Motilal Oswal - Parag Milk Foods (PARAGMILK) MOSL: PARAG MILK FOODS (Buy)-Steadiness in top-line growth now visible

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Motilal Oswal

EUR 120.00 For Business Accounts Only

MOSL: PARAG MILK FOODS (Buy)-Steadiness in top-line growth now visible

Parag Milk Foods: Steadiness in top-line growth now visible; Near-term margin to remain under pressure due to milk inflation

(PARAG IN, Mkt Cap USD0.3b, CMP INR235, TP INR305, 30% Upside, Buy)

net sales grew sharply by 29.8% to INR6.7b (our estimate: INR6b) in 4QFY19. Milk Products continued growing robustly by 24.7% YoY to INR4.2b. Adjusting for one-offs, EBITDA increased 6.1% YoY to INR587m (our estimate: INR616m), while PAT was up 62.7% YoY to INR425m (our estimate: INR274m). EBITDA margin contracted 200bp YoY to 8.7% in the quarter.
Gross margin shrank 240bp YoY to 29.6%, largely due to an unfavorable product mix (the share of low-margin SMP expanded 500bp YoY to 19.3% of sales) and inflation in milk prices.
FY19 performance: Sales/EBITDA/adj. PAT grew 22.6%/23.4%/51.6%. EBITDA margin expanded 10bp to 10%.
Key concall highlights: (1) One-offs for the quarter stood at ~INR150m (PSI incentive reversal of ~INR70m and expected credit loss provisioning of ~INR80m). (2) Average milk procurement price was ~INR24-25 for FY19; PARAG expects a further increase in milk price (+6-7% for FY20). (3) Lower gross margin sequentially was attributable to higher SMP sales (2.5% impact) and increased milk prices (~1% impact).

14/05/2019 1 EN

Underlying

Parag Milk Foods

Parag Milk Foods Ltd. Parag Milk Foods Limited is engaged in manufacturing and processing of milk and milk products. The Company offers a range of products, which include cheese, ghee, whey proteins, paneer, curd, yoghurt, milk products, liquid milk, milk-based beverages and milk powders. The Company's brands include Gowardhan, under which traditional dairy products, such as ghee, are marketed; Go, under which western lifestyle dairy products, such as cheese, are marketed; Pride of Cows, under which premium milk is sold, and Topp Up, under which flavored milk is marketed. The Company has an aggregate milk processing capacity of approximately two million liters per day. The Company has a product basket comprising over 150 stock keeping units (SKUs). Its manufacturing facilities are located in Manchar (Pune district) and Palamaner (Chittoor district).

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INE883N01014 National Stock Exchange of India India

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Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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MOSL: PARAG MILK FOODS (Buy)-Steadiness in top-line growth now visible

Parag Milk Foods' Q2FY20 results (Outperformer) - Weak H1, strategy execution will be a key monitorable

Parag Milk Foods' Q1FY20 results (Outperformer) - Revenue traction healthy, higher input cost impacts margins

MOSL: PARAG MILK FOODS (Buy)-Growth continues-Milk Inflation impacts operating performance

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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