Moneycontrol
Sep 07, 2017 10:45 AM IST | Source: Moneycontrol.com

In light of Kwality's woes, how did Indian dairy majors fare in the past 5 years?

Moneycontrol analyzed the fundamental parameters of some of India’s most renowned dairy companies over a five-year period to determine the best performers across a series of financial variables.

In light of Kwality's woes, how did Indian dairy majors fare in the past 5 years?

Ritesh Presswala & Krishna Karwa

Moneycontrol News

Kwality, one of India’s most well-known dairy companies, hit the lower circuit on two consecutive trading days earlier this week, thus triggering pandemonium amongst its investors. On the back of subsequent clarifications issued by the company’s management in this regard, wherein no facts/events were attributed to such a drastic downfall, the stock not only recovered from yesterday’s unexpected intra-day 20 percent correction, but also gained 6 percent by end of the session, and seems to be doing well.

In the wake of this hullabaloo, we analyzed the fundamental parameters of India’s dairy majors over a five-year period to determine the best performers across a series of financial variables.

Here’s what our study suggests:-

Sales slowdown pan-industry

As seen in the exhibit below, almost all players witnessed a decline in the rate of top-line growth from a year on year perspective. Hatsun Agro, however, managed to swim against the wave by posting a robust set of revenues every year.

Sales_Dairy06092017_new

 

Best Operating Margins

Kwality's and Hatsun Agro's margins recorded an uptick over the years, barring a minor blip in FY15 in case of the latter. EBITDA margins of other companies were subject to erratic fluctuations when looked at from an overall standpoint.

EBIDTA_Dairy06092017

 

The most consistent bottom-line performer

Kwality’s profits, unlike others, grew steadily every year. Additionally, the degree of volatility in its profit after tax (PAT) margins was also the least.

PAT_Dairy06092017

 

Debt-equity synopsis

Though all companies in the dairy space have been gradually decreasing their dependence on borrowed funds for operations, the likes of Hatson Agro and Kwality need significant and noticeable improvement on this front in comparison to their peers.

DE_Dairy06092017

 

With GST now underway, unorganised entities, which comprise a significant chunk of India's dairy industry, are likely to lose out on their pricing advantage to organised counterparts over a period of time. Given the inelastic demand for dairy products across the breadth and depth of the country, the sector as a whole is poised to grow well going forward. Nonetheless, how things pan out for each of the above companies in due course remains to be seen.

PricePerformance_Dairy06092017_new

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