AVANTIFEED - Avanti Feeds ltd. Share Price

Avanti Feeds Limited provided a cautious yet optimistic outlook for the second half of FY26 during its recent earnings call.

Management highlighted several key points:

1. Financial Performance: For Q1 FY26, the company reported a consolidated gross income of INR 1,657 crore, representing a 15.7% increase quarter-over-quarter (QoQ) from INR 1,432 crore, and a 7.7% year-over-year (YoY) increase from INR 1,538 crore. The profit before tax (PBT) for the quarter stood at INR 249 crore, up 18% QoQ from INR 211 crore and 38% YoY from INR 180 crore.

2. Feed Sales Volume: The management expects feed sales to reach approximately 560,000 metric tons in FY26, slightly above the 2024 figures of 555,247 metric tons. Despite challenges, the anticipated shrimp production of 1 to 1.1 million metric tons for the year supports this target.

3. Tariff Impact: The introduction of a reciprocal tariff of 50% by the U.S. raised concerns, particularly affecting the shrimp processing business from which Avanti derives over 60% of its revenues. Management indicated that while near-term impacts may be manageable, the long-term challenge remains significant if such tariffs persist.

4. Market Diversification: The company is actively seeking to expand its market presence beyond the U.S. into countries like Japan and the European Union and has noted a growing domestic market potential.

5. Raw Material Pricing: An overshoot in raw material prices, such as fish meal rising to INR 105 per kg from INR 93, and soybean meal increasing to INR 47 from INR 39, could impact profitability moving forward. Management emphasized the volatility of these prices and the necessity for stabilization to maintain margins.

6. Production and Quality: Production activities have recently stabilized after heavy rains caused premature harvesting. Management is optimistic about a good production period through October-November.

Overall, while the company has navigated the first half strong, management anticipates challenges in the latter half of FY26 with potential price pressures. The focus will remain on diversifying markets and stabilizing raw material costs to sustain growth.

Major Questions and Answers from the Q&A Section

1. Question from Nitin Awasthi (InCred Capital):
"For the shrimp industry as such, do you expect a fall or stability within the shrimp feed volumes?"
Answer:
I anticipate that shrimp feed volumes will remain stable, at around 560,000 metric tons for this year. We don't expect a steep drop in shrimp production despite the recent tariff changes, as overall industry dynamics indicate consistent demand.

2. Question from Nitin Awasthi:
"Given the tariffs, do you see any positive developments, particularly in pricing?"
Answer:
Yes, there's likely to be an inflation in shrimp prices in the U.S. due to the imposed tariffs. This could change how products are perceived seriously regarding pricing, potentially helping eliminate claims of 'dumping' against us.

3. Question from Yash Chandorkar (Vivog Commercial Ltd.):
"How will the tariff impact your company?"
Answer:
The 50% tariff significantly impacts around 55% of our U.S. exports. However, the immediate effect on our shipments has been manageable as we continue to serve other markets, ensuring a diversified approach.

4. Question from Ronak Shah (Equirus Securities):
"Are discounts being offered due to the imposition of tariffs?"
Answer:
We are unable to absorb the 50% tariff and are passing it on to our customers. This situation affects pricing dynamics, but for now, we continue with normal operations while exploring diverse markets.

5. Question from Kumar Divyanshu (Individual Investor):
"What percentage of your revenue comes from the domestic market for shrimp feed?"
Answer:
More than 99% of our revenue is generated from the domestic market for shrimp feed, which shields us somewhat from the fluctuations caused by the U.S. tariff situation.

6. Question from Ayush Mittal (Mittal Analytics Pvt. Ltd.):
"Has the government requested a price cut on shrimp feed?"
Answer:
No, we have not been asked to cut our prices. We recently decreased prices by INR 4 in April, and there's no indication from either the government or farmers for additional cuts.

7. Question from Ayush Mittal:
"What revenue target have you set for your Pet Care segment this year?"
Answer:
We have set a revenue target of INR 10 crores for our Pet Care segment this year, and we plan to expand our product offerings further.

8. Question from Rahul Rathi (Purnatha):
"Regarding CapEx for fish and pet feeds, what guidance can you provide?"
Answer:
Currently, we are focusing on trialing fish feed. The capex for the fish segment will be medium-level. For the Pet Care segment, we aim to finalize our budget next quarter.

9. Question from Vincent Andrew (Geojit Financial Services Ltd.):
"Can you share the amount of export incentives received this quarter?"
Answer:
We need to review this internally to provide accurate figures on export incentives. Please reach out via email for further discussion.

10. Question from Vincent Andrew:
"Are you currently able to pass on increased duty costs to customers?"
Answer:
Some customers are managing to absorb the tariffs, but a 50% increase is challenging for supply chains to cope with overall in the long term. The intricate dynamics of our pricing are still being evaluated.