Sunday, July 24, 2011

Don`t act in haste and repent at Leisure - AVT Natural ;-)

New series starting on flashback of past calls that have been right.
AVT Natural - up ~ 4x since buy reco. given in Oct`10
Blockbuster latest Q1 FY12 June`2011 ending results.
  • Revenues up 2.6x YoY
  • EBITDA margins at 40% vs 1%.YoY
  • PAT at 11 crores vs (1 crore) loss.YoY. ( Profit After Tax = PAT , 1 crore Rs = 10 Million Rs)
This quarter PAT is equal to last years entire annual PAT of 11 cr ! Promoter has also recently increased its stake from 70% to max. allowable limit of 75% in the last quarter.

At cmp of 400, AVT Natural is at market cap of ~ 300 crores, FY11 PE of 27x but if you consider the latest quarter results and project entire annual FY12 PAT as this quarter PAT x 2 then it will be trading at 1 year forward PE of 13x.
Have to dig into reasons such huge spike in sales and operating margins.

AVT Natural Products reports net profit of Rs 11.58 crore in the June 2011 quarter
Past results details here
Sales rise 155.47% to Rs 48.13 crore

AVT Natural Products reported net profit of Rs 11.58 crore in the quarter ended June 2011 as against net loss of Rs 1.24 crore during the previous quarter ended June 2010. Sales rose 155.47% to Rs 48.13 crore in the quarter ended June 2011 as against Rs 18.84 crore during the previous quarter ended June 2010.
ParticularsQuarter Ended
Jun. 2011Jun. 2010% Var.
Sales48.1318.84 155
OPM %40.621.01 3928
PBDT18.72-0.40 LP
PBT17.82-1.24 LP
NP11.58-1.24 LP
Buy call given in Oct`10 when price was 100.
Date: Sat, Oct 23, 2010 at 8:27 AM
Subject: AVT NATURAL PRODUCTS +20% post results - another 30-50% upside left

AVT NATURAL PRODUCTS-  cmp 112. Market cap 85 crs . 1st target 150 , 2nd target -200 in a year
Target - should target at least its previous high of 140-150 in Sep 2006 ( or +30% upside) in next 3-6 months  on record sales and earnings this year i.e
Today results were out. up +20% at 112  .
Technicals - stock was hanging around 50 DMA of 94 but below 200 DMA of 97. today closed above 200 DMA. good breakout on strong volumes of 0.64 lac shares ( or 6x 2 week average). chart here.
Stop loss 97-100  / trailing of - 10%
Business - 
producing Lutein from Marigold Flowers oleoresins. In this space it is the largest Indian player and among the top 3 in the world. Main benefits of Lutein is can prevent cataract ( Age related blindness), good use as natural food color ( to provide orange skin color to poultry - main market Mexico),an antioxidant and new uses for skin care.
Website - http://www.avtnatural.com/

  • Good play on India spices and agri sector . market leader Synthite - a 400 cr firm is unlisted. recent mgmnt interview here. so only way to play this is one list co. that is AVT natural.
  • Also can be a good agri farm land play, claims to own over 35,000 of farm land in India. source here
  • Macro of Oleoresin industry here
Benefits and market size of Lutein
The LuteinTM market is segmented into Pharmaceutical, Nutraceutical, Food, Pet Foods and Animal Feed and Fish Feed.  The Pharmaceutical market is estimated to be about US $190 Million, Nutraceutical and Food is estimated to be about US $ 175 million annually.  Apart from the customary Age related Macular Degeneration applications, newer applications are emerging in Cosmetics, Skin Care and as an Antioxidant.  It is one of the fastest growing areas of the $ 2 Billion carotenoid market.  There are several LuteinTM ester suppliers, but few pure natural products, namely marigolds.  Companies like Indus Biotech PVt. Ltd, OmniActive Health Technologies and Kemin Industries have patents.  The market size of LuteinTM is anticipated to grow at an average annual growth rate of over 22%.
blockbuster results - QoQ Sep`10 vs Jun`10 Vs prev year FY10
  • Sales  30 crs vs 18 crs ( prev year Sales of 83 crs. It exports 90% of sales. but net exports exposure including imports is 50% of sales)
  • EBITDA of 6 crs vs zero. ( prev year EBITDA of 16 crs)
  • OPM% of 20% vs 0% ( ( prev year OPM% of 19%)
  • PAT of  3.2 crs  vs (1.2) crs loss ( prev year PAT of 6.5 crs)
  • earnings quality very good - last 3 years CFO of + 8 crs, + 11 crs and 13 crs. ( FY10 to FY08)
  • On PAT of 12 crs, this year CFO should be around 14-15crs or P/ CFO of 6x.
  • good Dividend track record- last year on PAT of 6.5 crs paid a dividend of 3 Rs. or payout of 35%,this year on PAT of 12 crs , if it maintains same dividend payout, then dividend to double to 6 Rs  or at cmp 112, yield of 5.3%
  • both on good Cash flow earnings basis and dividend yield basis and market leader status in Marigold extract exports, the stock has potential of PE rerating from 7-8x to 15x. i.e in bull case can double also from cmp in a years time.   But for this upside,coming quarterly results has to maintain the same Sep`10 qtr momentum
  • Net debt increased to 50 crs vs 40 crs ( debt is net of 3 cr cash). Debt rising due to ongoing ,expansion it`s recent two subsidiaries in Singapore and China with over 7 cr of revenues.
  • So on Annualized Q2 basis at PE of 7x. and EV/ EBITDA 5.5x
  • ROCE and ROE from last year 15% and 13% should increase to ~20%-25%
  • the only company is US that has patent till 2022 to produce Lutein from Marigold is  Kemin Foods and AVT has long term purchase agreement with Kemlin
  • In 2006 it launched its Marigold farming into China with 2000 acres farm land. details here
  • Since 2006 , it had been operating a plant in Thailand for its US partner Kemlin. Thailand plant would send Marigold pellets for further processing in India
  • main highlight is its expansion plans and tie-ups with 2 US firms bearing fruit. Sep`10 quarter sales of 30 crs is highest ever. all set to cross its 5 year sales range of 70-80 crs and post record sales finally .
  • High promoter holding of 70 %
AVT Natural Products spurts after robust quarterly earnings
AVT Natural Products jumped 15.61% to Rs 108.50 at 13:10 IST on BSE, after net profit galloped 641.86% to Rs 3.19 crore on 71.46% rise in net sales to Rs 30.52 crore in Q2 September 2010 over Q2 September 2009.
The company declared its results during trading hours today, 22 October 2010.
Meanwhile, the BSE Sensex was down 19.52 points, or 0.10% at 20,241.06.
On BSE, 19,998 shares were traded in the counter as against an average daily volume of 8,104 shares in the past one quarter.
The stock hit a high of Rs 109.50 and a low of Rs 95.65 so far during the day.
The company has an equity capital of Rs 7.61 crore. Face value per share is Rs 1
AVT Natural Products net profit rises 641.86% in the September 2010 quarter Sales rise 71.46% to Rs 30.52 crore

Net profit of AVT Natural Products rose 641.86% to Rs 3.19 crore in the quarter ended September 2010 as against Rs 0.43 crore during the previous quarter ended September 2009. Sales rose 71.46% to Rs 30.52 crore in the quarter ended September 2010 as against Rs 17.80 crore during the previous quarter ended September 2009.
ParticularsQuarter Ended
Sep. 2010Sep. 2009 % Var.
Sales30.5217.80 71
OPM %20.3811.46 78
PBDT5.231.44 263
PBT4.390.73 501
NP3.190.43 642

1 comment:

Anonymous said...

Good one!