Recommendation From Edible Oils & Solvent Extraction Sector
This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.
AVT NATURAL PRODUCTS LTD. : MAKING PROFITS, NATURALLY!
HERE IS WHY
✓Good financial improvement
✓Good growth prospects
✓Focus on cost reduction
AVT Natural is a leading manufacturer of plantbased extracts and natural ingredients solutions for the food, beverage, animal nutrition and nutraceutical industries of the world. AVT Natural Products operates in the business segment of food and feed ingredients from natural raw materials. There are four product categories: marigold extracts for eye care, food colouring and poultry pigmentation, spice oleoresin and oils for food colouring and flavouring, valueadded teas – decaffeinated teas and instant teas and animal nutrition products.
The company reported net sales of Rs 396.41 crore in FY20, an increase of 16.88 per cent. It had reported net sales of Rs 339.15 crore in FY19. The company reported PBIDT of Rs 57.08 crore in FY20, an increase of 36.89 per cent. It had reported PBIDT of Rs 41.70 crore in FY19. The company reported PAT of Rs 34 crore in FY20, an increase of 63.13 per cent. It had reported PAT of Rs 20.84 crore in FY19. The company has reported cash from operating activities of Rs 70.54 crore in FY20 as against negative CFO of Rs 29.62 crore it reported in FY19. The company saw significant improvement in bottom line, achieved through a combination of improved operational performance over the year and higher price realizations for marigold segment, especially in the last quarter.
Its net sales were at Rs 129.64 crore in December 2020, up by 10.41 per cent from Rs 117.42 crore in December 2019. Its PBIDT was at Rs 25.68 crore in December 2020, up 19.16 per cent from Rs 21.56 crore in December 2019. The quarterly net profit was at Rs 16.58 crore in December 2020 as against net profit of Rs 12.87 crore in December 2019, an increase of 28.84 per cent. The company maintains a very positive outlook of the future. Marigold is expected to remain as the key business segment contributing to both the topline and bottom line. The company will aggressively increase the acreage under cultivation by expanding the farmer base. The marigold feed grade prices are looking favourable.
The company will introduce two new hybrids which will deliver higher yields and product recoveries. This is expected to give the company an edge over competition in the coming years. It continues to give thrust on increasing the volumes in certain specific geographies where higher margins can be garnered. The company has expanded its product range in the food and beverages market with new natural ingredients. Its foray into the global animal nutrition market is expected to reap rewards in the years to come. The shift in animal feed market to natural ingredients presents a large opportunity. The company is leveraging its knowledge in natural ingredients to introduce innovative new ingredients into the market.
This segment is expected to contribute to the business significantly and grow as a key pillar going forward. The company is investing heavily in research and development and expects to invest in new product lines as opportunities emerge. The stock is trading at an adjusted PE multiple of 10.59x, which well below its industry average PE. The total debt to equity ratio is 0.151. On the returns front, it has ROE and ROCE of 13.74 per cent and 16.68 per cent. By virtue of these factors, we recommend our reader-investors to BUY this stock.
