Apex Frozen Foods Hits Daily Upper Limit For A Fifth Day

Shrimp exporter Apex Frozen Foods Ltd. is locked at the upper circuit for the fifth straight trading session on Tuesday, aided by a depreciating rupee and rising exports. The stock has more than doubled in value in the last 25 trading sessions and has gained more than 145 percent to its issue price of Rs 175.

According to the latest United Nations report, India is expected to be a standout performer in seafood exports this year. The country's exports are set to surge by 41 percent more due to bumper harvesting of vannamei shrimp, the report said. India was the largest exporter of shrimp in 2016.

Apex Frozen Foods generates 100 percent of its revenue from exports to the U.S., the U.K. and a few countries in the European Union. To meet the expected surge in demand, the company is increasing its capacity by 20,000 million tonnes per annum (MTPA) by the end of June 2018.

The company might look to discontinue with the 6,000 MTPA leased unit once the new capacity is ready.

Another factor which has been working in favour of the company is depreciating rupee. Being an exporter, the company generates higher income on depreciating rupee.

In the last one-month rupee has depreciated by 2.5 percent, while the non-deliverable forward market is factoring in another four percent drop in rupee value in the next 12 months.

Analysts’ Take

• New capacity has a potential revenue of Rs 700 crore, says ICICI Direct.
• New capacity to boost return on capital employed to 48 percent, says ICICI Direct.
• Equirus Securities expects company’s revenue/net profit to grow at CAGR of 25 percent/45 percent over FY17-20.
• EBITDA margin to expand by 350 basis points led by savings coming from discontinuation of leased capacity and lower procurement cost.