This dairy stock has more than doubled investors money in a year; worth a look?

The stock performance of a Patiala-based dairy company is worth noting. Incorporated in 1973, the company boasts state-of-the-art facilities and high-capacity machinery. While milk powders and pure ghee are its core products, the company also deals in high-end casein and demineralised whey powder. Whey powder (or sweet whey) is a by-product of cheese production, while casein is a type of protein found in milk that gives milk its white colour. 

Casein and whey powder are used in the production of chocolates, ice cream, health supplements, infant food, etc. Besides this, casein has some industrial uses too, like in knitting needles, cosmetics, pharmaceuticals, automobile paint, etc, the firm says.

The company is Milkfood, and as part of the Jagatjit Group, it has its headquarters in the National Capital Region (NCR), as per the company's website.

About Jagatjit Group

Established in 1983, Saron Mechanical Works is a manufacturer of farm equipment under the brand name Jagatjit. Its product range includes Rotary Tillers (Rotavator), Straw Reaper, Rotor Seed Drill, Land Levellers, Mud Loader, Straw Mulcher, and Happy Seeder, among others. 

Dairy Sector in India

According to Invest India, India is the highest milk producer and ranked first in the world, contributing 24 per cent of global milk production in 2021–22. The milk production of India registered a 51 per cent increase during the last eight years i.e., during the years 2014–15 and 2021–22, and increased to 221.06 million tonnes in the year 2021–22. Milk production has increased by 5.29 per cent over the previous year, 2020–21.

Further, the dairy market in India's size reached Rs 14,899.8 billion in 2022. Looking forward, it is expected that the market will reach Rs 31,185.7 billion by 2028, exhibiting a growth rate (CAGR) of 13.2 per cent during 2023–2028, notes market research firm IMARC Group.

Besides, according to a report, "Dairy and Products Annual 2021" (India), published by the United States Department of Agriculture, "A key Indian demand driver for fluid milk consumption is India’s demographics. About a third of the national population is under 14 years of age, a cohort inclined to consume higher quantities of milk. Dual-income households, rapid digitisation of commerce (e-platforms), increasing disposable incomes, growing urbanisation, changing consumer lifestyles, and other demographic shifts are helping to pump up demand for processed, value-added dairy products."

Milkfood - A Look at Financials

Milkfood's total revenue on a consolidated basis as of the June 2020 quarter stood at Rs 80.5 crore which increased to Rs 150.8 crore as of December 2022, up 87 per cent. However, there has not been a linear rise, and it has witnessed some intermittent blips. Operating profit as of December 2022 stands at Rs 7.8 crore against Rs 4.4 crore in the June 2022 quarter, Trendlyne data show. The operating profit margin as of Dec' 2022, stands at 5.20 per cent against 5.52 per cent in June 2022 quarter. The company's operating expenses were Rs 142.6 crore vs Rs 75.9 crore in June 2022 quarter. Net profit for the December quarter was Rs 3.3 crore, compared to Rs 0.1 crore in the June 2022 quarter. Basic earnings per share (EPS) for the December quarter came in at Rs 6.7, compared to Rs 0.2 in the June 2020 quarter.

ALSO READ: India needs to be export competitive to capture overseas market for surplus milk: Niti Aayog member

Further, Trendlyne notes that the company's price-to-earnings ratio (P/E) is 36.8, lower than its sector PE ratio of 61.1, which is a positive for the stock as it seems undervalued and has more legs to rally. Another positive is the debt-to-equity ratio. Milkfood's debt-to-equity ratio of 0.6 is less than 1 and hence healthy. This implies that its assets are financed mainly through equity, as per the analysis.

Milkfood's shareholding/ownership

Karamjit Singh Jaiswal is the promoter of the company, with a 34.8 per cent stake. Jupiter India Fund, one of the leading active asset managers, owns a 6.5 per cent stake in the company, while Dhanvani Investments has 11.5 per cent of the company's shares.

Stock performance

Milkfood's scrip has rallied 114 per cent from its 52-week low of Rs 286 hit on the BSE on May 17, 2022. However, it has slipped around 16 per cent from its 52-week high of Rs 728 touched on February 6, 2023. The company is slated to release its March quarter numbers later in the day (May 1, 2023).