IPO NOTE

26th AUGUST, 2015

SUBSCRIBE

Prabhat Dairy Ltd. Nifty

7,880.70

Sensex

26,032.38

COMPANY BACKGROUND Incorporated in 1998 and promoted by Nirmal family, Prabhat Dairy Ltd. is an integrated milk and dairy product company in India catering to both institutional as well as retail customers. customers It produces variety of fresh, dry, frozen, cultured and fermented dairy products like flavoured milk, sweetened condensed milk, milk, ghee, yoghurt, chaas, lassi, etc. The company has recently setup new facility for commercial production of cheese, paneer and shrikhand and currently has aggregate milk processing capacity of 1.5 million litres per day.

Issue Details Offer Price Band Face Value Shares Offered (in crores) Issue Size (in crores) Type Promoters Listing (Stock Exchange) Offer Open Date Offer Close Date

` 140 - 147 10 3.6 `505.9 – 516.2 Offer For Sale & Fresh Issue Nirmal Family Trust, Sarangdhar Nirmal, Vivek Nirmal NSE, BSE 28 August, 2015 1 September, 2015

Website: www.prabhatfresh.com Scrip Estimates Market Cap (` Crores) EPS - FY15 (`) P/E(x) Shareholding Pattern (%) Promoter & Promoter Group IABF Proparco Public & Others

1,300 – 1,350 2.95 47.5 – 49.8 Pre Offer

FINANCIALS Prabhat Dairy Ltd. reported consolidated net profit of `21 crore and total revenues of ` `1000.8 crore in FY15. Of the total revenues from finished goods in FY15, 75.8% were derived from sale of institutional products and 24.2% % from sale of retail consumer products. Debt to Equity for FY15 stood at 1.2x. OBJECTS OF THE ISSUE The primary objective of the issue of the fresh issue of `300 crores is to repay the debt of the company and its wholly owned subsidiary SAIPL of approximately `185 crores; and for capex of approximately `35.1 crores. Apart from the fresh issue, 1.47 crores share are being sold by the Promoter (Nirmal Family Trust), IABF and Proparco; Proparco the company will not receive any proceeds and all the proceeds will go to the Selling Shareholders. INVESTMENT RATIONALE

Post Offer

61.4

44.3

22.7 14.2

10.5 5.6

1.7

39.5

Investors should read the risk factors and more detailed information in the Prospectus and the application form before investing in the issue.

 Focus on increasing retail consumer product share to improve profitability: The share of retail consumer products of the total revenues from finished goods stood at ~24.2% in FY15. The company plans to focus more on retail consumer products and improve its share to the topline by expanding its distribution on network and intensive marketing of its branded products.. The management aims for 50:50 share from institutional products and retail consumer products in the coming years. The retail consumer products attract higher gross margins, while the operating margins gins are similar to institutional products. With increasing share from retail consumer products, the management expects operating margins to improve over the period and thus expect better profitability.

 New products and increasing capacities to drive growth: The company has recently Financials FY13 FY14 (` ` crore) Sales 483.0 641.1 Expenditure 434.4 568.3 EBIDTA 48.7 72.8 EBIDTA (%) 10.1 11.4 Depreciation 16.5 24.4 Interest 18.4 29.7 Other Inc. 0.8 0.8 PBT 14.6 19.5 PAT 9.5 14.1 PAT (%) 2.0 2.2 Equity Capital 16.9 27.1 8.30 7.66 EPS (`) Source: Prabhat Dairy Ltd. RHP

Ronak Morjaria Tel: +9122-66638959

FY15 856.7 765.9 90.7 10.6 33.5 33.0 1.0 25.3 20.8 2.4 71.4 2.95

setup additional facility at Shrirampur for manufacturing high profit margin products like mozzarella cheese, cheddar cheese, processed cheese, paneer and shrikhand, shrikhand which has a potential to generate revenues of ~`300 300 crores. crores The initial focus of the company would be focus on B2B and supply to the QSR (Quick Service Restaurants) Restaurant segment. The company continues to increase its capacities and capabilities of its existing dairy products to benefit from the growth opportunities in future. f With limited players in manufacturing various types of cheese heese and targeting QSR segment, coupled with increasing capacities we believe the company is building blocks for the future.

 Niche institutional clientele: The company caters to niche institutional clients like Abbott Healthcare for milk powder for baby food and Mondelez India for sweet condensed milk. The company also co-manufactures manufactures products like ghee, curd, yogurts, etc for leading FMCG companies like Britannia fIndustries, tries, Heritage Foods and Mother Dairy. We believe the company can leverage its variety of product portfolio to existing institutional clients with its strong relationship,, which can further auger company’s growth.

