APEX - Apex Frozen Foods Limited Share Price

Management Outlook and Major Points:

Apex Frozen Foods Limited's management expressed cautious optimism driven by improving global shrimp demand, particularly in the U.S. (inventory normalization) and the EU (73% YoY sales growth in Q3). Key highlights:

1. Market Diversification: The EU now contributes 45% of sales (up from 30% YoY), reducing reliance on the U.S. and mitigating risks like Countervailing Duties (CVD).

2. Pricing Trends:

   • Average realization rose 13% YoY to Rs.749/kg in Q3.
   • Raw material costs surged 21% YoY due to supply constraints (lower farmer stocking earlier).

3. Supply Recovery: Rising global prices are expected to incentivize Indian farmers to increase shrimp production, easing raw material shortages in the medium term.

4. Financial Performance:

   • Q3 revenue grew 56% YoY to Rs.231 Cr, with volumes up 37% YoY.
   • Gross margins contracted to 25% (vs. 28% in 9MFY25) due to elevated input costs.

5. Operational Challenges:

   • Freight costs remain volatile (Red Sea disruptions), though moderating.
   • Pending EU regulatory approvals for a new facility (5+ years delayed) limit growth in ready-to-eat (RTE) segment (8% of Q3 volumes).

6. CVD Impact: The U.S. CVD rate is 5.77% (up from 4.36%), with a review expected by March 2026. Management anticipates potential refunds post-review, depending on Indian government submissions.

7. Capacity Utilization: Currently at ~35%, expected to improve as supply recovers. Focus on expanding RTE sales (targeting 15"“20% of volumes) to boost margins.

Outlook: Near-term growth hinges on raw material supply recovery and EU approvals. Medium-term prospects are positive, supported by demand recovery, diversification, and stabilizing input costs.

Question 1:
"Reduction in the basic custom duty for frozen fish paste and fish hydrolysate. What would be the benefit of that to our Company?"
Answer:
Apex does not import frozen fish paste/hydrolysate and focuses on domestically sourced shrimp, so the duty reduction does not impact its operations.

Question 2:
"Can we consider this margin [25% gross margin] as a new normal or do you see margins reverting?"
Answer:
Margins are pressured by high raw material costs due to supply constraints. Improved farm-level supply (driven by higher shrimp prices encouraging farmer stocking) is expected to stabilize raw material costs, potentially improving margins.

Question 3:
"How are hatchery demand and farmer stocking trends impacting raw material supply?"
Answer:
Hatchery inquiries are improving as farmers show renewed interest in quality seed. Apex leverages its farmer network and focuses on traceability (linked to EU compliance), aiming to secure raw material from its hatchery output.

Question 4:
"Clarify CVD timelines, adjustments, and impact on U.S. sales costs."
Answer:
Current CVD rate is 5.77%, effective until a review concludes by March/April 2026. No financial adjustments are made; refunds (if any) post-review will be recognized then. Duties are paid upfront, with no retrospective provisioning.

Question 5:
"What was the ready-to-eat (RTE) sales volume and plant utilization in Q3?"
Answer:
RTE contributed 8% (244 MT) of Q3 sales volume. Production utilization for RTE was 11%, but sales lag due to pending EU approvals for the new facility.

Question 6:
"How does Indian shrimp compete with Ecuador in the U.S. market?"
Answer:
India's established reputation for diverse, high-quality products and reliability offsets Ecuador's logistical advantages. Indian realizations remain stronger due to product differentiation and customer trust.

Question 7:
"FY25 revenue outlook given supply challenges?"
Answer:
FY25 revenue is expected to remain flat YoY due to H1 supply constraints. Improved H2 supply (from farmer restocking) may boost Q4, with stronger growth anticipated in FY26.

Question 8:
"Are rising shrimp prices driven by feed costs or demand?"
Answer:
Demand recovery (U.S. inventory normalization, EU growth) and supply shortages"”not feed costs (stable)"”are key drivers. Farm-gate prices rose due to low farmer stocking in early 2024.

Question 9:
"Can freight costs be passed to customers?"
Answer:
Customers partially absorb freight hikes (e.g., Red Sea disruptions), but margins remain pressured. RTE expansion and diversification to higher-margin markets (EU) are critical for margin recovery.

Question 10:
"Trends in realization post-Q3 (Dec-Jan)?"
Answer:
Dollar realizations are stable, but INR appreciation (Rs.87/USD vs. Rs.85 in Q3) improves rupee realizations. Supply-driven volume growth and FX tailwinds support near-term revenue.