Buy Prabhat Dairy; target of Rs 144: Edelweiss

Prabhat Dairy (Prabhat) reported sales growth of 9% YoY to INR 2.9bn, driven by growth in SMP (40%), ghee (60%) and curd (22%). However, EBITDA fell 8% YoY with margins dipping to 8.5% (10% in Q1FY16) due to gross margins contracting 125bps YoY to 19.2%, as milk procurement prices increased on droughts conditions in Maharashtra. Driven by fall in interest cost and lower tax, PAT surged 64% YoY. Given expected 20% EBIDTA CAGR (led by increase in value-added sales), strong 72% earnings CAGR, and 387bps jump in adjusted pre-tax RoCE to 15.1% (17.1% including incentives) over FY16-18E, we maintain ‘BUY’ with an unchanged target price of INR 144.  For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.