Avanti Feeds – I

I chose to value Avanti Feeds based on my screen for high growth companies with low P/E ratio and low debt.

Numbers and Narratives

Avanti Feeds is an industry leader in the shrimp feed business from which it garners its primary income. It is a high growth – low margin company with consistent longterm investment. I expect the growth to plateau over the next 5 years as the company matures and the margins to stay low because of the nature of business.

The core numbers that I arrive at based on the story are

• Compounded revenue growth for next 5 years = 15% (19% historical)
• EBIT margin in year 10 = 12% (13% most recent year)
• Initial cost of capital = 11.36%

Valuation

I’ve used the above numbers along with the financial information to compute my DCF valuation for Avanti Feeds as seen below.

As you can see, the valuation price came out to ₹538.12, about 20% higher than the last traded price of ₹450.70.

Information

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