The profit margins of dairy companies are expected to increase in the September quarter after a sharp contraction in the March and June quarters.
Shares of Parag Milk Foods rallied as much as 7 per cent to Rs 111.70 apiece on the BSE on Friday after the company introduced a new product to its premium category.
At 01:15 PM, the stock was trading over 3 per cent higher at Rs 107.50 on the BSE. The stock had hit a 52-week high of Rs 177 on the BSE on September 24, 2019, while its 52-week low level stands at Rs 48.50, hit on March 19, 2020.
Parag Milk Foods, which runs brands such as ‘Gowardhan’, ‘Go’, ‘Pride of Cows’ (POC), ‘Avvatar’ today launched Pride of Cows Curd, Full of Love. “Pride of Cows Curd is made from pure Pride of Cows milk and is derived from the Company’s own farm. The curd will be delivered to the consumer’s doorstep through a completely contact-free process that involves a full automated milking and production system and a cold chain network that maintains a constant temperature throughout in order to retain the curd’s flavour and aroma,” the company said in its press release.
The curd market has witnessed significant growth in the recent past on account of a burgeoning number of health-conscious consumers in India. With the health benefits associated with curd, such as its high-protein content and gut-friendly nature with all the goodness of milk, the curd market is bound to grow rapidly in the coming years, the press release added.
Meanwhile, the profit margins of dairy companies are expected to increase in the September quarter after a sharp contraction in the March and June quarters because of demand destruction following the Covid-19 outbreak.
According to the analysts with ICICI Securities, dairy companies with strong business moats such as brands, distribution network, and healthy balance sheet to enjoy a lower cost of capital as there will not be any (material) change in risk premium.
“With lower interest rates, the dairy companies may enjoy a better return on equity (RoE) as interest cost will be lower. With likely better return ratios and reduction in the cost of capital, the spread will expand resulting in higher economic value added (EVA) creation,” it said in a sector update report on July 22.
The brokerage has a “HOLD” rating on Parag Milk and Hatsun Agro and a “BUY” call on Heritage Foods.