ICICI Securities research report on Dodla Dairy
We believe acquisition of Sri Krishna Milks to be value accretive in medium term as (1) Sri Krishna operates in key region of Dodla i.e. South India and same products where Dodla has strong understanding i.e. milk and curd, (2) While Sri Krishna was loss making, it has Gross margin of ~22% over FY18-21 which indicates strong consumer acceptance of the brand and (3) post acquisition Dodla will be able to consolidate its position in North Karnataka, South Maharashtra and Goa. However, we believe the acquisition will be earnings decretive in FY23 and also likely in FY24 as the interest income on acquisition value of Rs500mn will be likely higher than profits generated by Sri Krishna.
Outlook
We remain structurally positive on Dodla due to its competitive advantages and strong growth opportunity in South India, with a DCF-based TP of Rs615 (19.4x FY24E EPS).
At 16:01 hrs Dodla Dairy was quoting at Rs 528.65, up Rs 69.05, or 15.02 percent.
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It has touched an intraday high of Rs 548.00 and an intraday low of Rs 475.00.
It was trading with volumes of 45,643 shares, compared to its thirty day average of 22,347 shares, an increase of 104.25 percent.
In the previous trading session, the share closed up 0.87 percent or Rs 3.95 at Rs 459.60.
The share touched its 52-week high Rs 672.00 and 52-week low Rs 385.00 on 11 November, 2021 and 24 February, 2022, respectively.
Currently, it is trading 21.33 percent below its 52-week high and 37.31 percent above its 52-week low.
Market capitalisation stands at Rs 3,145.08 crore.
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