India's Shrimp Exporters to Retain Supremacy in US Markets | CORPORATE ETHOS

India’s Shrimp Exporters to Retain Supremacy in US Markets

By: | March 13, 2018
shrimp exports

India has proved its strength in shrimp exports by becoming the biggest exporter in 2016 achieving a value of US $3.8 bn while many of the Asian nations underperformed due to diseases, environmental regulations, labour issues and floods.

According to a recent CRISIL report, India’s shrimp exports are expected to double to $7 bn annually by 2022 as the major players are expanding their infrastructure to cater to increasing demand for value-added products from big global retail chains and restaurants.

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India could attain leadership status as it strongly lobbied to have SPF (Specific Pathogen Free) vannamei broodstock imported from the United States for cultivation. Pacific white shrimp takes less time to grow to market size, is more resistant to disease than black tigers, and is more affordable. India was long known to be a leader in black tiger (Penaeus monodon) farming but costs 25 to 35 % higher than vannamei broodstock making it less competitive.

Amidst the positive trends seen in shrimp exports, here is a look at the major listed players in this domain-

#Waterbase Ltd  (BSE: 523660)  Category:  Small Cap

Waterbase Ltd, established in 1987 as Thapar Waterbase Ltd, is a leading manufacturer of high quality shrimp feed in India. It process shrimp in IQF, Block Frozen and Cooked form from its own captive farms which are exported to Japan, Europe and United States. It was set up in technical collaboration with Luxue, Taiwan, which is one of the world’s largest producers of prawn and fish feeds.  The company is promoted by Vikram Thapar, Chairman of the Karam Chand Thapar (KCT) Group, a diversified Indian conglomerate with business interests in logistics, coal and commodity trading, capital goods, real estates and energy.

The company has state-of-art technology, processing plants and R&D facilities to ensure quality products for global markets. It has set up its own shrimp farms in Nellore, Andhra Pradesh that can produce 500 million post larve or seeds per annum to be sold to farmers for growth and harvesting.

In 2016-17, the company reported a net profit of Rs 12.56 cr compared to Rs 1.387 cr in the previous year while sales rose to Rs 331.88 cr compared to Rs 299.77 cr the previous year.
In Q3FY18, the net profit rose sharply by 1872.11% on annualized basis to Rs 3.27 cr while sales rose 10.77% to Rs 59.96 cr.

At present there are only buyers in the Waterbase counter in BSE. It has soared 10% to Rs 284.40 after falling to 258 levels yesterday.  It is trading at a PE of 43.55 indicating higher valuation by market. Financial parameters give a mixed picture with lower return on equity of 9.29%, on assets of 4.73% and net profit margin of 3.59%. The liquidity and cash flow ratio presents a mixed picture, not quite attractive.

#Apex Frozen Foods Ltd (BSE:540692, NSE: APEX) Category : Mid Cap

Apex Frozen Foods was established in 2012  and is an export oriented company catering to USA, UK, and European countries. Operational facilities are strategically located along the coastal belt of Andhra Pradesh. Proximity to ports, fish farms are advantageous for Apex. Products include white shrimp and black tiger shrimp. Three years ago it got recognition as a three star export house from DGTF, Vishakapatnam. It has also won ‘Best Aquaculture Practices’ award and has taken part in global seafood exhibitions. The company is led by Karuturi Satyanarayana Murthy, Chairman and Managing Director with 20 years of experience in aquaculture industry and assisted by an able team.

The company reported a net profit of Rs 24.40 cr in 2016-17 as against Rs 18.94 cr the previous year.
Revenue rose to Rs 709.68 cr as against Rs 608.26 cr the previous year.  The company has reported a net profit of Rs 18.84 cr in Q3FY18 while sales was Rs 262.83 cr. On a returns perspective, 131.61% half yearly is much above the industry returns and Nifty but negative on short term basis.

Financial parameters are attractive with return on equity of 25.21%, assets of 9.50%, net profit margin of 3,49% are worth mentioning while liquidity and cash flow are a cause for concern,

The scrip is trading at a PE of 36 indicative of moderate valuation by market.  On technical charts, 49.22 is neutral while ADX of 14 indicates range bound trade while MACD has witnessed a crossover signaling a move in either direction while the scrip is rebounding but trading below 50 DMA of 720.

Target: 730   Duration : 3 weeks   Strategy: Buy/hold

#Avanti Feeds Ltd (BSE: 512573, NSE: APEX) Category: Mid Cap

Avanti Feeds Ltd was established in 1993 is a leading manufacturer of prawn and fish feeds and shrimp processor and export from India. It has four prawn and fish feed manufacturing units in Kovvur, Vemuluru and Bandapuram in West Godavari in Andhra Pradesh and Pardi in Valsad District in Gujarat. The shrimp processing and exporting units in Gopalapuram in East Godavari District in AP has state of the art technology and excellent storage and logistic capabilities. The company was set up by Late Sri Alluri Venkateswara Rao in technical collaboration with Pingtai Enterprises, Taiwan.

The company reported a Q3FY18 net profit growth of 155.56% annualized at Rs 105.07 cr while sales rose 28.44% to Rs 706.43 cr. The scrip is trading at a PE of 26.54 indicating lower valuation by market as compared industry PE of 52.53.  Financial parameters – return on equity of 33.46%, on assets of 4.77%, net profit margin of 7.84% are on par with industry but liquidty and cash flow ratios are a cause for concern.

On technical charts, RSI of 53.71 indicates bullishness while ADX of below 10 indicates range bound trading, MACD has witnessed a bullish cross over indicating buying opportunity. The scrip is rebounding to near 50 DMA.
Target: 2600   Duration : 4 weeks. Strategy: Hold/Buy

Summary
The aquaculture companies were under pressure on imposition of anti-dumping duty on shrimp exports from India which was raised to 2.34% from 0.84% by US Department of Commerce. With rising demand and an average margin of 10-12 percent, shrimp exports are comfortable enough to withstand any nominal rise in anti-dumping duty, according to analysts. All the exporters and processors are on expanding mode with the Avanti Feeds, the largest shrimp feed company intending to clock a turnover of Rs 1200 cr in 2018-19.

CRISIL expects value added exports to rise more than the current 15% as China, Thailand, Vietnam have seen their production dip due to various issues such as shortage of fresh water, salinity intrusion and illegal shrimp farming. India’s emphasis on lower-density shrimp farms have helped control diseases and help maintain quality. With lower debt and a compounded annual growth rate of 9% between 2015 and 2017 and with over 75 quality shrimp exporters, India is set to retain its supremacy in the coming years.