2QFY2019 Result Update | Dairy Products
November 6, 2018
Parag Milk Foods
BUY
CMP
`256
Performance Update
Target Price
`330
Y/E March (` cr)
Q2FY19
Q2FY18
% yoy
Q1FY19
% qoq
Investment Period
12 Months
Net sales
573
505
13.7%
549
4.4%
EBITDA
58
50
16.3%
60
-2.7%
EBITDA margin (%)
Stock Info
10.1%
9.9%
10.9%
Adjusted PAT
30
25
22.2%
28
7.6%
Sector
Dairy Products
Market Cap (` cr)
2,153
For Q2FY2019, Parag Milk Foods (PARAG) posted decent performance with
Net Debt (` cr)
214
14%/22% yoy growth in revenue/ PAT led by 23 bps expansion in margin. The
Beta
1.1
company has maintained its revenue target of `2700+ crore for FY2020 backed
52 Week High / Low
414/220
by widening distribution network and product portfolio.
Avg. Daily Volume
1,38,424
Revenue rose 14%: Q2’s top-line growth was led by growth in the high-margin
Face Value (`)
10
Value Added Products (VAP) segment. It is introducing many new products/
BSE Sensex
34,950
Nifty
10,524
variants of existing products like premium ghee, protein powder, Mishti Doi which
Reuters Code
PAMF.NS
would boost its revenue in coming quarters.
Bloomberg Code
PARAG.IN
Margins were decent: On the operating front, the company’s margin were robust
at 10.1% due to lower input cost which offset rise in employee and other
expenses. The company has guided for 11-12% by FY2020 on the back of
Shareholding Pattern (%)
improving product mix and distribution network.
Promoters
45.9
Outlook and Valuation: We have maintained our earnings estimates in view of
MF / Banks / Indian Fls
11.9
new products pipeline and robust H1 performance. We expect PARAG to report a
FII / NRIs / OCBs
21.2
CAGR of ~17%/35% in revenue/ earnings over FY18-20E. The stock is currently
Indian Public / Others
20.8
trading at 13.4x its FY2020 earnings, which looks attractive looking at its evolving
FMCG story. We maintain BUY with a revised target price of `330 (17x FY2020E
Abs. (%)
3m 1yr
3yr
EPS).
Sensex
(5.8)
3.9
33.3
Key Financials
PARAG
(17.9)
(7.2)
-
Y/E March (` cr)
FY2016
FY2017
FY2018E
FY2019E
FY2020E
Price Chart
Net Sales
1,645
1,731
1,986
2,271
2,706
% chg
13.9
5.2
14.8
14.3
19.2
Net Profit
49.4
35.9
89.2
115.4
162.1
% chg
33.0
(27.2)
148.1
29.4
40.5
OPM (%)
9.0
5.1
10.0
10.4
11.1
EPS (Rs)
5.9
4.3
10.6
13.7
19.3
P/E (x)
44.0
60.4
24.3
18.8
13.4
P/BV (x)
5.8
3.2
2.8
2.4
2.1
RoE (%)
13.6
5.5
12.0
13.4
15.9
RoCE (%)
15.3
4.3
15.3
17.2
20.8
Source: Company, Angel Research
EV/Sales (x)
1.6
1.3
1.1
1.0
0.8
Nidhi Agrawal
EV/EBITDA (x)
17.2
26.3
11.5
9.8
7.6
022 - 3935 7800 Ext: 6872
[email protected]
Source: Company, Angel Research
Please refer to important disclosures at the end of this report
1
Parag Milk Foods |2QFY2019 Result Update
Exhibit 1: Q2FY2019 Performance
` Cr
Q2FY18
Q2FY19
YOY %
Q1FY19
QOQ%
H1FY19
H1FY18
YOY %
Net Sales
505
573
13.7%
549
4.4%
1,123
917
22.4%
Total Income
508
573
12.9%
549
4.4%
1,123
923
21.7%
Total Expenditure
455
515
13.4%
490
5.2%
1,005
838
19.9%
Raw Material Consumed
298
330
10.7%
335
