Emkay Global Recommends Buying Parag Milk Foods, Targets Rs 250
Parag Milk Foods Research Report
Company Overview
We initiate coverage on Parag Milk Foods, driven by its sustained focus on top-line growth and strengthened front end. The company's strong brand portfolio, 33 years of sector expertise, and steady expansion of its distribution network position it well to capture growth opportunities in the value-added dairy segment.
Growth Expectations
Read also: Oshea Herbals Aims for Rs 650 Crore Revenue Amidst Expansion Efforts
We expect Parag Milk Foods to sustain mid-teens revenue growth, consistent with its four-year trend. With recent GST cuts in value-added dairy and ongoing category formalization, the company is well-positioned to capitalize on growth opportunities. We anticipate EBITDA margin expansion of ~40bps over FY25-28E, driven by the company's medium-term focus on the topline and recent inflation in milk prices.
Key Financial Projections
- Earnings CAGR: ~23% over FY25-28E
- EBITDA margin expansion: ~40bps over FY25-28E
- ROCE: 18% in FY28E (vs 14% in FY25)
- Net debt-to-equity: 0.1x in FY28E (vs 0.6x in FY25)
Recommendation
We initiate coverage on Parag Milk Foods with a BUY rating and a DCF-based target price of Rs250 (implied P/E of 15x). The company's strong backend capabilities and brand portfolio enable it to scale up front-end capabilities and accelerate growth.
Investor Takeaway
Investors should consider buying Parag Milk Foods due to its potential for sustained revenue growth and margin expansion.
More in Sector
Oshea Herbals Aims for Rs 650 Crore Revenue Amidst Expansion Efforts
Suzlon to Expand Business Scope Beyond Wind Energy, Invests Rs 500 Crore in New Subsidiary This Fiscal Year
SoftBank Sells Over 3% Stake in Lenskart Solutions for $373 Million
