Motilal Oswal - Parag Milk Foods (PARAGMILK) MOSL: PARAG MILK FOODS (Upgrade to Buy)-Marginal miss, but growth consistency now visible-Inexpensive valuations

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Motilal Oswal

EUR 120.00 For Business Accounts Only

MOSL: PARAG MILK FOODS (Upgrade to Buy)-Marginal miss, but growth consistency now visible-Inexpensive valuations

Parag Milk Foods: Marginal miss, but growth consistency now visible; Inexpensive valuations; Upgrading to Buy

(PARAG IN, Mkt Cap USD0.2b, CMP INR206, TP INR260, 26% Upside, Upgrade to Buy)

Net sales grew 15.7% YoY to INR6b (our estimate: INR5.97b) in 3QFY19, led by robust growth in milk products (+18.9% YoY). EBITDA rose 5.7% YoY to INR620m (our estimate: INR658m), while adj. PAT grew 20.6% YoY to INR307m.
Gross margin expanded 190bp YoY to 32.6%, driven by an improved product mix, favorable commodity prices and export benefits. However, higher other expenses (+210bp YoY to 18% due to investments in distribution expansion and ad spends) and employee costs (+70bp YoY to 4.2%) led to a 100bp YoY contraction in the EBITDA margin to 10.3%.
9MFY19 performance: Sales, EBITDA and adj. PAT grew 20%, 30.4% and 46.8%, respectively. EBITDA margin expanded 80bp YoY to 10.4%.
Key concall highlights: (1) Volume growth for the quarter was 3% better than sales growth. (2) Guided for FY20 EBITDA margin of 11-12%, after assuming 5-7% normal milk procurement inflation. (3) NWC improved to 60 days (as on Dec’18) from 61 in Sep’18 and 70 days at FY18 exit.

05/02/2019 10 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 (Upgrade to Buy)-Marginal miss, but growth consistency now visible-Inexpensive valuations

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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