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Avanti Feeds Ltd

| Q3 FY26 Investors Conference Call

BULLISH SENTIMENT

Report Source

⬤7th Mar 26

Summary : Avanti Feeds anticipates strong growth in shrimp exports due to favorable trade policies and positive farmer sentiment, complemented by expansion in its pet food segment, despite facing raw material cost pressures.

Management Perspective positive : Management expressed pleasure with results, highlighted positive farmer sentiment, anticipated better market access from trade deals, and was bullish on Asian markets. They noted strong pet food reception and government support for fisheries.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 consolidated gross income was INR 1,447 crores, down 12.78% QoQ but up 2.99% YoY.
  2. Nine-month FY26 consolidated PBT increased by 32.7% YoY to INR 698 crores.
  3. Shrimp feed sales decreased QoQ and YoY in Q3 FY26, but nine-month sales volume increased.
  4. Shrimp processing gross income grew 39% YoY in Q3 FY26, driven by higher prices and favorable exchange rates.
  5. Pet care division sales grew from INR 95.08 lakhs in Q2 to INR 136.2 lakhs in Q3 FY26.

Future Growth Prospects

  1. Expect minimum 10% growth in feed volume consumption for FY26 due to positive farmer sentiment.
  2. Pet food project expanding portfolio, strengthening presence in Tier-1/2/3 cities and e-commerce.
  3. Anticipate better market access and higher demand in EU and UK due to reduced tariffs.
  4. Bullish on Asian market for shrimp exports, expecting continued higher sales in the region.
  5. Government's increased allocation to fisheries sector supports aquaculture and export promotion.

Management Insights

  1. Q3 FY26 results reflect mixed performance, with strong YoY PBT growth but QoQ declines in some segments.
  2. Raw material cost averaging provided a temporary advantage in Q3 margins, but Q4 will face higher prices.
  3. The new shrimp culture season has begun with positive expectations from farmers and stakeholders.
  4. Trade deals with UK and EU are expected to significantly improve market access and demand for shrimp.
  5. The pet care project is receiving positive market acceptance, with plans for own production in 14-15 months.

Signs of Skepticism

  1. Q3 feed sales decreased, yet management expects 10% FY26 volume growth, citing off-season and new season optimism.
  2. Raw material price increases are noted to impact Q4 profitability, despite Q3 margin improvement from inventory averaging.
  3. Exact implementation dates for UK/EU trade deals are uncertain, estimated at six to nine months.
  4. Pet food business margins are deemed 'too premature to talk about' due to high initial brand-building costs.
  5. Amazon starting its own pet food brand is acknowledged as a threat to the company's pet food distribution.

Risk Factors

  1. Increasing prices of major raw materials like fish meal and soya bean meal are impacting margins.
  2. Raw material prices fluctuate significantly due to agricultural and fish catch dependencies.
  3. Q4 FY26 PBT is expected to be lower (14.5%-15%) due to continued raw material price increases.
  4. Uncertainty exists regarding the U.S. government's new import surcharge, potentially rising to 15%.
  5. High initial expenditure for brand promotion and market penetration in the pet food business.

Good To Know

  1. The company's feed sales for nine months FY26 reached 4,38,335 MT, with an FY26 estimate of 5,55,000 MT.
  2. India's frozen shrimp exports increased by 8.3% in value and 3.56% in volume during 2024-25.
  3. The U.S. Supreme Court ruled IEEPA tariffs unlawful, leading to their deactivation from February 24, 2026.
  4. A new U.S. temporary global import surcharge of 10%, potentially 15%, replaced the IEEPA tariffs.
  5. The pet food manufacturing facility land has been purchased, with design and government approvals in progress.

Key Drivers

  1. Reduced EU/UK tariffs boost shrimp exports.
  2. Positive farmer sentiment drives aquaculture growth.
  3. Government support enhances fisheries sector.
  4. Pet food expansion with own production.

Key Analyst Discussions

Competitive Environment

  1. Company aims to scale shrimp processing and focus on value-added products to gain market share.
  2. Pet food market penetration strategy involves product quality, new launches, and pan-India distribution.
  3. Amazon's own pet food brand is a threat, but the company expects to offer competitive discounts.

Market Trends & Consumer Behavior

  1. Fish meal prices are rising due to increased demand from East/West Asia and rupee depreciation.
  2. Farmer sentiment for the new shrimp culture season is positive, expecting increased cultivation area.
  3. Higher inquiry for Indian shrimp is observed, but demand will fully return post off-season.

Financial Highlights

  1. Q3 feed division gross margin improvement was due to averaging of earlier low raw material costs.
  2. Steep increase in Q3 processing opex was primarily due to a 50% reciprocal tariff.

Product Composition

  1. Dog food accounts for 60-65% of the pet food division's revenue.

Strategic Considerations

  1. UK/EU trade deals are expected to expand the shrimp market due to reduced import duties.
  2. FY27 target markets and projections are being finalized, with a bullish outlook on Asia.
  3. Capex for the pet food manufacturing facility will be estimated in the next one to two quarters.
Avanti Feeds Ltd (AVANTIFEED) Concall Report Analysis & Insights | Dhanarthi