New Delhi, December 14, 2017: Edelweiss has published a report on dairy sector and they expect India to be the world’s largest dairy producer by 2020.
According to the report, the triggers for the big uptick in the dairy industry are higher per capita consumption, growth in demand for branded milk, which is seen at 15 percent. They think the share of organised players would increase to 26 percent from current 22 percent. Value added products would grow at 20 percent according to CNBC TV18.
To discuss the rationale behind this report, the outlook for the dairy sector and also on why they are upbeat on Parag Milk, Heritage Foods, CNBC-TV18 spoke to Head of Reserach at Edelweiss Aditya Narain and Author of the report Shradha Sheth.
According to Sheth, there are strong structural levers for Indian Dairy industry to drive a strong 15-20 CAGR for a long period of time.
Talking stock specific, Sheth said Parag Milk has a strong value added portfolio, which is almost 65 percent of their sales and industry is just at about 35 percent. Second, they have created strongest brands in record time. Third, they have invested ahead of value chain.
The house has a buy on Parag Milk with target price of Rs 340.
According to her several categories like say cheese are still underpenetrated in India, for example while cheese is less than 1 percent of milk industry, in Europe it is around 36 percent, so there is a huge scope for growth for this categories.
According to them, direct procurement is also one of the success factors for the companies.