Recommendation from Edible Oils & Solvent Extraction Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

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AVT NATURAL PRODUCTS .:ON AN ASSURED GROWTH PATH

HERE IS WHY
✓Strong balance-sheet
✓Steady and consistent growth over the years
✓Huge opportunity for growth

AVT Natural Products Ltd. is primarily engaged in the manufacturing of plantbased extracts and natural ingredients solutions for the food, beverage, and animal nutrition and nutraceutical industries. It has been in the business for over 25 years and has become one of the leading players. The key business areas include marigold extracts, spice oleoresins and food oils along with value-added teas and animal nutrition. The company’s passion for new initiatives, commitment to quality and emphasis on sustainable businesses practices has enabled it to create world-class businesses and emerge as a leader in its chosen business areas.

The company reported net sales of ₹559.4 crore in FY22 compared to ₹485.13 crore in FY21. That is a growth of nearly 15.3 per cent. The EBIDTA witnessed a strong jump of 45.5 per cent to reach ₹115.6 crore in FY22 as against ₹79.7 crore in the previous year. Also, the PAT saw a high growth of 60.8 per cent with an increase from ₹45.3 crore to ₹72.85 crore from FY21 to FY22, respectively.

In the past five years it has delivered strong profit growth with a CAGR of 26.15 per cent.

Not only has the company posted strong growth figures in FY22, it has also been able to maintain a robust balance-sheet as well. On the liquidity front, an increase of nearly 9.25 times can be seen in the cash flows from operating (CFO) activities increasing from ₹8 crore in FY21 to ₹74 crore in FY22. The shortterm liabilities along with long-term borrowings take the amount to about ₹80 crore. The CFO of ₹74 crore and receivables of ₹102 crore are more than enough to suffice for the total liabilities of the company. In Q4FY22, revenue grew by 2.99 per cent YoY to ₹129.33 crore from ₹125.57 crore in Q4FY21.

On a sequential basis, the top-line was down by 12.7 per cent. PBIDT excluding other income was reported at ₹19.21 crore, up by 20.32 per cent as compared to the year-ago period and the corresponding margin was reported at 14.85 per cent, expanding by 214 basis points YoY. PAT was reported at ₹15.86 crore, up by 34.34 per cent from ₹11.81 crore in the same quarter for the previous fiscal year. The PAT margin stood at 12.26 per cent in Q4FY22, expanding from 9.4 per cent in Q4FY21. On the returns front the company has delivered good return on equity of 15.5 per cent and return on capital employed of 19.07 per cent.

The stock is trading near the price-toearnings multiple of 18.8 times which is significantly lower than the industry average of 37.5 times. It has a low debt-to-equity ratio of 0.16 times. Recently, its Board of Directors has approved the company’s proposal to enter into the business of agrochemical products, organic chemicals, inorganic chemicals, oils, fats and waxes and food and food by-products. The above proposal is due for shareholders’ approval, which would be concluded in the upcoming annual general meeting. The company maintains a very positive outlook for the future with growth coming from both existing and new divisions. Its business segments performed really well in the previous fiscal and are expected to do well in the future as well. By virtue of all these factors, we recommend our readerinvestors to BUY the scrip. 

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