US trade deal hope lifts Avanti Feeds, but it needs a wider export net
Avanti Feeds is diversifying into new export markets and exploring other segments, but higher raw material costs could erode margins
The stock of Avanti Feeds Ltd, one of India’s largest shrimp exporters, saw a relief rally after commerce and industry minister Piyush Goyal hinted at reaching a fair and balanced trade deal with the US. It has risen more than 10% since the positive news on Tuesday.
China’s escalating tensions with Japan also sparked hopes of higher exports to the former. Avanti has meaningful exposure to both the US and China.
Following US President Donald Trump’s tariff tantrum, the stock had corrected 35% since the reciprocal tariff saga started in April. India exports $3 billion worth of shrimp annually, 48% of which goes to the US. Avanti Feeds' exports to the US stood at 72% of its total processed shrimp sales in H1FY26.
The oft-quoted “fall" (autumn) deadline for the anticipated US-India trade deal is approaching. A favourable trade deal would take the pressure off Avanti Feeds and improve its earnings trajectory.
Its exports to the US have been weighed down by 58% tariffs. Amid this, China’s retaliatory ban on Japanese seafood following Japan’s statements on Taiwan, could bode well for India’s shrimp exporters if they manage to fill the gap left behind by Japanese shrimp. China is the second-largest export market for Avanti.
In Q2FY26, revenue rose 19% year-on-year to ₹1,610 crore aided by strong volume growth in shrimp processing and export business. Ebitda margin rose 200 basis points to 15.1%.
Despite US headwinds, management remains confident that government measures to support exporters affected by tariffs will help the business recover.
Mitigating risks
To negate the concentration risk, it has been prioritizing value-added offerings which command higher margins, pushing for higher domestic consumption, and diversifying into new export markets. It is also exploring adjacent segments, including pet food and fish feed.
Avanti stock is currently trading at ₹848 apiece and has some ground to cover to reach the pre-April level of ₹914. But there could be hurdles.
Cost of major raw materials – fish meal and soybean meal – increased sequentially in Q2FY26, and the management expects continued strain in Q3FY26. This could erode margins. Also, with 23% of revenues coming from exports, any negative surprises on the US trade deal can play spoilsport.
Meanwhile, even as the valuation at 19.1x FY27 earnings based on consensus Bloomberg estimates offers comfort, risks remain from raw material price volatility and fluctuating periods of strong and weak demand, production, and prices in the international market, known as global shrimp cycles.
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