AVT Natural Products Ltd

 AVT Natural Products Ltd

Part of the A.V. Thomas Group of Companies (Ajit Thomas - Promoter)

AVTNPL’s product portfolio includes 

1. Marigold extracts,(reducing to 35-40%) -  for Eye care, Food colouring & Poultry pigmentation 
2. Spice oils and oleoresins (paprika, capsicum, pepper, etc) ( 30-40% ) -  food coloring and flavoring 
3. beverages (instant tea and decaffeinated tea) among others. ( 25-30% )
4. Rosemary extract started from 2021 

Sale Contribution	2018	2019	2020	Mar 2021
Marigold (Food Grade) Oleoresin	83	111	153	163
Spice Oleoresins	119	121	112	179
Decaffeinated teas & Instant Tea	111	82	97	127
Animal Nutrition	0	0	4.2	0.68

Mar 2022 - Marigold sale increased to 240 Cr. Others things were flatish.

Manufacturing facilities in 

1. Vazhakulam - Cochin (Kerala) and 
2. Tiptur (Karnataka). 
3. Sathyamangalam (Tamil Nadu) 

Subsidiary

1. AVT Natural Europe Ltd. (100%)
2. AVT Natural S.A. De C.v., Mexico (100%)

Reason for Good top and bottom line

• Significant improvement in bottom line in 2020-21 was achieved through a combination of improved operational performance over the year, higher price realizations for marigold & growth in new product segments (high-margin marigold extracts.)
• Despite severe weather challenges, the company achieved a 40% increase in marigold flower collection compared to previous year, brought about by an aggressive expansion in the growing areas and close coordination between all the stake holders particularly the AVT team & the growers 
• AVTNPL’s operating income grew due to volume growth in the spice oleoresins and beverages segments and introduction of new product lines
• Has entered into long-term strategic agreements with key customers, including Kemin Industries (5-year agreement ), for exclusive supply of rosemary extract. Started from 2020-21
• https://www.myrecipes.com/extracrispy/rosemary-extract-does-the-most

 

+Ve

• Major portion of the company’s working capital requirements has been funded through accruals, reducing dependence on borrowing.
• Continue to generate cash flow from operations worth ~Rs. 55-60 crore per annum over the medium term 
• R&D spend per year has increased from 2.2 Cr in 2013 to 10 Cr in 2021 for development of Hybrid seeds of Marigold with higher Xanthophyll yield. It is a continuous process.
• Promoter's salary in form of commision is upto 1.5 Cr
• Very insignificant related party transaction

 

-Ve

• High working capital intensity of the business owing to seasonality in availability of raw materials which translates into high inventory holding requirements.
• The company’s raw materials comprise agricultural commodities, which are exposed to agro-climatic risks, lending uncertainty to the business both with respect to availability and market prices. (Long experience of Promoter)
• Earnings remain sensitive to fluctuation in foreign exchange rates due to the company’s export (98%) oriented business model (forex hedging practices)
• Company’s top-3 customers accounted for ~60% of its revenues (long and established relationships with major customers coupled with exclusive supply agreements with some key customers )
• Prior to COVID marigold product faced stiff competition from China players leading to subdued margin.

2022: Hybrid seed cultivated on approximately 1000 acres during the Summer/ Monsoon season in 2021-22 The expansion planned for year 2022-23.

2020: After thorough testing and screening a new hybrid has been selected for commercial seed and flower production. This Hybrid will be cultivated on approximately 500 Ac during the Summer / Monsoon season in 2020.

2018: Invested in a new state of the art facility for marigold production. Will become more efficient and cost effective producer.

2016-17: It was a breakthrough year for the Company in the Instant Tea business. Years of development work to produce quality products at competitive prices, coupled with a focused marketing strategy, have resulted in the Company acquiring key customers during the last quarter of 2016-17.

The Decaff business will continue to do well and the Company will reaffirm its status as the largest Tea Decaff Company in the world.

2013: Very high prices of Marigold Oleoresin Feed grade meant for Poultry Pigmentation lead to very high profit

Neelamalai Agro has holding in below companies which is leading to other income of 34 Cr.

Gujarat Ambuja Exports

Gujarat Ambuja Exports is engaged in manufacturing of 

Feb 2022

The ethanol capacity of around 180 klpd each to be added at Hubli and Chalisgaon by end of fiscal 2022 

17 Jan 2022

Setting up of 1000 TPD Corn Wet Milling Plant to manufacture Starch, Starch Derivatives and Polyols viz., Sorbitol, Maltitol and Mannitol at Sitarganj, UttaranchaL Will increase revenue by 15%.

