Home
IPO
About
Market
Product Category
Smart Extras
News
Demat
Advertise
Parag Milk Foods Ltd- Research Report

Parag Milk Foods Ltd- Research Report

Huge Growth and Aggressive Expansion Story

Industry

CMP

View

Targets

Time Frame

Parag Milk Foods Ltd, engaged in the development and promotion of 100% fresh cow’s milk and milk products under international brand names with a diverse portfolio in over 10 product categories. 

Rs.200205

Prudent to Buy at cmp and add on declines up to

Rs.170/- with stop loss Rs.150/-

Target 365 / 550+

6-18

Months

 

*All Parameters on Consolidated Basis (As on 31.03.2023)

KEY FUNDAMENTALS

VALUATIONS

Market Capitalization (at CMP)

2359 Cr.

Total DEBT on Books

596 Cr.

Fixed Assets (Net Block)

481 Cr.

Cash in Hand in Books

84 Cr.

Free Reserves

691 Cr.

Trade Receivable / Payable

168 / 153 Cr.

Investments

5 Cr.

Inventories

574 Cr.

EPS (2022-23 TTM Basis)

5.58

P/E (2022-23 TTM Basis)

36.60

Industry P/E

44.10

Book Value

68.80

Price / Book Value

2.92

ROCE (2022-23 TTM Basis)

8.57%

Current Ratio

1.89

Debt to Equity

0.74

200/100/20 DMA

112 / 133 / 185

(All Data Taken from Annual Report and Moneycontrol.com)

 

Company Background: At Parag, each day is filled with providing new inspiration to consumers, to create fresh trends in dairy consumption. Each of our brands Gowardhan, Go, Topp Up and Pride of Cows, play a central role in people's lives – they awake to them and consume them all day long. Each with their own unique taste and place in life. We are passionate about making milk moments a source of delight and inspiration. From new ways to delight children, to healthier ways to spread goodness and cheer in families, from delicious ways to entertain friends, to providing the quickest ways in which a mother can provide taste and nutrition.  From making ghee, which is as close to home made ghee, the first packaged shredded cheeses designed for convenience and the first cheese in a squeeze tube to delight children, to cream cheeses in many exotic flavors to make entertaining exciting, the first natural fruits based yogurts, or making fresh Paneer with extended shelf life for convenience and India’s freshest, highly nourishing farm to home milk. Parag has led successful dairy farming in India.

Dr. Kurien ushered in ‘White Revolution’ in India with ‘Operation Flood’, the largest project for dairy development in the world. As a direct result, India became selfsufficient and global leader in milk production and dairy farmers the architects in their own development. This revolution led to an increase in milk production in many folds which led to the co-operatives declaring milk holidays around Pune. This adversity was circumvented by Mr. Devendra Shah (our Founder & Chairman) by helping farmers by collecting their milk on such milk holidays. And thus, was born Parag Milk Foods Ltd.

Parag Milk Foods Ltd, founded in 1992, is one of India's elite private sectors dairy companies, with a diverse portfolio in over 15 consumer centric product categories. We pride ourselves for providing the best global source of expertise and scientific knowledge in support of the development and promotion of quality cow’s milk and milk products, to offer consumers nutrition, health, and well-being.

We manufacture products of truly international quality under internationally famous brand names such as Gowardhan, Go, Topp Up & Pride of Cows. Our Its product portfolio includes ghee, fresh milk, skim milk powder, whole milk powder, paneer, an array of processed and natural cheese, cheese spreads, butter, dahi, dairy whitener and Gulab jamun mix under the brand names of 'Gowardhan' and 'Go’, all made from 100% fresh cow milk. Pride of Cows is a brand of fresh farm- to -home milk and Topp Up, a flavored milk in many a variant.

 

Company’s Infrastructure: Parag Milk Food Limited (PMFL) has a huge infrastructure for production of the products and to store and transportation to the different distributors from their plants. Here below are the processing units/ production units of the company which are operational at a very efficient pace.

Milk Processing Unit, Manchar

 

The Gowardhan factory was started in the year 1992. It is located in the milk belt of Manchar on the Mumbai Nashik highway. Unit 1, processes raw milk into processed pouch milk, curd, paneer, ghee, and shrikhand. The huge investment in infrastructure has enabled the unit to process up to almost 12 lakh liters of milk daily. The factory has employed around 600 fixed + daily wage workers. Thus, being the source of income for farmers in the neighboring towns and villages.

