Apex Frozen Foods Faces Challenges

Apex Frozen Foods Ltd. (Apex), a company based in South India (Andhra Pradesh) that exports processed shrimps with a capacity of 34,240MT, is facing challenges in major markets like the USA, leading to a downgrade in our rating to Accumulate. We have revised the target price to Rs. 255, taking into account the subdued demand. In Q3FY24, the company experienced a 34% YoY decline in revenue, primarily due to reduced total volumes (-26% YoY) and realization (-11% YoY), despite the EU market showing around 50% YoY volume growth.

The drop in global shrimp prices and a shift in the product mix, with a lower share in the USA, contributed to the impact on realization. The operating profit also decreased by 33% YoY. However, there is an expectation that the inventory surplus situation in key export markets will improve, supporting demand. Currently, Apex is awaiting approval for ready-to-eat (RTE) products for the EU market. To reflect the current demand slowdown, we have adjusted our volume assumptions downward.

Our expectations are for revenue and profit after tax (PAT) to grow at 17% and 58%, respectively, over FY24-26E. We have rolled forward to FY26E EPS and valued Apex at 14 times FY26E EPS.