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Equirus Securities
Apex Frozen Foods (Long)
CMP: ₹197.45
Target: ₹480
Apex Frozen Foods’ 1QFY20 revenues declined 7 per cent y-o-y to ₹222 crore (in line with EE) off a high 1QFY19 base which saw one-off export incentive refunds of ₹11 crore. Export volumes and realisations were broadly flat for 1QFY20 as capacity utilisation improved to 95 per cent (versus 69 per cent in 4Q and 80 per cent in 3Q). EBITDA margins contracted 796bps y-o-y to about 5.5 per cent (-393 bps versus EE) on already-contracted export prices and a spike in RM prices due to lower availability. The company’s new 20,000 MTPA plant is ready but the commercial productions would start in 3Q.
We pare FY20/FY21 EPS by 21 per cent/19 per cent to factor in 1) miss in 1Q numbers; 2) reduction in MEIS incentives to 5 per cent (versus 7 per cent earlier); and 3) delay in commissioning of the new plant. Our September 20 target price of ₹480 (rolled over from a June 2020 target price of ₹500) is set at 15x TTM P/E (unchanged).
Maintain Long on cheap valuations and strong earnings growth expectations from the new plant.
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