SPA Securities is bullish on Parag Milk Foods has recommended buy rating on the stock with a target price of Rs 342 in its research report dated May 14, 2019.
SPA Securities' report on Parag Milk Foods
In the backdrop of increasing milk procurement prices, we are fine tuning our revenue and profitability estimates. We expect Parag to post Revenue CAGR at 22% during FY19-21 compared to 21% earlier. Going forward, aggressive expansion of distribution network & inorganic growth is expected to aid revenue growth (acquisition of Danone India's dairy plant at Sonepat, Haryana in FY'18). EBITDAM is estimated to take a knock of 150 bps to 9.5% for FY'20 as well as FY'21 as company needs to spend aggressively behind advertising and sales promotion to grow its health and nutrition business. EPS is estimated to compound 30% annually during FY'19 -'21 compared to earlier estimated 34%. At CMP of 235, the stock is trading at 10.3x FY'21E EPS.
Outlook
We maintain BUY with a revised target of INR 342(from earlier 453 ) at which stock will trade at 15x FY'21E EPS.
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