Cheese Processing Unit, Manchar 

 

The Go Cheese factory was started in early 2000. It is located in the milk belt of Manchar on the Mumbai Nashik highway. The UHT technology is of international standards with the best European technology, fully automated and requires minimum human intervention. Right from reception of milk to the finished product, we maintain strict non-human-contact through the entire manufacturing process.

Moreover, our plant is capable of churning out 1,000,000 liters of milk per day, has an output capacity up to 10 metric tons of butter, 25 metric tons of ghee, 10 metric tons of dahi (yoghurt), 40 metric tons of cheese and 65 metric tons of milk powder per day. The factory is quite often a part of study tours for school kids who learn the history & art of cheese making.

Another fascinating aspect of our plant is that it is one of the only two facilities in Asia with UHT technology. The equipment has been imported from Stephan Machinery Germany, pioneers in cheese processing equipment. The cheese can be stored in ambient condition without refrigeration up to a period of 6 months in tropical countries like India. The company is sure to reach national markets with its UHT treated, superior quality cheese, which will be available in a variety of forms such as slices, wedges spreads and an assortment of exciting flavors under a new brand name, Go.

Milk Processing Unit, Palamner

 

The Gowardhan plant was started in early 2010 at Chitoor, Palamner, town on the AP-Karnataka border. The idea was to cater to the south market with fresh cow milk. The plant is equipped with state of the art technology which packs milk & dairy products in tetra packs. The employee strength is 400+ thus helping farmers get a source of income through their livestock.

Bhagyalaxmi Dairy Farm, Manchar

 

Pride of Cows is a brand of Parag Milk Foods. It is regarded as India's most modern dairy farm with the finest international equipment that provides the customers with superior farm-to-home milk. It is strategically located in the milk belts at Manchar, Maharashtra and Palamner, Andhra Pradesh.

At Pride of Cows, we ensure the cows well-fed and are eat well-balanced meals as per their nutritional needs and requirements, milk production, body weight, location, and age. The idea is to pamper the cow because only when a cow is happy will it yield the necessary high quality milk. The parent company Parag Milk Food's product portfolio includes milk, skimmed milk powder, whole milk powder, ghee, processed cheese, butter, dahi, proprietary foods like dairy whitener and gulab jamun mix powder under the brand names of Go and Gowardhan.

Company’s Value Chain: We have an integrated business model that encompasses the entire value chain of the dairy based food and beverages business and includes a range of activities including manufacturing and processing to branding and distributing a wide variety of products. We have well established relationships, developed over several years, with farmers in the proximity of our facilities, and our continuous engagement with them enables us to consistently procure raw milk and at competitive prices.

Products: As we have already discussed that company is engaged in the production and development of different products related to dairy products. Company is the second largest producer, manufacturer, and seller of the Cheese in India, having more than 35% overall share in the market. Besides that, there are many other products of the company which are offered under 4 different BRANDS in the local market which have equivalent quality standards of Export quality to the many developed countries. Some of the products are explained and mentioned in the next part of this report.

GOWARDHAN Brand and the product Portfolio of Brand

GO Brand and the product Portfolio of Brand

PRIDE OF COWS Brand and the product Portfolio of Brand

AVVATAR Brand and the product Portfolio of Brand

Shareholding Pattern:Shareholding pattern of the company seems strong as Promoters holds more than 41.63% of the stake in this company as of 31.03.2023. Besides this, FII holds more than 8.76% stake and DII holds more than 7.20% stake in this counter. The rest of the 42.41%+ stake is held with the retail shareholders. There are also some Investors on the list who hold more than 1%-3% stake in the company from general public. Below graphical presentation of the shareholding pattern clearly explains the proportion of holding by each category:

Fundamental Outlook: Parag Milk Food Limited is in the best place for future growth and progress. PMFL is the second largest producer of Cheese and developing many more products to cater the growth for the company in the coming quarters. Company has been selling its products under the roof of 4 well established Brands. 

