Buy Prabhat Dairy; target of Rs 144: Edelweiss

Prabhat Dairy (Prabhat) has established credentials as a specialty ingredients supplier logging 25% revenue CAGR over FY12-16. The company is on course to be a value-added player, catapulting its gross block >40% in FY16, to be the third-largest cheese player in India. Further, it is advancing as a B2C player (sales mix to rise from 27% to 37% over FY16-18E) with aggressive brand spends (49% ad spends CAGR over FY16-18E). We estimate Prabhat’s value-added segment’s capacities to yield 17% sales and 20% EBITDA CAGR and adjusted pre-tax RoCE to jump an impressive 386bps over FY16-18E to 15% (17.1% including incentives). We estimate PAT to post 72% CAGR with full deployment of capex and repayment of debt. Initiate coverage with ‘BUY’ and TP 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.