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    This stock rose 78,000% in eight years, but lost 60% market value in two years — Here's why

    This stock rose 78,000% in eight years, but lost 60% market value in two years — Here's why

    This stock rose 78,000% in eight years, but lost 60% market value in two years — Here's why
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    By Pranati Deva   IST (Published)

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    The aquaculture company lost over 60 percent of its market value in the last two years as the rising cost of Shrimp and softening output prices squeezed margins. The stock, which hit its all-time high of Rs 940.48 on October 1, 2017, had declined 62.4 percent to currently trade at Rs 353.

    Avanti Feeds, India's biggest shrimp feed maker, has given returns of nearly 29,000 percent to the investors in the last 10 years. The stock which traded around Rs 1.2 per share in June 2009, is currently trading around Rs 350 per share. So, a Rs 1 lakh investment in the company in 2009 would have become Rs 2.9 crore today.
    However, the aquaculture company lost over 60 percent of its market value in the last two years as the rising cost of shrimp and softening output prices squeezed margins. The stock, which hit its all-time high of Rs 940.48 on October 1, 2017, had declined 62.4 percent to currently trade at Rs 353.
    So in eight years, from 2009 to 2017, the stock rose a whopping 78,233 percent. To put this in perspective, an investment of Rs 1 lakh in 2009 would have given a return of Rs 7.8 crore. However, an investment of Rs 1 lakh in 2017 would have been reduced to below Rs 40,000 in the current day. In the last one year, the stock has fallen over 34 percent.
    However, analysts believe that this may be the end of bad days for the stock as India’s shrimp exports continue to gain momentum which could benefit the company. Farm-gate price started witnessing improvement from April which will encourage farmers and provide a better outlook for the industry, they added.
    "Despite lowering volume assumption in feed segment to factor decline in the quarter, revenue and PAT is expected to grow at 14 percent and 20 percent CAGR over FY19-21. We roll forward to FY21, continue to value at 15 times considering healthy growth and return on equity and no debt, maintain a target of Rs 427 with a Buy rating," Geogit Securities said in a report.
    For Q4, Avanti Feeds reported a revenue of Rs 858 crore, up 2.8 percent. Profit reported was Rs 76 crore down 11.4 percent Y-O-Y with the margin at 20.7 percent (contracting by 255 basis points Y-O-Y) due to a 6.2 percent increase in raw materials.
    According to Edelweiss Securities, Avanti has reported weak numbers in FY19 mainly due to the fact that after the crash in global shrimp prices as well as the farm gate prices, farmers moved away from aquaculture which impacted the demand for feed. However, the processing business has done well and is seeing healthy growth as the company is ramping up its utilisation.
    Avanti Feeds has marked its presence in the field of aquaculture by engaging in manufacturing high-quality feed for shrimps. The company has a strong technical and marketing tie-up with the Thai Union group of Thailand to strengthen its capabilities in the field of aquaculture.
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