Kwality limited presentation by Market Hub Research Department
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Presentation on Kwality Limited, FMCG Dairy Products Company- Report By Sanjay Prajapat. Growing company in Dairy Industry expanding its product portfolio and improving financials.
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Kwality limited presentation by Market Hub Research Department
- 1. KWALITY LIMITED Sector: FMCG-DAIRY PRODUCTS By: Sanjay Prajapat, Equity Research Analyst, Market Hub Stock Broking Pvt. Ltd. 11th March, 2017
- 2. Industry Dynamics: 400 MLPD milk produced 160 MLPD retained for own consumption 240 MLPD available 70 MLPD- Organized Sector 170 MLPD- Unorganised Sector • Only 20% of the sector is organized • Overall growth of the sector - 15% • Growth of organized sector – 19% • Growth of Value added segment – 25%
- 3. About the Company: • Largest private player with strong presence in North India • 6 processing facilities in Haryana, UP and Rajasthan • Current capacity – 3.4 MLPD, expanding further by 0.9 MLPD for Value added products • Procurement markets: Haryana, UP, Rajasthan • Sales Market: Haryana, UP, Rajasthan, Delhi, NCR Region, Punjab
- 4. Business Reengineering Plan Brand Products S&D Sourcing of Milk Quality Framework IT Framework People
- 5. Higher Revenue and Margins More Value Added Products Higher Direct Procurement Moving from B2B to B2C • Company has planned to roll out value added products through its Haryana Plant in the next 12-18 months in phased manner • Margins from Value Added products are 20% and above compared to institutional sales generating margins on an average of only 4.5-5% • In the last 5 years, direct procurement has reached from 0% to 20%. Company is planning to take this ratio to 50:50 and topline from VAP has gone from zero to 1800 cr. in the last four years • Plan is to reverse the revenue mix of institutional sales to retail sales from existing 68:32 to 30:70, i.e. 70% of sales coming from value added products
- 6. Peer Comparison: Company Name Kwality Hatsun Agro Heritage Foods Vadilal Net Sales(FY16) 5724.23 3444.59 2380.58 444.48 PBIDT 380.82 309.32 138.89 58.94 PBIDT % 6.44 8.97 5.83 12.94 ROCE 18.77 23.31 28.76 22.99 ROE 21.47 36.89 25.99 23.46 TTM PE 23.01 105.61 35.97 28.34 Mcap/Sales 0.62 2 1.01 1.25
- 7. Moving towards the Goal • Strategic launch of VAP like flavored milk, lassi, yogurt, butter, cream etc. • Signed Akshay Kumar as brand Ambassador and Promotion of dairy products under the brand name “Kwality” • Signed contracts with top organizations for IT management, social media marketing and Media interaction • KKR investment in the company for 520 cr. • MOU with Bank of Baroda to provide loan to 1 lakh farmers • 1st dairy company to issue ESOPs
- 9. Conclusion: • With the changing business strategy from B2B to B2C player and growth prospects, considering the company’s focus on direct procurement, developing Value added products and brand development, even if we consider a modest 10% growth in coming 3 years, Kwality Limited is expected to post significant improvement in margins and bottomline.
- 10. Thank You