MOSL: SPOTLIGHT — Prabhat Dairy - Solid institutional player-Moving toward consumer business
​SPOTLIGHT — Prabhat Dairy: Solid institutional player; Moving toward consumer business
(PRABHAT IN, Mkt Cap USD0.2b, CMP INR122)
Incorporated in 1998 by the Nirmal family, Prabhat Dairy (Prabhat) is a fully integrated milk & dairy products company engaged in the sale of products to institutional and retail customers. The company sells specialty and co-manufactured products to its institutional customers, as well as branded dairy products under the brand names of Prabhat, Prabhat Flava, Prabhat Milk Magic and Volup (a recently launched brand for ice-cream). It aims to become a larger and stronger regional player with a good mix of liquid milk, fresh value-added products and longer-shelf-life products.
The consumer branded business (B2C) is expected to account for ~50% of its overall revenues by 2020 (30% as on FY17), led by Hotels, Restaurants and Caterers (HoReCa), and Retail.
The B2B business already has a solid foundation with a healthy list of clients, which can be leveraged to develop new products and add new clients to drive steady growth over FY17-20.
Prabhat targets 80% direct sourcing of milk by FY20 (~70% currently), which should help it source higher volumes of good-quality raw milk on a consistent basis.
Utilization at its cheese manufacturing facility (third largest in India after Parag Milk Foods and Amul, with capacity of 30 MT/day) is expected to increase from ~20% currently to 40% in FY18 and 80% by FY20.
The company has delivered a strong operating performance over past four years, with revenue, EBITDA and PAT CAGR of 22%, 15% and 25%, respectively. At CMP, the stock trades at 19x FY19E EPS.
Prabhat Dairy Limited is an integrated milk and dairy products company. The Company is engaged in the business of procurement and processing of milk and sale of milk and milk products, such as ghee, flavored milk, skimmed milk powder, whole milk powder and condensed milk. Its portfolio consists of dairy products, including pasteurized and sweetened milk; clarified butter (ghee); yoghurt; dairy whitener; cheese; paneer; milk powder; lassi, and chaas. It also offers products, such as ultra-pasteurized or ultra-high temperature (UHT) milk, Shrikhand, mishti doi, gulab jamun mix, Prabhat Gold, Prabhat Fresh, Prabhat Popular and Prabhat Rich. The Company sells its products under their retail consumer brands, as well as ingredient products or co manufactured products to various institutional and multinational companies. The Company's milk collection platform consists of approximately 440 milk collection centers, over 20 milk chilling centers and 100 bulk milk coolers.
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