[email protected]

Way2Wealth Brokers Pvt. Ltd. (CIN U67120KA2000PTC027628) SEBI Rgn. No. : Applie plied for. No. 14, Frontline Granduer, Walton Road, Banga ngalore-560001; Website: www.way2wealth.com Email: research@way2w 2wealth.com

Way2wealth Researc arch is also available on Bloomberg WTWL

Prabhat Dairy Ltd. IPO Note 26th August, 2015

KEY CONCERNS 

The company is exposed to risk of procuring milk of required quality at competitive price. Since, raw milk is the key raw material for all the dairy products, inability to procure sufficient quantity and required quality milk from its milk farmers, milk vendors or milk supplierss at competitive price; may affect the company’s business operations and profitability.



The company is exposed to high regulatory risk, since it is regulated by various regulators like FSSAI along with regulatory acts like Food Safety and Standards Act, 2006 and Food Safety and Standards Rules, 2011. Failure to maintain the quality standards required by the respective regulators may lead to discontinuation of the product and thus adversely affecting the company’s business.



The company is also exposed to concentration oncentration risk, since 75.8% of the revenues from sale finished products in FY15 were from institutional products; products with 36% revenues from its top five clients. The contract term with the institutional clients ranges from 1 to 3 years and may even be terminated inated with immediate effect on breaching the contractual terms and product quality. Losing order from institutional client may significantly impact the total revenues of the company.

VALUATION AND INVESTMENT ARGUMENT At the offer price bands, the issue is available at P/E of 47.5x – 49.8x its FY15 EPS of ~ ~`2.95, , valuing the stock at 1.3x Market Cap to Sales. Sales We believe there are great opportunities for dairy products in the FMCG industry with increasing premium products product in the market. market The company’s focus on retail consumer products, products introduction of new high margin product like cheese and expanding capacities as well as capabilities, coupled with strong relationship with existing institutional clients; we believe the company com fully equipped to benefit the growth opportunities in future. future Hence we recommend SUBSCRIBE to this issue.

Way2Wealth Brokers Pvt. Ltd. (CIN C U67120KA2000PTC027628) SEBI Rgn. No. : Applie lied for. No. 14, Frontline Granduer, Walton Road, Bangal galore-560001; Website: www.way2wealth.com Email: research@way2we 2wealth.com 2|P a g e

Way2wealth Research rch is also available on Bloomberg WTWL

Prabhat Dairy Ltd. IPO Note 26th August, 2015

COMPANY’S BUSINESS AT A GLANCE Prabhat Dairy Ltd. has automated production facilities located at Shrirampur (Ahmednagar) and at Navi Mumbai with advanced equipment having an aggregate milk processing capacity of 1.5 million litres per day. As of 30th June, 2015, the company has milk collection facilities with more than 450 milk collection centres, over 15 milk chilling plants and over 85 bulk milk coolers. 65% of the milk is procured directly from the milk farmers and the balance from third party milk vendors. Retail consumer products are sold under its own brands namely Prabhat, Flava and Milk Magic. The company has large distribution network with more than 350 distributors and more than 100 Prabhat mini stockists. Mondelez India Partially Skimmed Milk Sugar Concentrate; Skim Milk Powder; Skimmed Milk Preparations; etc

Specialty Ingredient Products

Abbott Healthcare Speciality Milk Powder for Baby Food Other Companies Speciality Milk Powder and Sweetened Condensed Milk

Institutional Products

Heritage Foods Dairy Whitener, Curd (Dahi); Butter Milk Co-manufactured Products

Prabhat Dairy Ltd.

Prabhat Pasteurized Milk, Clarified Butter, SMP, Curd, Lassi and Chaas

Retail Consumer Products

Britannia Curd (dahi), Clarified Butter (ghee) Mother Dairy Ice Cream; Milk Ice; Milk Candies

Milk Magic Sweetened Condensed Milk Flava Flavoured Milk

Sales Mix 100.0%

Institutional Products Retail Products 85.3%

85.4%

80.0%

75.8%

60.0% 40.0% 20.0%

14.6%

14.7%

24.2%

0.0% FY13

FY14

FY15

Way2Wealth Brokers Pvt. Ltd. (CIN C U67120KA2000PTC027628) SEBI Rgn. No. : Applie lied for. No. 14, Frontline Granduer, Walton Road, Bangal galore-560001; Website: www.way2wealth.com Email: research@way2we 2wealth.com 3|P a g e

Way2wealth Research rch is also available on Bloomberg WTWL

Prabhat Dairy Ltd. IPO Note 26th August, 2015

KEY FINANCIAL CHARTS

Sales Sales (Rs. in Crores)

