Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Dairy - Spread between milk procurement prices and selling prices remains high - ICICI Securities

Posted On: 2021-01-07 06:44:57 (Time Zone: Arizona, USA)

Wholesale milk prices have remained flat MoM in Dec'20. As dairy companies have not raised milk prices post Feb'20, wholesale milk prices have remained flat from Jun'20 to Dec'20. Milk procurement prices have continued to remain at lower levels as (1) demand from HoReCa and value-added products is still lower, (2) commencement of flush season and (3) lower fodder prices and availability of green fodder. Our channel checks suggest minor increase in milk procurement prices in Dec'20 MoM. Dairy companies have not raised prices post Feb'20 and we do not model them to raise prices till Q1FY22. However, they have also not reduced prices as consumers still prefer branded packaged products. We have a BUY rating on Heritage Foods with a TP of Rs400 (12x FY22E) and HOLD on Hatsun Agro with a TP of Rs830 (49x FY22E).

- Wholesale milk prices remain flat MoM: Wholesale milk prices remained flat at elevated levels. Wholesale milk prices have remained largely similar over Jun'20-Dec'20. Key reason is no price hike by dairy companies after Feb'20.

- Global SMP prices moving up: Global SMP prices had corrected from US$3,036/MT in Jan'20 to US$2,380/MT in April'20. But, SMP prices have increased again to US$2,930/MT in Dec'20. We had expected correction in global SMP prices to lead to correction in SMP / milk prices in India. However, (1) INR depreciation and (2) upward trajectory in SMP prices will arrest any such benefit.

- Exports of Indian SMP: We believe with rising global SMP prices, Indian companies will be able to export the excess SMP inventory. This will reduce supply pressures in India and may result in higher milk prices in next 2-3 quarters.

- Milk procurement prices are stable at lower levels: Milk procurement prices continue to remain at lower levels with (1) lower demand for value-added products, (2) lower off-take by HoReCa, and (3) increased productivity during flush season. From our channel checks, we note there is a minor increase in milk procurement prices in Dec'20, MoM.

- No pricing action by dairy companies: We do not expect dairy companies to raise prices due to (1) deflation in milk procurement prices and (2) weaker economic outlook post the lockdowns. Companies have also not reduced selling prices as they are not facing competitive pressure from unorganised players with consumers still preferring branded packaged products due to health and hygiene concerns.

- Impact on companies: We expect all dairy companies to benefit due to lower milk procurement prices. As Hatsun and Heritage generate 60%+ revenues from liquid milk, they will benefit more.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Union Budget 2021-22 - Preview Report - YES SECURITIES

Alembic Pharma (Q3 FY21) - 'First signs of sartans weakness' - YES Securities

CSB Bank Q3 Earnings Call - Key Takeaways - YES Securities

ICICI Lombard - Q3FY21 Result Report - YES Securities

Gateway Distriparks - Q3FY21 - Multiple triggers at play - ICICI Securities

Prince Pipes and Fittings - Improving governance; rerating inevitable - ICICI Securities

CEAT - Margins resilient due to healthy replacement mix - ICICI Securities

Hatsun Agro Products - Commencement of three plants and lower tax rate to boost return ratios in FY22 and beyond - ICICI Securities

Alembic Pharmaceuticals - India recovers, US sees pressure - ICICI Securities

Q3FY21 Result update - MindTree Ltd - ICICI Direct

Q3FY21 Company update - Shoppers Stop - ICICI Direct

IPO - Indigo Paints Ltd - ICICI Direct

Larsen & Toubro Infotech Ltd - Q3FY21 First Cut - ICICI Direct

Tata Communications - Q3FY21 First Cut - ICICI Direct

Maintain ADD on Mindtree - Into another operating orbit - HDFC Securities

NBFCs Q3FY21 Results Preview - Micro headwinds > Macro tailwinds - HDFC Securities

Mindtree - Margin beat and raise cycle seems to be over! - ICICI Securities

Shoppers Stop - Focusing on omni-channel growth - ICICI Securities

Piramal Enterprises - Strategic synergies, optional value to follow DHFL's buyout - ICICI Securities

Motherson Sumi Systems - Focus remains on growth and cost efficiency - ICICI Securities

Metropolis Healthcare - Acquires Hitech Diagnostics in South India - ICICI Securities

Nifty PE shifting orbits - ICICI Direct

Rallis India Ltd - Q3FY21 First Cut - ICICI Direct

Q3FY21 Company update - GTPL Hathway - ICICI Direct

Q3FY21 Result update - HDFC Bank - ICICI Direct

Q3FY21 Result Update - PVR Ltd - ICICI Direct

Q3FY21 Result update - HCL Technologies - ICICI Direct

Maintain BUY on HCL Technologies - Mode-2, 3 driven momentum - HDFC Securities

HDFC Bank Q3FY21 Results - Concall Highlights and Views of YES SECURITIES

HDFC Bank Q3 FY21 - 'Stellar Show' - Retain BUY and raise 12m PT to Rs1870 - YES Securities

IPO Review - Indian Railway Finance Corporation (IRFC) - ICICI Direct

HCL Technologies - Q3FY21 First Cut - ICICI Direct

Logistics Sector Update - Indian Railways - getting aggressive - HDFC Securities

Indigo Paints - IPO view - YES SECURITIES

Infosys - Near-term margins will likely come under pressure - ICICI Securities

CESC - 7% dividend yield + higher ESG rating - ICICI Securities

South Indian Bank - Unveils vision 2024; targets RoA / RoE of 1% / 13% by 2024 - ICICI Securities

Maintain BUY on Infosys - Growth certainty on explosive deal wins - HDFC Securities

Maintain ADD on Wipro - Growth acceleration - HDFC Securities

Consumer Durables - Q3FY21 Results Preview - HDFC Securities

Q3FY21 Company Update - Filatex India - ICICI Direct

Q3FY21 Result Update - Wipro Ltd - ICICI Direct

Q3FY21 Result Update - CESC - ICICI Direct

Monthly Inflation - December 2020 - ICICI Direct

Q3FY21 Result Update - Infosys - ICICI Direct

Banks Q3FY21 Results Preview - Scope for optimism beyond a tepid 3Q - HDFC Securities

Consumer Discretionary Companies - Q3FY21 Results Preview Report - HDFC Securities

Pharma Sector Update - Ample catalysts to sustain luster - HDFC Securities

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on IIP data

Infosys - Q3FY21 First Cut - ICICI Direct

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020