ICICI Securities research report on Hatsun Agro Products
We are enthused by EBITDA margin expansion posted by Hatsun in Q1FY24 YoY. Correction in milk procurement price has resulted in gross margin expansion of 110bps QoQ. We model the full benefits of lower input prices to be visible in Q2FY24. The sale of windmill assets is likely to be value accretive in our view as the RoCE on windmill operations was lower than cost of capital. We remain positive on Hatsun structurally due to competitive advantages such as brands, distribution and milk procurement. We also believe it is likely to benefit from favourable milk cycle for dairy companies.
Outlook
However, we need more safety on valuations and retain HOLD rating. We value the stock at target price of INR 1,000 (implied 50x FY25E; prior TP: INR 880) as per DCF methodology.
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