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Reviews and Analysts Recommendations for the IPO of Parag Milk FoodsPhillip Capital Analysts Jubil Jain, Naveen Kulkarni and Preeyam Tolia said
The stock is available at 26/21x our FY17/FY18 earnings vs. 33/21/10x FY17 earnings for Hatsun Agro/Prabhat Dairy/Kwality Dairy (our/Bloomberg estimates) while it is available at FY17/FY18 EV/EBITDA of 13/11 vs. 14/8/7x for FY17 EBITDA for the same peerset. The stock is slightly expensive to some peers but the higher valuation is justified by lower share of institutional sales, stronger brands, distribution reach, and strong execution history. Also, we believe that the lower RoE/RoCE for dairy players vs. FMCG companies is compensated by 35% discount to FMCG sector multiple and higher growth and premiumisation prospects compared to penetrated FMCG categories. High valuations justified; Recommend SUBSCRIBE
Way2Wealth Brokers Said,
At the offer price bands of Rs220-227/- the issue is available at P/E of x 42-44x its FY16 EPS(annualised & diluted) of ~Rs5.2/-, valuing the stock at 1.3x Market Cap to Sales. Though we feel the industry has great potential with increasing penetration of premium products in the market; risk-return trade-off for the IPO investors may not be much in favour as there may not be much left on the table post-listing. Risk-averse investors would do well to AVOID the issue.
Choice India Analyst Rajnath Yadav said,
At the lower price band of Rs. 220 per share, Parag’s share are priced at a P/E multiple of 70.9x to its FY15 earnings, which is at a premium to the peer P/E multiple of 64.2x. At a higher price band of Rs. 227, the company’s share is available at P/E multiple of 73.1x. Retail investors are entitled for a discount of Rs. 12 per share. Post retail discount, still, the company is priced at a P/E multiple of 67x and 69.2x (to its restated FY15 EPS), respectively, at lower and higher price band. we recommend a “AVOID” rating for the public issue
NVS Wealth Managers said,
In fact, many matured companies having a consistent track record of growth in profits, regular dividend payments and which belong to various sectors are available for investment at a decent PE multiple ranging from 8x to 10x…far cheaper than 75x of Parag Milk Foods Ltd. In our opinion, investors are advised to happily skip the issue.
SPA Securities Analysts said,
At higher price band, the stock will trade at trailing P/E, EV/EBIDTA and EV/Sales (post issue) of 44.6, 15.1 and 1.32 respectively, which is lower than its peers Hatsun Agro and Prabhat Dairy. Due to reasonable valuation coupled with industry leading growth rate and scope for margin improvement, we recommend SUBSCRIBE for long term investors.
Destimoney Research Analysts Recommend as under,
Given the premium valuation at Rs. 220-227 price band, we believe that the stock has little room for listing gains. Due to attractiveness of industry dynamics and company’s investment in value added products business, we feel the earnings should improve in next couple of years. We recommend investors to SUBSCRIBE to IPO with holding view of at least three years.
Bank of Baroda Analyst Akanksha Tripathi said,
We believe that the company is poised for strong growth going forward on account of 1)leading manufacturers and marketers of dairy-based branded foods in India, 2)integrated business model, 3)pan India presence, 4)established brand, 5)strong customer base in retail as well as intuitional like Yum! Restaurants (India) Private Limited (for Pizza Hut, Taco Bell and KFC), Jubilant Foodworks Limited (for Domino‘s Pizza) and Sankalp Recreation Private Limited (for Sam‘s Pizza) 6)growing dairy industry in India, 6)increasing per capita income. Hence we recommend, ‘SUBSCRIBE’ to the issue.
IndiaInfoLine - IIFL analysts have the following Review,
As a result, at 26x FY18E EPS at the upper IPO price band of Rs227, we feel that the company is richly priced related to the growth prospects and also the emerging competition. For the retailers, the IPO is offered at Rs12 discount, which is available at 42.4x PE FY16E, is still expensive in our view, compared to its peers. AVOID.
K R Choskey Analyst Nirvi Ashar recoommended,
Its EBIDTA for 9MFY16 is around 8.8% which was 7.8% in FY11. PAT for 9MFY16 stood at around 319.2 Mn and the margin was around 2.6% compared to 0.1% in FY11. We believe with Parag being in production and distribution of cow milk and all other products being vegetarian is positive for a company. Subscribe for Long Term
Prabhudas Liladhar Analysts Amnish Aggarwal and Gaurav Jogani have the following Review
PMF is expanding processing capacity by 70%, by adding capacity for Whey powder, Cheese, Paneer, UHT milk and Curd for sustaining strong growth in the coming few years. Sustained 15‐20% sales growth, debt repayment of Rs1bn and improvement in cash flows will enable the company achieve 30% PAT CAGR over FY16‐18. The stock at 37x FY16E would offer limited listing gains. Long‐term prospects look encouraging with scope of decent returns over the coming 2‐3 years.
SMC REsearch Analysts Said,
The Company places significant emphasis on quality control and product safety at each step of the manufacturing process, right from the procurement of raw milk until the final product is packaged and ready for distribution. However, the manufacturing facilities and procurement operations of the company are concentrated in a few regions and any adverse developments affecting these regions could have an adverse effect on its business. Moreover, 55.17 % of the promoter shareholding is pledged. A long term investor can opt this issue.
Khambatta SEcurities Ltd Analyst Ankit Merchant said,
At the price band of Rs 220-227, Parag‟s IPO is expensive compared to direct competitors. At upper price band of Rs 227, stock is available at 50.4x FY15 EPS and 34.9x FY16E EPS, while industry average is currently 29.8x. However, we believe that company is poised to grow at healthy rate, consequently, re-rating will render the valuation cheaper compared to industry average. Hence we recommend, investors with medium to long term view can “SUBSCRIBE” this IPO.
