Automation And Diversification Will Shape Seafood Future Amid Tariffs

Key Takeaways

• Diversification into value-added products, geographic expansion, and domestic growth aims to reduce risk and stabilize earnings through broader revenue streams.
  
• Investments in automation, efficiency, and R&D-backed quality support margin improvement and help sustain pricing power amid evolving market trends.
  
• Heavy reliance on volatile shrimp exports and feed segments exposes Avanti Feeds to global trade, input cost, disease, and regulatory risks, threatening long-term profitability.

Catalysts

Manufactures and sells shrimp feeds in India, Europe, the United States of America, Japan, Korea, China, Russia, Canada, and the Middle East.

• Expansion into value-added and branded shrimp products, as well as ramping up pet food and fish feed businesses, is expected to diversify revenue streams beyond core shrimp feed and exports, enabling higher margins and more stable earnings over time.
  
• Ongoing investments in automation and operational efficiency, coupled with raw material cost stabilization as upcoming harvests arrive, should support margin recovery and improved profitability across both the feed and processing divisions.
  
• Avanti Feeds is actively reducing its dependence on the US export market by expanding sales networks in Japan, Europe, Korea, and other geographies, alongside efforts to grow domestic shrimp consumption in India; this geographic diversification is likely to steady revenue growth and reduce earnings volatility in future periods.
  
• Consumption of seafood, including shrimp, is likely to see sustained long-term demand driven by rising global protein intake, health and wellness trends, and urbanization in Asian and emerging markets, all of which expand Avanti Feeds' addressable export and domestic market and could drive top-line growth.
  
• The company's continued focus on R&D-driven, high-quality offerings and its strong brand reputation in both B2B (shrimp feed) and B2C (processed shrimp and pet food) segments positions Avanti Feeds to maintain pricing power and premium margins in a market increasingly conscious of food safety, traceability, and sustainability.

Avanti Feeds Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Avanti Feeds's revenue will grow by 1.9% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 10.1% today to 9.7% in 3 years time.
• Analysts expect earnings to reach ₹5.9 billion (and earnings per share of ₹41.69) by about September 2028, up from ₹5.8 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.2x on those 2028 earnings, up from 15.8x today. This future PE is greater than the current PE for the IN Food industry at 22.1x.
• Analysts expect the number of shares outstanding to decline by 0.05% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.73%, as per the Simply Wall St company report.

Avanti Feeds Future Earnings Per Share Growth

Risks

• The recent imposition of a 50% reciprocal tariff by the US on Indian shrimp exports-India's largest export market, accounting for over 60% of Avanti Feeds' processing revenue-presents a significant risk; if these tariffs persist, long-term export sales and net margins could substantially decline despite current efforts at market diversification.
  
• Raw material costs for key inputs (fish meal, soybean meal, and wheat flour) are highly volatile and influenced by agricultural cycles, oceanic supply, and government minimum support prices; rising and unpredictable input costs could erode profit margins and introduce earnings volatility over the long term.
  
• Disease outbreaks and climate-related disruptions (such as premature harvests due to heavy rains and local disease events) have already caused production slowdowns, and if such events become more frequent due to climate change, both feed sales volumes and overall shrimp supply could suffer, negatively impacting revenue.
  
• Overdependence on shrimp feed and processing as core revenue streams-with plans for further expansion and diversification into other segments on hold due to market volatility-limits Avanti's ability to offset cyclical or structural downturns (such as regulatory changes, raw material inflation, or international trade disruptions), raising long-term earnings risk.
  
• Increasing global competition and lower tariff regimes in other major shrimp-exporting countries (like Vietnam, Ecuador, and Thailand) may erode India's cost competitiveness and market share; higher compliance costs due to tightening food safety, traceability, and sustainability standards could further compress net margins if Avanti cannot match these industry shifts efficiently.

Valuation

• The analysts have a consensus price target of ₹757.5 for Avanti Feeds based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹834.0, and the most bearish reporting a price target of just ₹681.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹60.5 billion, earnings will come to ₹5.9 billion, and it would be trading on a PE ratio of 25.2x, assuming you use a discount rate of 12.7%.
  
• Given the current share price of ₹670.75, the analyst price target of ₹757.5 is 11.5% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.