1200.0

1000.8

1000.0

856.7

800.0

641.1

600.0

Sales growth at ~36.7% CAGR during FY11 to FY15

483.0

400.0 200.0 0.0 FY12

FY13

FY14

FY15

Source: Company, Way2Wealth Research

120.0

EBIDTA (%) 11.5

11.4

100.0

11.0

80.0 60.0 40.0

10.6

10.5 10.1

10.1

10.0

20.0

9.5

0.0

9.0 FY12

FY13

FY14

EBITDA Margins (%)

EBITDA (Rs. in Crores)

EBIDTA

EBITDA growth at ~48% CAGR during FY11 to FY15

FY15

Source: Company, Way2Wealth Research

PAT

PAT (%) 3.0

20.0 15.0

2.0

2.2

2.5

2.4 2.1

2.0 1.5

10.0

1.0

5.0

0.5

0.0

0.0 FY12

FY13

FY14

PAT Margins (%)

PAT (Rs. in Crores)

25.0

PAT growth at ~22.1% CAGR during FY11 to FY15

FY15

Source: Company, Way2Wealth Research

Way2Wealth Brokers Pvt. Ltd. (CIN C U67120KA2000PTC027628) SEBI Rgn. No. : Applie lied for. No. 14, Frontline Granduer, Walton Road, Bangal galore-560001; Website: www.way2wealth.com Email: research@way2we 2wealth.com 4|P a g e

Way2wealth Research rch is also available on Bloomberg WTWL

Prabhat Dairy Ltd. IPO Note 26th August, 2015

Team Analyst

Designation

Nilesh Doshi Mahesh Bendre Jaysheel Garg Shivani V. Vishwanathan Nisha Harchekar Ronak Morjaria Vijay Gyanchandani

President (Research) AVP AVP Sr. Research Analyst Sr. Research Analyst Research Associate Research Associate

Institutional Sales Ramanjaneyulu BV Vinod Vijay Birla Bhavika Ravasia

Sector

Email

Telephone

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

+9122-6633 8950 +9122-6146 8937 +9122-6146 8921 +9122-6663 8956 +9122-6146 2952 +9122-6633 8959 +9122-6633 8272

Designation

Email

Telephone

Institutional Head – Sales Senior Manager Senior Manager

[email protected] [email protected] [email protected]

+9122-6146 2913 +9122-4019 2998 +9122-4019 2995

Institutional Dealing

Designation

Email

Telephone

Ajay Prabhudesai Mitul Doshi Gautam Vyas

Assistant Vice President Institutional Sales Trader Institutional Sales Trader

[email protected] [email protected] [email protected]

+9122-4027 8930 +9122-4027 8932 +9122-4027 8934

Capital Goods, Auto, Auto Ancillary Power, Power Equipment, Coal Mining FMCG, Auto Chemicals, Textiles

Way2Wealth Brokers Pvt. Ltd. (CIN C U67120KA2000PTC027628) SEBI Rgn. No. : Applie lied for. No. 14, Frontline Granduer, Walton Road, Bangal galore-560001; Website: www.way2wealth.com Email: research@way2we 2wealth.com 5|P a g e

