For 1QFY2019, Parag Milk Foods (PMFL) posted healthy numbers on top-line front, however bottom-line was below expectation. The company’s revenue grew by ~15% yoy, while the operating margins contracted by 182bps yoy. On the bottom-line front, PMFL reported de-growth of ~3% yoy to `28cr on the back of poor operating performance.
Outlook and Valuation: Parag Milk Foods is anticipated to post strong growth in value added products on the back of its diversified product basket, strong brands and wide distribution network. Further, PMFL would benefit from a shift in mix in favor of the organized market for dairy products. At the current market price, the company trades at a P/E of 9.4x its FY2021E EPS. Thus, we maintain our Buy recommendation on PMFL with Target Price of `304.

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