Recommendations From Other Agricultural Product

AVT Natural Products (AVTNPL) is engaged in the production of nutraceutical grade products. The company's principal products and services are marigold oleoresins, spice oleoresins and de-caffeinated tea. It operates through the solvent extracted products segment. It engages in contract farming in which it provides farmers with seeds. The company’s marigold oleoresin products include marigold (food grade) and marigold (feed grade). Its spice oils and oleoresins products include OR paprika, OR capsicum, curcumin powder 95 per cent and OR black pepper. The company’s Value Added Tea products include decaffeinated tea, green tea and instant black tea. Its post-harvest processing centres are located across various locations in Tamil Nadu and Karnataka.

 AVTNPL’s Marigold business continues to dominate the top line and bottom line of the company. Banking on its scale of operations & continued focus on cost efficiencies, the company aims to become the least cost producer of Marigold oleoresin in the world. On the Marigold growing areas, company is going all out in getting more areas for cultivation, and reaching out to a larger farmer base.

On TTM basis, AVTNPL’s top line increased 7.97 per cent to Rs.288 crore on YoY basis at the end of December 2016. The company’s EBITDA also rose 15.38 per cent to Rs.46.74 crore. Its net profit also increased 19.57 per cent Rs.27 crore on a yearly basis at the end of December 2016. AVTNPL has repaid all long-term and short-term debts and recorded ‘zero debt’ status for the third consecutive year. The company’s interest coverage ratio stood at 26.66x in FY16. 

The company’s ROE and ROCE stood at 11.19 per cent and 17.05 per cent respectively in FY16. On the valuation front, share price of AVTNPL is trading at trailing twelve months (TTM) PE of 31.12x as compared to peers such as ADF Foods (43.72x) and Foods & Inns (282.05x).  At the same time, the company’s  PE is trading attractive as compared  to industry PE of 37.67x. We recommend our reader-investors to BUY the stock.