Fishing for Alpha : Research on Coastal Corporation Ltd
(Disc: I am not a SEBI registered analyst and this is not a recommendation. These are my personal opinions and should not be considered investment advice. Please talk to a registered Investment advisor. For further discussions you can reach out to me on sarthaksaraf43@gmail.com or on my Linkedin )
Coastal Corporation Ltd has doubled its capacities yet the stock still trades at less than 1x its book value - is the market overlooking a turnaround or is this a classic case of value trap?
Industry Overview
CCL belongs to the Aquaculture industry which is commonly referred to as fish farming, involves the breeding, rearing, and harvesting of aquatic organisms, including fish, crustaceans, mollusks, and aquatic plants. This sector is essential for meeting the demand for global seafood. India’s aquaculture industry has witnessed significant growth thanks to our geographic location and high demand from domestic and international markets.
India’s aquaculture industry is forecasted to grow at a 7.5% CAGR and the market is expected to reach 28.8 Million tons from the 14.4 in 2024.
The Indian aquaculture industry is divided into farmed shrimp and wild shrimp. Farmed shrimp dominate the market and are further divided into L. Vannamei, Penaeus Monodon and scampi.
L. Vannamei’s dominate the Indian market due to rapid growth, high survival rates and resistance to diseases. If we talk about sizes, shrimps are available in different sizes ranging from 31-40 to greater than 70. 31-40 is the best selling size in the market.
Industry Competitors
There are various listed and private players in the market today serving the aquaculture industry with prominent names including Avanti Feeds Ltd, Apex frozen foods ltd, Zeal Aqua and Liberty frozen foods pvt ltd. New age players like King Infra ventures ltd are also gaining market share. In general Indian shrimp exporters face tough competition from countries like Ecuador which provide similar shrimp at a cheaper rate to the American consumer.
Macroeconomic effects
The aquaculture industry is currently facing massive headwinds due to global uncertainty primarily led by the US.
US has imposed reciprocal tariffs on Indian goods at 10% which is set to end on July 9th. The US also imposes CVD and anti dumping duty on shrimps exported from India. The US is the biggest market for Indian shrimp exporters. In FY24, India exported frozen shrimp valued at $4.8 billion to the US, according to the Marine Products Export Development Authority (MPEDA)
Ecuador is a major competitor for Indian shrimp exporters. The US has imposed only a 10% tariff on shrimp exported from Ecuador making it cheaper and faster to transport. On average it takes about 30 days to transport shrimp from India to the US which is higher when compared to Ecuador.
Ecuador lacks infrastructure to process shrimps and therefore only provides basic shrimp to the US. This is the only advantage Indian exporters hold over Ecuador. Capital investments into Ecuador will force Indian exporters to find alternate markets for their shrimps.
Business Overview
CCL is a HACCP, BRC, and BAP-certified producer and exporter of high-quality Aquaculture seafood products. It handles the sourcing, processing, and packaging, of Shrimps to the international market. The key product line consists of sea-caught and aquaculture shrimps, value -added and processed, raw or cooked in frozen blocks or IQF forms. It has also started commercial production of ethanol under its subsidiary Coastal Biotech Pvt ltd. It is a three star government export house and is a complete export oriented unit primarily exporting to USA. It recently diversified by exporting into Japan and Korea.
Coastal corporation is based in the Kakinada Special Economic Zone (KSEZ). The company has three state of the art processing facilities situated at Andhra Pradesh’s coast. The company provides raw frozen blocks and individually quick frozen (IQF) shrimp, as well as cooked shrimp available in both frozen blocks and IQF forms.
Business Model and Key segments
The company’s business model can be divided into two key segments
Aquaculture business - Major revenue
Ethanol production - Commercial production began in May 2025
Company has three product offerings
Ready to eat products
Standard products
Value added products
It employs more than 830 people and has a 71 TPD processing facility.
Major revenue source is by selling shrimps to the American and European market.
Coastal Biotech Private Limited, company’s subsidiary has started its ethanol production in Odisha. The plant spanning over 30 acres has 198 KLPD capacity and is expected to diversify the company’s operations over medium term.
Financials
Company’s sales are cyclical in nature ranging from 600 crores in March 20 to 628 in March 2025 displaying cyclicality in business. Margins are also cyclical ranging from 7-8% in 2020 to 5% in 2025 showing increasing competition, low pricing power and change in government incentives.
