For Q1FY2019, Parag Milk Foods (PARAG) posted decent performance with 33%/168% yoy growth in revenue/ PAT led by 376 bps expansion in margin. The company has delivered strong results amid various concerns like farmers strike, rise in procurement prices of raw milk which reiterates our conviction in its premiumisation story.
Outlook and Valuation: We have maintained our earnings estimates in view of new products pipeline and robust Q1 performance. We now expect PARAG to report a CAGR of ~17%/35% in revenue/ earnings over FY18-20E. The stock is currently trading at 16.9x its FY2020 earnings, which still looks attractive looking at its evolving FMCG story. We maintain BUY with a target price of `410 (21x FY2020E EPS).

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