Skip to content

    Apex Frozen Food

    APEX
    Fast Moving Consumer Goods·4 Feb 2025
    Management Summary

    Apex Frozen Foods reported strong Q3 FY25 revenue growth of 56% YoY to ₹231 crores, driven by improved demand and significant expansion in the EU market. However, profitability was impacted by a gross margin compression to 25% due to a 21% YoY increase in raw material costs. The company remains optimistic about future supply improvements and demand recovery, but faces ongoing challenges with EU regulatory approvals for its new facility and the impact of CVDs on US sales. For FY26, the company targets 12,000 tons of volume, with 15-20% from the higher-margin RTE segment.

    Highlights

    5

    • Net Revenue for Q3 FY25 was ₹231 crores, up 56% YoY and 16% QoQ.

    • EU market sales grew 73% YoY in Q3 FY25 and 42% YoY in 9 months FY25, diversifying sales mix.

    • Average realization registered a growth of 13% YoY and 8% QoQ to ₹749 per kilo in Q3 FY25.

    • Shrimp volume sold increased 37% YoY and 7% QoQ to 2,903 metric tons in Q3 FY25.

    • Management expects 12,000 tons of volume for FY26, with 15-20% from the higher-margin ready-to-eat segment.

    Concerns

    4

    • Gross margins compressed to 25% in Q3 FY25, down from 28% in 9 months FY25, due to higher raw material costs.

    • Average raw material purchase cost grew 21% YoY and 15% QoQ to ₹372 per kilo in Q3 FY25.

    • Ready-to-eat approvals for the new facility from the EU have been pending for almost 5 years, hindering full capacity utilization.

    • Overall FY25 volume is expected to remain 'mostly flattish' compared to last year due to earlier supply constraints.

    Key financials

    Metrics

    9

    Periods

    2

    Headline

    6
    • Net Revenue
      ₹231 Cr
      YoY+56.1%QoQ+15.5%
    • Gross Margin
      25%
    • Shrimp Volume Sold
      2,903 metric tons
      YoY+37.1%QoQ+7.1%
    • Average Realization
      749 Rs/kilo
      YoY+13%QoQ+8%
    • Average Raw Material Purchase Cost
      372 Rs/kilo
      YoY+21%QoQ+15%

    9M

    3
    • Net Revenue
      ₹616 Cr
      YoY-4.2%
    • Gross Margin
      28%
    • Shrimp Volume Sold
      8,184 metric tons
      YoY-5.3%

    Guidance & targets

    3
    CategoryTargetPriority
    Volume
    Total Volume
    12,000 tons
    		Medium
    Volume
    Ready-to-Eat (RTE) Volume as % of total
    15-20%
    		Medium
    Volume
    Total Volume
    mostly flattish
    		Medium

    Raw Material Supply Improvement

    Next quarter (Q4 FY25) and Q1 FY26
    CurrentConstrained, leading to high farm-gate prices.
    TargetEasing of supply constraints, stabilization of farm-gate prices.

    Why it matters

    Direct impact on gross margins and overall production volumes.

    So, because of that, definitely the supply of the shrimp had impacted almost most part of the year we have noticed it and now the conservative approach of the farmers is also slowly easing. It's slowly easing... So, which is currently the supply is the key challenge right now, which we are foreseeing. And I mean, we expect that as explained, we expect that to be changing.

    How to verify

    key_financials.metrics[label='Gross Margin']

    Risks & concerns

    4
    RiskSeverity

    Raw Material Supply Constraints

    Conservative approach by farmers due to past low pricing led to reduced stocking and overall farm-level production, impacting raw material availability and increasing costs. — Management acknowledged

    high

    EU Regulatory Approval Delays for New Facility

    Approvals for the new ready-to-eat facility have been pending for almost 5 years due to regulatory issues between India and the EU, hindering market diversification and full capacity utilization. — Management acknowledged

    high

    Countervailing Duties (CVDs) and US Tariff Issues

    Ongoing CVDs and potential tariff-related issues with the US market impact sales and profitability, although the company is diversifying to mitigate this. — Management acknowledged

    medium

    Volatility in Freight Costs

    Global events like the Red Sea crisis cause freight costs to fluctuate, impacting overall costs, though customers are providing some support. — Management acknowledged

    medium

    Q&A highlights

    8

    “Well, as mentioned in our opening remarks, yes, we are quite positive. See, the main point in regard to the gross margin is that there was a drastic impact on the supply issues because of the overall conservative approach of the farmers which was explained.”

    Addresses the significant drop in gross margins from ~35% to 25% and links it directly to raw material supply constraints, with management expressing optimism for future improvement as farmer confidence returns.

    asked by Tushar Raghatate

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 FY25 Performance Overview

    Apex Frozen Foods reported a robust Q3 FY25 with net revenue reaching ₹231 crores, marking a significant 56% year-on-year and 16% quarter-on-quarter increase. This performance was notable as it was the first time Q3 revenue surpassed Q2, typically the strongest quarter. Shrimp volumes sold also grew by 37% YoY and 7% QoQ to 2,903 metric tons, indicating strong demand recovery. The company's average realization for Q3 FY25 was ₹749 per kilo, reflecting a 13% YoY and 8% QoQ growth.

    02

    Raw Material & Pricing Dynamics

    Despite strong revenue growth, gross margins compressed to 25% in Q3 FY25, down from 28% in the nine-month period. This was primarily due to a 21% YoY and 15% QoQ increase in raw material purchase costs, reaching ₹372 per kilo. Management attributed this to a conservative approach by farmers in 2024, leading to reduced stocking and higher farm-gate prices. However, rising global shrimp prices are expected to encourage farmers to increase seed stocking in the upcoming cropping season, potentially easing supply constraints.

    03

    Market Diversification & EU Growth

    The company successfully diversified its sales mix, with the EU market's share in overall sales increasing to 45% in Q3 FY25, up from 36% in Q3 FY24. This resulted in a 73% YoY sales growth in the EU during Q3 FY25 and 42% YoY for the nine-month period. This strategic shift aims to mitigate risks associated with the US market, particularly concerning countervailing duties, and establish a more geographically diverse sales footprint.

    04

    Ready-to-Eat (RTE) Segment

    The ready-to-eat (RTE) segment contributed 244 metric tons to sales volume in Q3 FY25, representing 8% of total sales. While this segment offers better margins, its full potential is hampered by pending EU regulatory approvals for the new facility, which have been delayed for almost five years. Management expects RTE volume to increase to 15-20% of total volume in FY26, assuming EU approvals are eventually granted, which would significantly contribute to margin expansion.

    05

    CVD & Regulatory Environment

    The company is currently paying a Countervailing Duty (CVD) of 5.77% on US exports, following an earlier rate of 4.36%. A review of this duty is expected to conclude around March-April 2026, with management anticipating a reduction and potential refunds based on justifications provided by the Indian government regarding indirect tax reimbursements. The long-pending EU approvals for the new facility remain a significant regulatory hurdle, impacting the company's ability to fully leverage its capacity for the European market.

    06

    Outlook & Volume Guidance

    For the current fiscal year (FY25), the company expects overall volume to remain 'mostly flattish' compared to the previous year, primarily due to supply challenges experienced in the first half. However, management is optimistic about improved supply conditions in Q4 FY25 and Q1 FY26, driven by increased farmer stocking. For FY26, the company projects a total volume of approximately 12,000 tons, with 15-20% expected to come from the higher-margin RTE segment, contingent on supply improvements and regulatory clearances.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.