September 21, 2016 / 18:35 IST
KR Choksey's research report on Kwality
Kwality Ltd. (Kwality) was incorporated in 1992 as Kwality Dairy (India) Ltd. The company was set up as a backward integration unit of Kwality Ice Creams India Ltd and was acquired by Dhingra Family in 2002. Kwality is one of the fastest growing private sector dairy companies with a new range of innovative products and enjoys a large presence in Northern India. It has six processing plant with 3.2Mn liter capacity per day.
We remain positive on the stock with the growth and changing strategy from B2B to B2C player. As this would help expand margins. Its key strategy and focus remains on procurement model, developing branded products & brand development. We are expecting the growth to be around 10-12% in FY17E and FY18E with improvement in EBIDTA margins to 6.8% in FY18E from 6.1% in FY16. We assign PE of 15x to its FY18E EPS of INR 17.5 and recommend ‘BUY’ rating on the stock with the target price of INR 263 and an upside of 112%.
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