Capex of 400-500 cr via internal accrual

31 Aug 2021

- Upcoming 1000 TPD State-of-the-art Maize Crushing Plant at Malda, West Bengal. Coming live by Jun 2022. Will increase revenue by 15% 800 cr

- 1MW Solar Plant at Akola, Maharashtra

Business Divisions

Maize Processing (52% of FY21 revenue)[1]

- GAEL is the largest maize processing company in India with installed capacity of 3,000 tonnes per day (TPD). The company's products include liquid glucose, sorbitol, dextrose anhydrous, dextrose monohydrate, maltodextrin and high fructose corn syrup.

- Operating margins in excess of 20% for fiscal 2022

- Corn Starch Derivatives, 

GAEL has four plants located at 

1. Himmatnagar (500 tpd) in Gujarat, 
2. Sitarganj (750 tpd) in Uttarakhand, - adding 1000 tpd 
3. Hubli (750 tpd) in Karnataka and 
4. Chalisgaon (1,000 tpd) in Maharashtra. 

Agro Processing (30% of FY21 revenue)[1]

- GAEL has India's second largest soybean crushing capacity with six plants located across Gujarat, Madhya Pradesh and Maharashtra with combined capacity of 4,600 tpd. GAEL also has capacity for edible oil (1200 tpd) and wheat milling.

- Edible oil margins have remained stable in the range of 6-7%

Soya Derivatives, 

Feed Ingredients,

Edible Oils. 

Cotton Yarn (4% of FY 21 revenue)[1]

- GAEL has one plant located at Himmatnagar, Gujarat for its cotton yarn segment, with a capacity of 65,520 spindles. GAEL has recently entered into an agreement with a large textile company to provide this plant on a dedicated basis for contract manufacturing.[2]

- The cotton yarn segment has been incurring losses over past few years, however has turned profitable in fiscal 2021. 

Marquee Clientele

GAEL's clients include Dabur, Mondelez, Asian Paints, Patanjali, Nestle, Colgate, Heinz [1], ITC, HUL, Biocon, Parle[3], Cargill India, Agro Tech Foods, BL Agro Oils[4]

The company has its own warehouses as well as fleet and not on rent, unlike its competitors supporting the margins. Also most of company’s processing plants are near to the raw material sources which reduces the freight costs and improves the operating efficiency.  

All these states are major maize growing areas.

Planned raising of funds

GAEL has proposed an equity issuance for fund raising up to Rs 1000 Cr. [5]

Economies of scale

GAEL has a market share of 25%. GAEL buys raw materials in bulk once a year around the harvesting season (typically in March), giving them a 4-5% procurement cost advantage compared to peers.[2][6]

NGL Fine Chem

NGL Fine Chem

ValueResearch

30 Mar 2018
Topline	Expected To increase to 170 from 100 in 2 years
Operating margin%	@ 21% To increase
PE	@ 22 Expected to be flat
EPS	Expected To increase to 30 from 19 in 2 years

http://forum.valuepickr.com/t/ngl-fine-chem-re-rating-possible/2276/37

http://www.valuepickr.com/resources/2044/

Human APIs / Veterinary APIs Kindly educate us on NGL's addressable domain. Any plans for addressing adjacent domains?

We are into Veterinary and Human APIs. If we look at the industry, 80% of veterinary products are also used for human beings. Exclusively veterinary products would be about 20% of the market.

Anthelmintics - De-wormers - is a major category of products we operate in. Animals have to take de-worming once a month due to raw food and conditions ingest in. There is a huge number of worms that need to be routinely expelled from their bodies. Similarly Blood Parasites is another big category. Animals get a lot by different types of ticks and fleas.

New product introductions is a continual process. We added one new analgesic product. We are adding one product to the muscle growth category. Till now we have only been addressing API requirements for mammals. Now we are looking to introduce five new Poultry products.

In 1997 we had 1 product and 2007 we could offer 6-7 such products. By 2017 we are now offering 22 products.

Most are 7-8 stage synthesis complex chemistry products (higher scope for value-addition).  Some are 3-4 step products.  We have developed the process chemistry for all products in-house.

Competition
Peer comparison: (Hester is not a relevant peer)

Particulars (in%)	2017
	Sequent	Hester	NGL	Lasa
RM Cost	48.7%	23.03%	37.7%	65.5%
Employee Cost	03.14%	15.0%	09.13%	09.04%
Other Exp	26.01%	28.02%	22.06%	06.09%
OPM	11%	33%	26%	23%
Dep.	08.06%	05.07%	3.0%	04.03%
Finance Cost	4.0%	08.02%	0.7%	04.07%
PBT	0.1%	25.0%	22.0%	08.13%

Aug 2017: NGL AGM notes:

Product and Strategy: 

Company is more focused into veterinary APIs. Though they are veterinary formulations and human API in small proportions, the focus areas is veterinary API. Company is NOT focused on US and Europe markets. US and Europe require huge investments and long gestation periods. There is sufficient scope in unregulated markets of Latin American and African markets. The company supplies to manufacturing factories as well as MNCs. This wants to be going forward as well. The company previously needed agents to supply to these markets. Now due to better relationships developed over past 5 years This has reduced the commission costs of the company.

