Avanti Feeds Limited
About: Avanti Feeds Ltd. is an exporter and in a business of manufacturing of prawn and fish feeds, and shrimp processor. Avanti Feeds also has established joint venture with Thai Union Frozen Products PCL., the world’s largest seafood processors and leading manufacturer of prawn and fish feeds in Thailand. Avanti has multiple Prawn and a Fish Feed Manufacturing Units and producing nutritionally well balanced and high quality feed, consistently, catering to the Indian prawn and fish farmers, at their doorstep. In the below fundamental analysis, we will figure out if Avanti Feeds Ltd. is possible multibagger for FY 2020 or not.
We have picked selected line items which actually matters to evaluate the Balance sheet of Avanti Feeds Ltd. As we can see, the Equity Share Capital of the company has remained the same throughout last 5 years wherein, they have increasing their Reserves year by year. This is a very good stance for fundamentally strong company. Looking at the secured and unsecured loans, they have continuously reduced their loans and in the FY 2018, they don’t have any loan which makes it a Zero debt company, which is another sign of a fundamentally strong company. Being a stock analyst, I always look for a Zero debt company because if you get the shares of such companies at an intrinsic value, it will definitely give you profits. Coming back to the topic, let’s continue if Avanti Feeds is multibagger or not.
Profit and Loss Statement
As shown in the Profit and Loss Statement of Avanti Feeds Ltd, they have been consistent in increasing their Net Sales and their Employees Cost has been increasing too, which means they need more and more staff every year. They have reduced their interest too as they have reduced their secured loan, which we saw above in the balance sheet and in the FY 2019, they will have to pay Zero interest as they completely paid off their loans. Overall, the profit and loss of the company gives a good sign to continue its profit in coming years too and we can expect this company to becoming a multibagger soon. Till now, we have seen Avanti Feeds is a good company, now will dig deeper and go into the Fundamental Analysis of the company.
The closing price of Avanti Feeds Ltd on 22nd Feb was Rs. 241.85, from this we will go into the Price to Earnings ratio of the company. We can see the EPS is 21.18 which make the current PE ratio of the company as 16.14 times (shown in the below mentioned image). We can also the share is trading near to its 52 weeks low, it is another sign that the stock price can run upwards anytime soon and have the possibility to a multibagger or at least 2-3 bagger.
Future PE Ratio
Now we will calculate 1 Year forward PE ratio with the help of CAGR. If we calculate the EPS of the company for 3 years, we see the CAGR is 38.77%, which gives the Estimated EPS of 126.80 and using the estimated EPS, we can get forwarded PE ratio which is 2.51 times. Any case where the forward PE ratio is lesser than the current PE ratio, we can say the stock is undervalued. Therefore, we can say the stock is trading low from its original price.
Relation between PB Ratio and Return on Equity
As we can see the PB ratio of Avanti Feeds Ltd. is increasing and with a dip in FY 17, Return on Equity is back to 44.24 in FY 18. It can be a good time to invest in this stock and expect to book profits in coming year or so.
Evaluation of stock price using PEG Ratio
From the above analysis, we can see the PEG ratio is 0.76. I would like to mention that if the PEG ratio of a company is lesser than 1, it is the best time to buy the stock as it’s undervalued, which is the case with Avanti Feeds Ltd at the moment. We all can get this stock and book good profit when it will become a multibagger in upcoming years.
Target Price using EBITDA
Here, we have calculated EBITDA of last 7 financial years and basis on the EBITDA, we can calculated the Expected EBITDA for next Financial Year, which comes to be 914. If we divide the Share Outstanding by Forecasted EV, we can get the target price of Avanti Feeds Ltd, which could be 1051, that is almost the triple of the current share price. And if we keep the 2/3rd as the safety margin, we get 701 and still higher than the current share price, thus, it shows the possibility to be a multibagger and definitely a must buy stock.
Target Price using PE Model
In the above analysis, we have tried to calculate the Target price using the PE model. Here we can see, the ideal entry price of the share is 307, I agree that as per PE model, the current share price is slightly higher; however, it still shows great potential to be a multibagger and we can buy the share to make profit in future.
From the all above analysis, we can Avanti Feeds Ltd. is currently trading undervalued and also has all the sign to be a multibagger for the upcoming years. This seems to be a stock which can run up and it must be added in our portfolios. Being a stock analyst, I would strongly recommend buying this stock to be rich in near future.