Profit and loss statement
As said sales were more or less cyclical with FY25 showing good growth. Margins have reduced by a 100 bps. Other Income remains relatively stable and interest costs increasing due to capacity additions and new ethanol capacity.
Balance Sheet
Long term debt has increased from 176 to 411 crore due to capex of ethanol plant and shrimp processing lines. The same can be confirmed from CWIP where 140 crores is set to be included in fixed assets in FY26. Since production started in the month of May the new capacity has been shown under capital work in progress. Other assets include inventory of 240 crores which is line with sales figures. Cash and Cash equivalents are healthy at 50 crores.
Cash flow statement
Operating cash flows accounted for just 10% of EBITDA indicating the company’s low cash conversion. This was majorly due to increase in inventory at year end. Receivables have reduced on a year on year basis. Payables were positive 37 crores.
Investing cash flow was negative primarily due to capex of new facilities. No fixed assets were disposed of.
Financing cash flow was positive due to increase in borrowings primarily for working capital and commissioning the new facility. Interest of around 19 crores was paid relating to working capital and some long term debt.
Investment thesis
Ethanol capacity - Company being over reliant on US exports has diversified itself into new age high government support business like Ethanol. With a 198 KLPD capacity the plant running at full capacity can generate revenue of about 500 crores considering current ethanol prices. Net margins are expected to be around 5-6% depending on industry dynamics. The Indian government has met its target of 20% ethanol blending six years before deadline. This indicates increasing demand for ethanol in coming years potentially benefitting the company.
Long standing customer relations - Despite tariffs on Indian shrimp, US customers were ready to bear the tariffs costs indicating good relationship with customers and high quality of products. Company deals with reputed clients like Great American Seafood Imports co, Tampa Bay fisheries and pacific coral. This indicates steady demand despite geopolitical headwinds.
High Government support - The Marine fisheries sector was a sunrise sector in the latest budget. Under the Pradhan Mantri Matsya Sampada Yojana (PMMSY), the sector received an investment of 20000 crores from FY21- FY25. This scheme aims to provide credit to farmers for fisheries and set up aqua parks. It also focuses on integrating satellite based technology and GIS based resource mapping for mapping marine fish landing centers and fishing grounds. This sector exported goods worth 60000 crores in FY24 making it an important sector for the country.
Geographical advantage - All processing units are situated near the coast of Andhra Pradesh which makes it easier for the company to procure raw materials and make them harvest ready quickly. All purchases from suppliers are situated near the coastline making the supply chain process efficient.
Experienced promoters - Mr T.Valsaraj handles the day to day operations of the company. He has a good track record in the aquaculture industry and is supported by a professional team. With him at the helm the company has initiated long standing relationships with American and European suppliers.
Risks
Macro Uncertainty - Trump tariffs is the main reason for macro uncertainty with the US imposing reciprocal tariffs on Indian goods. This has led to a 26% tariff which was reduced to 10% for a 90 day period ending on July 9th. However after the 90 day period ends the tariffs are expected to rise to 26% . Adding CVD and ADD will increase them further by 8% imposing a 34% tariff on Indian shrimps. The aquaculture industry requires high government support and incentives in order to flourish. Uncertainty has led to a fall in stock prices.
High competition - CCL industry faces high competition from players like Avanti feeds and Kings Infra Ventures ltd . It faces external competition from countries like Ecuador and China. Ecuador currently only lacks infrastructure which is the major competitor for Indian Aquaculture industry.
Delayed Capex - Company delayed capex for their Odisha processing plant. Odisha plant was about to be commissioned this year but due to demand loss the plant had to be stopped. The company had identified land and capex costs but did not proceed with the capex. This shows subdued demand for the product.
High client concentration risk - About 85% of revenues are derived from US consumers signifying high concentration risks. Company is however diversifying its revenue concentration by venturing into new markets and starting an Ethanol capacity.
Conclusion
Overall the company’s stock price has been bottoming out. Its P/B is about 1 which is the lowest in 5 years. It currently has an overhang which should be clear after July 9th. Promoters in the past have met their guidance when appearing on business shows like NDTV Profit. CCL appears to be a low risk bet considering current market trends.