Expansions:

Current 30cr expansion in Tarapur is almost 90% complete. First phase will be completed by October and by Jan second phase will be ready. Plant wants to be fully operational for FY19. Total sales can be 60-70cr from this capex in next 2-3 years. There are customers waiting for this capex to complete. The plant has zero liquid discharge and is fully automated.

Only this capacity reached 50% of the new capacity, company has already procured the country. This capex can be around 50cr. The company is already seeding the market with these new products / molecules.
R & D folks wants to be from 18 to 30 in next 3 years. Mostly MSc and PhDs

Margins expanded due to the following reasons
1 Energy conservation due to better heat recovery systems. Water usage was halved. Recovery of water heat.
2. Minimize wastage lead to almost 2% improvement
3. Strong r & d - improved yield efficiency and strong processes. Processes were improved for older molecules.

Other points:
90 days credit and there are 30 days for shipment. Receivables always wants to be high for the company.
Company works only with USD. Forward cover with continuous hedge.
Capital wants to be deployed back in business rather than dividend at least for next one year.
Competitors include sequent and Lasa in listed space. There are 30-40 companies in unlisted space who are competitors.
30% of sales are long term contract. Remaining are spot contracts.

I would advise the management highly for
a) for clear strategy and focus of attacking unregulated markets first
b) seeding market for new molecules and planning next set of capacities ahead of time (giving good future visibility for next few years)
c) cost optimization measures leading to higher margins
d) Less customer concentration risks. Top customer is 12% of sales

Big risk is raw material price increase.

AGM on 31st Aug'16 and what is addressed by Mr. Rahul Nachane MD

Key highlights

The company has completed the capex program of Rs 25 crore in Tarapur with which additional 35% of capacity has been added.

With this new capacity, now the company can generate a double digit sales growth in future for next 3 years. Management expects cash flow at the time of the financial crisis, or otherwise due to additional depreciation due to the capex and incidental expenses.

Veterinary segment is poised for a strong growth in the next 3-5 years. Lot of outsourcing opportunities has emerged in this sector.

The company has 2 long term contracts and needed to achieve the long term contracts. With the added capacity, management is trying to find 3-5 contracts which it expects to receive by the year FY'17.

The margins for Q1 FY'17 were helped by higher offtake of high margin products by an international customer in export business along with rupee depreciation. It's difficult to determine the margin exactly as different products have different margins. On average, given the fall in raw material prices and a depreciated rupee, average Ebidta margin will be around 19-20%.

More than 90% of company's business is API's. More than 80% of the total business is exports.

For FY'17, management expects net sales of around Rs 110 crore

The company does process tests on patented and matured products in its lab and has about 16-18 API products . 3 more are in the pipeline for FY'17.

Post the completion of capex program, management expects dividend to be declared from FY'17 onwards.

Source - Capital Line

Fiberweb India

Fiberweb India

Value Research

Screener

18 Mar 2018
Topline	Expected To increase as capacity expansion in progress
Operating margin%	@ 14% To increase
PE	@ 10 Expected to be flat or increase to 15

https://www.moneycontrol.com/news/business/moneycontrol-research/fiberweb-india-q3-does-business-model-uniqueness-lead-to-better-earnings-2504319.html?utm_source=IW_DATA_stockpage

capex

Starting FY19, Fiberweb's MBNF projects can add nearly Rs 60 crore annually to the company's turnover (at full utilization rate of 90 percent). Furthermore, Rs 125 crore wants to be expended on setting up a PFN factory in FY19,

	margin	Mar-18	Mar-19	Mar-20
Trading	12%	85.0	100.0	100.0
PSNF	15%	150.0	150.0	150.0
MBNF	22%	20.0	60.0	60.0
PFNF	30%	0.0	0.0	220.0
Profit before tax		37.1	47.7	113.7
share capital		1.4	1.7	1.7
No of shares		2.9	3.4	3.4
EPS without tax		12.9	14.0	33.4
EPS after tax		9.0	9.8	23.4
Share Price on 18th March		125.0
Projected PE before tax		9.7	8.9	3.7
Projected PE after tax		13.9	12.7	5.3

Positive of the company

• · Timely delivery        
• · Good quality        
• · Good customer relationship        
• · Being a technical fiber        

• · Its competitor in India is Golden Nonwovens (Jindal Company)        
• · MBNF & PFNF machines come in small capacity of 3k so big players are not interested in get into this. PSNF comes in big capacity of 18k, 25k etc ..        
• · In process to do listing in NSE.       
•   New Horizon has taken the equity @ 180 in Jan 2018