 

The dairy farming business is all set and expected to grow at a much higher pace in the coming years and Parag is in the appropriate position to capture these growth opportunities. The company is doing very good in terms of Revenue and Profits, and it is expected to perform exceptionally well in the coming quarters and years as well. The company has shown a CAGR growth of Sales of 18% in the past three years and CAGR Profit growth for the same period stands at 30%, which is truly good for any sector and any organization. Revenue for the company has grown to 2893 Crore in the Financial year 2022-23 from 1842 Crore in the financial year 2020-21, which is truly awesome. This growth can be seen from the following charts for three years, as well:

If we look at the financials of the company, then it is going on the right path of extraordinary growth in various segments. We can see from the below chart about the Operating profits and net profits for the last three years. It incurred an extraordinary loss in the financial year 2021-22, due to the company showing the huge loss on operating basis and net basis in the same year. But in the next year 2022-23 the company came back on track and recorded operating profit of 118 crore and 53 crore net profit. It is clearly visible from the below Financial Performance chart:

Due to the exponential expected growth in the products of the company and overall dairy sector, the company is expected to perform exceptionally well in the coming quarters and years.

 

Technical Outlook: Now let’s discuss the Technical Outlook of the share price movement of Parag Milk Food Limited in the Stock Market. PMFL is listed on both the National Stock Exchange as well as Bombay Stock Exchange. Here below is the Daily chart of its price movement on NSE:

So, from the above chart we can see that this counter has earlier given a Flag Breakout and it gained more than 48% from Breakout level in no time. And fortunately, now again it is making a Flag on the Daily Chart. First Breakout will be done at closing above 211 level and crossing the 219 levels with volumes support will be the confirmation of the breakout.

On a broader scale, this counter is completing the Rounding bottom pattern. It almost made a triple bottom and then it shown the rapid rise in the share price. Before this earlier Breakout, there was also a Tripple top making on the charts. On a broader way this can be said that this counter was trading in a range, and it gave a breakout from range and made flag and then it grew more than 48% in no time.

This counter is trading at 200-205 range and the target for completing Rounding Bottom pattern comes at 385, which is almost 95% returns from the Curren price, which is truly whopping. Once this level of 211-219 is taken out, fast and furious up move is expected in this counter. 

Moreover, there is not only just increase in the price, but also backed by huge volumes. In the last few weeks/months the volumes have exponentially grown, which indicates the accumulations before the actual breakout happened and this rocket up move is launched. Price is trading well above all key moving averages of 20, 100, and 200 Day, which is super positive. Besides this, RSI and MACD are also positively placed which indicates the sustainable up move in this counter.  So, overall, technically this counter is placed at the perfect levels, in terms of risk and reward basis. 

 

 

Key Positive Points: Parag Milk Food is growing at extraordinary pace in terms of top line and bottom line. PMFL is launching new innovative products catering to the young generation more, although it is already at the best spot in this field of operations. As India’s is now the biggest population counter in the world, its consumption market is already stands at the peak, which is also expected to grow further. There are many points on which Parag Milk Food Limited is the most favourable spot in the sector. Some of those are mentioned as below:

  • Parag Milk Food Limited (PMFL) is engaged in the development and promotion of 100% fresh cow milk and milk products under international brand names.
  • PMFL has many established brands in its pocket out of which Gowardhan,GO Brand, Pride of Cows, and Avvatar brands are the most popular one, which has their own place in the field of Dairy world. 
  • PMFL is the second largest producer of the Cheese in the Country, which caters to 35% of the Market Share of the country, which istruly whopping.
  • PMFL has a huge and well diversified Product portfolio. Under Gowardhan Brand PMFL deals in Everyday Dairy products like Ghee, Milk, and curd etc. Under GO Brand PMFL deals in UHT Milk, an array of processed and natural cheese products. Premium Packaged Milk is sold under Pride of Cows Brand. And the most recently introduced segment, Sports Nutrition and health supplements are dealt with under the Brand name AVVATAR.
  • PMFL is the first ever and the only Company in Country whichoffers the 100% vegetarian home grown whey proteins.
  • PMFL is the only company to manufacture Fresh Paneer with a 75day Shelf Life, which is truly good. Moreover, PMFL has the largestCheese production capacity plant in the Country with Dailyproduction capacity of 60 MT.
  • PMFL has the best geographical presence of its plants in Maharashtra, Andhra Pradesh, and Haryana. 
  • PMFL uses the UHT Technology while processing milk, which is a

European Technology, which requires minimum or no Human Interventions. It is the one of the Only TWO Facilities in ASIA with UHT Technology.

  • PMFL has the strongest Processing and distribution channels. For the distribution of products manufactured under 4 distinguished brands at the 3 State of the Art Manufacturing Facilities, PMFL has a strong and wide network of 29 Depots, 4500 Distributors, 500+ super stockists, 800+dedicated sales and marketing personnel, and 460000+ Retail

touch points pan India. They have 2500+ Village collection centers, 100+ Milk Chillers, 300+ Bulk Milk Coolers in terms of storage capacity.

