For Q4FY2018, Parag Milk Foods (PARAG) posted decent performance with 20%/18% yoy growth in revenue/ PAT and decent margin expansion. The company is introducing many new products/ variants and improving its supply chain management which would drive 20%+ earnings growth in next two years.
Outlook and Valuation: We have slightly upgraded our earnings estimates in view of new products pipeline, better off take in whey protein and the revised margin guidance from the management. We now expect PARAG to report a CAGR of ~18%/37% in revenue/ earnings over FY18-20E. The stock has given 35% return since our initiation in April. The stock is currently trading at 17.5x its FY2020 earnings, which still looks attractive looking at its evolving FMCG story. Hence we recommend BUY with a target price of `410 (21x FY2020E EPS).

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