Moneycontrol
Dec 05, 2017 11:56 AM IST | Source: Moneycontrol.com

Edelweiss bullish on Parag Milk, Heritage Foods, Prabhat Dairy; sees up to 41% upside

Edelweiss has maintained its buy call on Prabhat Dairy with a target price of Rs 211 per share, implying 32 percent potential upside over its Monday's closing price.

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Research firm Edelweiss looked bullish on dairy products manufacturer as it has initiated its coverage with buy rating on Parag Milk Foods and Heritage Foods, citing strong growth ahead. Stocks rallied more than 4 percent and 2 percent intraday, respectively Tuesday.

The brokerage house set a price target of Rs 340 for Parag Milk Foods, implying potential upside of 40.64 percent over Monday's closing price.

Edelweiss feels value added products revenue share is expected to increase to 70 percent by March 2020 as Parag is fortifying its profitable value-added products share by investing and expanding capacity.

It believes company's aggressive advertising spends will strengthen brand equity going ahead.

The research house expects revenue, operating income and net profit to grow at a compound annual growth rate of 14 percent, 32 percent and 49 percent, respectively by March 2020.

"We expect margins to expand by 335 basis points to 9.6 percent by March 2020, led by improving utilisations and return on capital employed is likely to expand by 1,064 basis points to 19 percent by March 2020," Edelweiss said.

It further said improving cash flow will lower debt/equity to 0.1 times by March 2020.

For Heritage Foods, the brokerage house has set a target price of Rs 976 per share, implying a potential upside of 28.5 percent over Monday's closing price.

"Stock entails immense potential in the sector," it said.

Edelweiss sees sales & EBIT CAGR of 23 percent & 21 percent, respectively over FY17-20.

The research house has maintained its buy call on Prabhat Dairy with a target price of Rs 211 per share, implying 32 percent potential upside over its Monday's closing price.

It has estimated sales, EBITDA & profit CAGR of 15 percent, 19 percent and 39 percent, respectively over FY17-20.

B2C and value-added products will drive growth, Edelweiss said, adding it is seeing a rapid expansion of distribution network.

At 11:22 hours IST, the stock price of Parag Milk Foods was quoting at Rs 250.55, up 3.64 percent and Heritage Foods was at Rs 767.10, up 1.03 percent while Prabhat Dairy was quoting at Rs 160.95, up 0.69 percent on the BSE.
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