-1.7%
665
626
6.3%
Stock Adjustment
31
9
-72.7%
6
32.8%
15
-4
-435.4%
Purchase of Finished Goods
34
58
74.1%
41
43.3%
99
35
186.4%
COGS
363
397
9.3%
383
3.7%
779
656
18.8%
Employee Expenses
22
23
4.3%
20
13.9%
44
41
5.8%
Other Expenses
69
95
37.8%
87
10.2%
182
141
29.2%
As a % of sales
Raw Material Consumed
59%
58%
61%
59%
68%
Stock Adjustment
6%
1%
1%
1%
0%
Purchase of Finished Goods
7%
10%
7%
9%
4%
COGS
71%
69%
70%
69%
71%
Gross Margin %
29%
31%
30%
31%
29%
Employee Expenses
4%
4%
4%
4%
4%
Other Expenses
14%
17%
16%
16%
15%
EBITDA
50
58
16.3%
60
-2.7%
118
79
48.5%
Other Income
4
1
-59.5%
2
-17.6%
3
5
-37.2%
Interest
7
8
3.7%
10
-25.6%
18
15
17.2%
PBDT
46
52
12.3%
51
1.3%
103
69
49.0%
Depreciation
13
13
3.4%
14
-1.4%
27
24
9.9%
PBT
33
39
15.8%
38
2.3%
76
45
70.4%
Tax
7
8
15.5%
9
-13.6%
18
10
68.0%
PAT
25
30
22.2%
28
7.6%
59
35
65.7%
Ratios
OPM (%)
9.9%
10.1%
10.9%
10.5%
8.7%
PAT margin %
4.9%
5.3%
5.1%
5.2%
3.9%
Tax rate %
21.2%
21.1%
25.0%
23.1%
23.4%
Source: Company, Angel Research
November 6, 2018
2
Parag Milk Foods |2QFY2019 Result Update
Risks to our estimates
1) Inability to procure sufficient good quality raw milk at commercially viable
prices
2) Increase in competitive intensity
3) Delay in launch of new products
November 6, 2018
3
Parag Milk Foods |2QFY2019 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
Total operating income
1,645
1,731
1,986
2,271
2,706
% chg
13.9
5.2
14.8
14.3
19.2
Total Expenditure
1,497
1,642
1,788
2,036
2,406
Raw Material
1,333
1,414
1,703
1,754
2,070
Personnel
67
79
85
95
114
Selling and Administration Expenses
82.4
113.1
-
140.8
167.8
Others Expenses
15
36
-
45
54
EBITDA
148
89
198
235
300
% chg
38.2
(40.1)
122.9
18.9
27.7
(% of Net Sales)
9.0
5.1
10.0
10.4
11.1
Depreciation& Amortisation
33
49
52
59
65
EBIT
115
40
146
176
236
% chg
44.1
(65.3)
267.3
20.3
34.0
(% of Net Sales)
7.0
2.3
7.4
7.7
8.7
Interest & other Charges
50
33
36
22
14
Other Income
2
11
9
5
5
(% of PBT)
2.3
62.7
7.9
3.1
2.2
Share in profit of Associates
-
-
-
-
-
Recurring PBT
67
18
119
159
227
% chg
94.9
(73.8)
581.0
33.4
42.4
Tax
19
0
30
44
65
(% of PBT)
29.2
2.3
25.3
27.5
28.5
PAT (reported)
47
17
89
115
162
Extraordinary Items
(2)
(19)
-
-
-
Less: Minority interest (MI)
0
0
0
0
0
PAT after MI (reported)
47
17
89
115
162
ADJ. PAT
49
36
89
115
162
% chg
33.0
(27.2)
148.1
29.4
40.5
(% of Net Sales)
3.0
2.1
4.5
5.1
6.0
Fully Diluted EPS (Rs)
5.9
4.3
10.6
13.7
19.3
% chg
33.0
(27.2)
148.1
29.4
40.5
November 6, 2018
4
Parag Milk Foods |2QFY2019 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E
FY2020E
SOURCES OF FUNDS
Equity Share Capital
70
84
84
84
84
Reserves& Surplus
291
573
660
774
935
Shareholders’ Funds
362
657
744
858
1,019
Equity Share Warrants
-
-
-
-
-
Total Loans
389
262
212
162
112
Deferred Tax Liability
-
-
-
-
-
Other liabilities
18.7
18.1
18.1
18.1
18.1
Total Liabilities
769
938
974
1,039
1,150
APPLICATION OF FUNDS
Gross Block
528
585
645
705
765
Less: Acc. Depreciation
183
226
280
