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Zeal AquaQ3 FY18

Zeal Aqua Q3 FY18 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹10.8P/E: 9.4Market Cap: ₹139 CrSector: Food Products

Management growth scorecard

Revenue

Category 2

Margin

Category 1

Fundraise

No

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 2
  • Zeal Aqua plans to increase processing capacity from 3,500 MT to 5,500-6,000 MT by FY 2019-20.
  • Expected turnover for FY 2018-19 is approximately ₹250-270 crores.
  • Average selling price of frozen shrimps is about $9 per kg, subject to market fluctuations.
  • Target to achieve production volume of around 3,000 MT in FY 2018-19 and 5,500 MT by FY 2019-20.
  • Management anticipates increasing net margins from the current ~7% to 10%-11% within 2 years as capacity expands.
  • Expects to capitalize on growing aquaculture markets, including US, China, and EU.
  • Plans to grow exports post USFDA certification by March 2020, aiming to penetrate the US market.
  • Growth to be supported primarily through internal accruals, with no immediate plans for additional debt.

See what Zeal Aqua management said on margin guidance — free account, 30 seconds.

Fundraise plans

No
  • Zeal Aqua Limited plans capacity expansion primarily through internal accruals, not through new debt.
  • No mention of current or immediate future fundraising through equity.
  • Regarding main board listing and related share capital requirements, the company has not decided on any specific plans for issuing bonus shares, rights issues, or other equity fundraising methods but will comply with necessary regulations if required.
  • Existing debt as of March 2018 has a debt-equity ratio of around 0.60.
  • Overall, no confirmed plans for new debt or equity fundraising were disclosed in the call.

See what Zeal Aqua management said on order book — free account, 30 seconds.

Capex plans

Yes
  • Zeal Aqua is increasing processing capacity from 3,500 MT to about 5,500-6,000 MT by FY 2019-20.
  • The expansion will be funded through internal accruals, no additional debt planned.
  • Capital outlay of approx. ₹42 crores was made for setting up a 6,000 MTPA processing facility at Olpad, Surat, started in 2016-17.
  • Factory started trial production in Q3 FY 17-18; fully functional from Q1 FY 18-19.
  • Plans to further reduce production costs through backward integration.
  • Applied for various certifications (ISO, HACCP, US FDA, BRC) to strengthen market presence and access.
  • Targeted turnover of around ₹270-350 crores in FY 18-19, with margin improvement expected from current 7% to 10-11% post capacity expansion by FY 19-20.

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Margin guidance

Category 1
  • Zeal Aqua aims to increase processing capacity from 3,500 MT to 5,500-6,000 MT by FY 19-20.
  • Expected turnover for FY 18-19 is around ₹250-270 crores.
  • Current margin guidance is around 7%; management targets achieving 10%-11% margins within 2 years.
  • Earnings growth is anticipated through capacity expansion funded entirely by internal accruals, without additional debt.
  • The company expects to improve profitability and margins similar to peers like Apex Frozen in the medium term.
  • EPS growth is expected to accompany margin improvement and turnover expansion but no specific EPS figures given.
  • Expansion and export market diversification (US, China, EU) are key growth drivers.
  • Zeal Aqua plans to leverage backward integration to reduce production costs, boosting operating profits.

Order book

The provided transcript from Zeal Aqua Limited’s March 13, 2018 conference call does not specifically mention current or expected order book or pending orders details. However, relevant insights include: - The company is focusing on increasing capacity from 3,500 MT to 5,500-6,000 MT by FY 19-20 to meet export demand. - They are targeting exports primarily to US, China, South East Asia, and the European Union. - Expected sales turnover is around ₹250-270 crores for FY 18-19, with processing unit reaching full functionality by FY 18-19 Q1. - Average selling price of frozen shrimps is about $9, subject to market fluctuations. - Management is actively pursuing marketing efforts globally (example: meeting buyers in Brussels). - They aim to gradually improve margins to 10%-11% by capacity expansion and operational scaling. No explicit figures or status on pending orders or order book size are disclosed in the transcript.

How does Zeal Aqua rank vs peers in Food Products?

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