  • So overall, PMFL is known for 5 Lakh+ farmers network, milkprocessing capacity of 3.40 Million Liters/day, 140 MT/Day capacityof Ghee and Cheese processing, 20 MT/Day Capacity of PaneerProcessing, 40 MT/Day capacity of Lactose processing, 12Lakh/day Whey processing capacity with 100% cow milk products,which makes it the well established player in the market.
  • As India is now the highest number of populations in the world, it is the biggest consumer market of the world now, which is expected to grow further. So, this segment is expected to grow at a high pace in the coming years. Moreover, there is a movement all around the world to become vegetarian, and we must have seen many well known people in the circle turning vegetarian in recent years, this will also boost the demand of the dairy products. Overall, this industry is expected to grow at a exponential pace. 
  • Till yet we are discussing the current positioning of the company in the Market. Now let’s discuss the Further Future plans. PMFL is engaged inthe expansion of Bhagyalaxmi plant to 500 Acres with number ofCows to be increased to 15000+ till 2027, from current level whichis 3025 only, which is 5 times from current levels.With the current numbers, Parag is one of the leaders in this segment and field, imagine the size of the organization when they will have implemented the full expansion plans till 2027 which is not too far from here. Almost 5 times they want to grow in the next 5 years in terms of the number of cows which translates to milk production and other milk products. This is a very aggressive expansion plan of the company, and in the Annual Report and Board meeting Promoters have boosted the confidence that they are on the way, and they will achieve the set target of expansion till 2027.
  • Indian Daily Industry is almost 14899.80 Billion at current, which is all set togrow to 31185.70 Billion till 2028, which is almost 2.20 times. Moreover, CowGhee Industry is expected to grow 123000 Crore from 76000 Crore, CheeseMarket to grow 26300 Crore from 7100 Crores, and Whey Market to grow2000 Crore from 660 Crore is expected in the next three years. And PMFL is all good to take advantage of this growth with its aggressive and bold expansion plans in coming years.
  • Promoters and Management of the company are very strong and having vast experience in this field. They have very optimistic and aggressive future plans with the company.
  • Shareholding or Ownership pattern of the company is also strong as more than 41.63% stake is held with Promoters. Foreign Institutional Investors also holds more than 8.76% stake in the company while Domestic Institutional Investors have more than 7.20% stake in the company. The remaining 42.27% stake is held by other retail individuals. Out of which there are many investors who hold more than 1% stake solely.
  • The company is also focused on the well versed advertisement of their products. The biggest Bollywood star actor of the decade, Mr. Amitabh Bachan, is promoting the products on different TV Channels. Company has chosen Mr. Dilip Singh Rana (The wrestler Icon of India – THE GREAT KHALI) for the promotion of its whey products, nutrition products and health segment products. Moreover, advertisements of GO CHEESE can also be seen on the India’s Biggest Sports Event, Indian Premium League (IPL). Management is very focused on the advertisement and utilizing the best sources for promotion of products.
  • Stock is trading well above its Key Moving Averages of 20, 50, 200 DMA, and RSI and MACD also supportive for the upcoming up move. 
  • Technically stock is ready for a big Flag Breakout as marked in the chart enclosed in the report. Last time also there was a Flag Breakout and after that PMFL price shot up with 48% growth in no time. This time also, after Flag breakout has happened, stock is expected to give similar kind of movement. Technical targets are 365/550+. 
  • PMFL is very strong on Charts, and Fundamentals are also hugely favourable in its growth in the coming quarters and years.

 

Conclusion: Overall, Parag Milk Food Limited with its strong earning visibility, strong brand, favourable geographical presence, huge clients, new products developments, huge and aggressive expansion in the production capacities, and sound fundamentals, has huge potential to deliver multifold returns on investment in coming quarters. So, at CMP of Rs.200-05/- is very lucrative. So, It is prudent to accumulate the Stock at cmp and on declines (Which is unlikely) up to Rs.170/- with maximum Portfolio allocation of 10% or Rs.2,00,000/- (whichever is lower) with Stop loss of Rs.150/-. On the upside one can expect targets of 365/550+ in the holding period of 6-12 Months. Closing above 211 will bring a new charm to this counter and above 219 it will shoot rapidly towards the mentioned targets. 

info@smartinvestment.in