while realisations rose 11 per cent. Rating agency CRISILBSE 0.37 % expects shrimp exports to grow at a CAGR of 17-19 per cent in value terms over the next five years, primarily driven by volumes.

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