340
404
Net Block
345
359
365
365
361
Capital Work-in-Progress
28
21
24
24
24
Investments
0
-
-
-
-
Current Assets
602
878
954
1,012
1,178
Inventories
272
429
455
529
630
Sundry Debtors
236
215
241
280
334
Cash
8
101
108
28
5
Loans & Advances
85
133
151
175
209
Other Assets
-
-
-
-
-
Current liabilities
211
382
453
474
560
Net Current Assets
391
496
502
538
618
Deferred Tax Asset
(11)
(10)
(11)
(12)
(12)
Mis. Exp. not written off
17
73
94
123
160
Total Assets
769
938
974
1,039
1,150
November 6, 2018
5
Parag Milk Foods |2QFY2019 Result Update
Consolidated Cash Flow Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
Profit before tax
67
18
119
159
227
Depreciation
33
49
51
59
65
Change in Working Capital
0
0
1
(116)
(103)
Interest / Dividend (Net)
47
25
36
22
14
Direct taxes paid
(14)
(16)
(32)
(44)
(65)
Others
(75)
(11)
0
0
0
Cash Flow from Operations
59
64
174
81
138
(Inc.)/ Dec. in Fixed Assets
(27)
(97)
(60)
(60)
(60)
(Inc.)/ Dec. in Investments
(4)
6
(22)
(28)
(37)
Cash Flow from Investing
(31)
(91)
(82)
(88)
(97)
Issue of Equity
6
278
0
0
0
Inc./(Dec.) in loans
60
0
(50)
(50)
(50)
Dividend Paid (Incl. Tax)
0
0
0
0
0
Interest / Dividend (Net)
(55)
(31)
(36)
(22)
(14)
Cash Flow from Financing
(26)
123
(86)
(72)
(64)
Inc./(Dec.) in Cash
1
96
7
(79)
(23)
Opening Cash balances
4
5
101
108
28
Closing Cash balances
5
101
108
28
5
November 6, 2018
6
Parag Milk Foods |2QFY2019 Result Update
Key Ratios
Y/E March
FY2016
FY2017
FY2018
FY2019E
FY2020E
Valuation Ratio (x)
P/E (on FDEPS)
44.0
60.4
24.3
18.8
13.4
P/CEPS
26.0
31.7
14.9
14.9
12.0
P/BV
5.8
3.2
2.8
2.4
2.1
Dividend yield (%)
0.1
0.2
0.0
0.0
0.0
EV/Sales
1.6
1.3
1.1
1.0
0.8
EV/EBITDA
17.2
26.3
11.5
9.8
7.6
EV / Total Assets
3.3
2.5
2.3
2.2
2.0
Per Share Data (`)
EPS (Basic)
5.9
4.3
10.6
13.7
19.3
EPS (fully diluted)
5.9
4.3
10.6
13.7
19.3
Cash EPS
9.6
7.9
16.7
16.7
20.8
DPS
0.2
0.4
0.1
0.1
0.1
Book Value
43.0
78.2
88.7
102.3
121.4
Dupont Analysis
EBIT margin
7.0
2.3
7.4
7.7
8.7
Tax retention ratio
0.7
1.0
0.7
0.7
0.7
Asset turnover (x)
2.2
2.1
2.3
2.3
2.4
ROIC (Post-tax)
10.9
4.8
12.8
12.9
15.0
Cost of Debt (Post Tax)
0.1
0.1
0.1
0.1
0.1
Returns (%)
ROCE
15.3
4.3
15.3
17.2
20.8
Angel ROIC (Pre-tax)
15.5
4.9
17.1
17.8
20.9
ROE
13.6
5.5
12.0
13.4
15.9
Turnover ratios (x)
Asset Turnover (Gross Block)
3.1
3.0
3.1
3.2
3.5
Inventory / Sales (days)
60
90
92
85
85
Receivables (days)
52
45
53
45
45
Payables (days)
58
99
102
99
99
Working capital cycle (ex-cash) (days)
55
37
43
31
31
Source: Company, Angel Research
November 6, 2018
7
Parag Milk Foods |2QFY2019 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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Disclosure of Interest Statement
Parag Milk Foods
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or
No
relatives
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on Expected Returns:
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period)
Reduce (-5% to -15%)
Sell (< -15%)
November 6, 2018
8