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For 2QFY2020, Parag Milk Foods (PMFL) posted healthy numbers on top-line
front, however bottom-line was below expectation. The company’s revenue grew
by ~12% yoy, while the operating margins contracted by 146bps yoy. On the
bottom-line front, PMFL reported de-growth of ~6% yoy to `29cr on the back of
poor operating performance.
Outlook and Valuation: Parag Milk Foods is anticipated to post strong growth in
value added products on the back of its diversified product basket, strong brands
and wide distribution network. Further, PMFL would benefit from a shift in mix in
favor of the organized market for dairy products. At the current market price, the
company trades at a P/E of 7.4x its FY2021E EPS. Thus, we maintain our Buy
recommendation on PMFL with Target Price of `250.

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