Way2wealth Research rch is also available on Bloomberg WTWL

Prabhat Dairy Ltd. IPO Note 26th August, 2015 Disclaimer Analyst Certification: I, Ronak Morjaria,, the research analyst and author of this report, hereby certify that the views expressed in this research report accurately reflect our personal views about the subject securities, issuers, products, sectors or industries. It is also al certified that no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations recomme or views in this research. The analyst(s), principally responsible for the preparation of this research report, receives compensation based on overall revenues of the company (Way2Wealth Brokers Private Limited, hereinafter referred to as Way2Wealth) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. It is confirmed that Ronak Morjaria,, the author of this report has not received any compensation from the companies mentioned in the report in the preceding 12 months. Our research professionals are paid in part based on the profitability of Way2Wealth, which include includ earnings from other business. Neither Way2Wealth nor its directors, employees, agents or representatives shall be liable for any damages whether wh direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise arise from or in connection with the use of the information contained in this report. This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Way2Wealth is not soliciting ting any action based upon it. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any such transaction. The contents of this material are general and are a neither comprehensive nor appropriate for every individual and are solely for the informational purposes of the readers. This material materi does not take into account the specific objectives, financial situation or needs of an individual/s or a Corporate/s or any entity/s. ent This research has been prepared for the general use of the clients of the Way2Wealth and must not be copied, either in whole or in part, or distributed or redistributed to any other person in any form. If you are not the intended recipient you must not use or disclose discl the information in this research in any way. Though disseminated to all the customers simultaneously, not all customers may receive re this report at the same time. Way2Wealth will not treat recipients as customers by virtue of their receiving this report. The distribution of this document do in other jurisdictions may be restricted by the law applicable in the relevant jurisdictions and and persons into whose possession this document comes should inform themselves about, and observe any such restrictions. The report is based upon information obtained from sources believed to be reliable, but we do not make any representation or warranty that it is accurate, complete or up to date and it should not be relied upon as such. Way2Wealth or any of its affiliates or employees employee makes no warranties, either express or implied of any kind regarding any matter pertaining to this report, including, but not limited to warranties of suitability, fitness for a particular purpose, accuracy, timeliness, completeness or non-infringement. non infringement. We accept no obligation to correct or update the information or opinions in it. Way2Wealth or any of its affiliates or employees employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. The recipients of this report should rely on their own investigations. In no event shall Way2Wealth Way2Wealth be liable for any damages of any kind, including, but not limited to, indirect, special, incidental, consequential, punitive, lost profits, or lost opportunity, whether or not Way2Wealth has advised of the possibility of such damages. This materiall contains statements that are forward-looking; forward looking; such statements are based upon the current beliefs and expectations and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking forward statements. These uncertainties include but are not limited to: the risk of adverse movements or volatility in the securities markets or in interest int or foreign exchange rates or indices; adverse impact from an economic slowdown; downturn in domestic or foreign securities securitie and trading conditions or markets; increased competition; unfavorable political and diplomatic developments; change in the governmental or regulatory policies; p failure of a corporate event and such others. This is not an offer to buy or sell or a solicitation solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. No part of this material may be copied or duplicated in any form by any means or redistributed without the written consent of Way2Wealth. In no no event shall any reader publish, retransmit, redistribute or otherwise reproduce any information provided by Way2Wealth in any format to anyone. Way2Wealth and its affiliates, officers, directors and employees including persons involved in the preparation or issuance of this report may from time to time have interest in securities / positions, financial or otherwise in the securities related to the information contained in this report. To enhance transparency, Way2Wealth has incorporated a Disclosure of Interest Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. Disclosure of Interest Statement in Prabhat Dairy Ltd. as on August 26, 2015 Name of the Security

Prabhat Dairy Ltd.

Name of the analyst

Ronak Morjaria

Analysts’ ownership of any stock related to the information contained Financial Interest Analyst : Analyst’s Relative : Yes / NO Analyst’s Associate/Firm : Yes/No

No

Conflict of Interest

No

Receipt of Compensation

No

Way2Wealth ownership of any stock related to the information contained

NIL

Broking relationship with company covered

NIL

Investment Banking relationship with company covered

NIL

No No No

This information is subject to change without any prior notice. Way2Wealth reserves at its absolute discretion the right to make m or refrain from making modifications and alterations to this statement from time to time. Nevertheless, Way2Wealth is committed to providing independent and transparent recommendations to its clients, and would be happy to provide information in response to specific client queries.

Way2Wealth Brokers Pvt. Ltd. (CIN C U67120KA2000PTC027628) SEBI Rgn. No. : Applie lied for. No. 14, Frontline Granduer, Walton Road, Bangal galore-560001; Website: www.way2wealth.com Email: research@way2we 2wealth.com 6|P a g e

Way2wealth Research rch is also available on Bloomberg WTWL

Prabhat Dairy - IPO Note.pdf

ngalore-560001; Website: www.way2wealth.com Email: research@way2w ... share to the topline by expanding its distribution network and intensive marketing of its ... would be focus on B2B and supply to the QSR (Quick Service Restaurant.

815KB Sizes 7 Downloads 200 Views

Recommend Documents

IPO Note
Oct 21, 2014 - SERRANO LTD. Singapore Research Team. Tel: 6533 0595. Email: [email protected]. KEY FINANCIALS. Source : Company. Dec YE.

IPO Note
Oct 21, 2014 - inline with its closest SGX-listed peer, Design Studio, which is trading at ... Over the longer term, we believe that management's intent to further.

Dairy Products- I.pdf
Sign in. Page. 1. /. 6. Loading… ... fat from 100 kg of milk testing 35% fat ? (c) What do you understand by pre 2 ... Displaying Dairy Products- I.pdf. Page 1 of 6.

Dairy Aseptic Systems.pdf
Dairy. Aseptic. Systems. Training Document. This Training Document is intended for. Training ... CIP Information 11 ..... Displaying Dairy Aseptic Systems.pdf.

New NEAT IPO version 4.29.00 (pdf) - NSE
Jun 30, 2015 - Admin URL (https://mock.nowonline.in/admin.html). • Trading terminal ... 2. Buy/Sell. C(2). 01 for Buy. 3. Symbol. C(10). Symbol. 4. Series. C(2).

QUALITY AND SAFETY MONITORING IN DAIRY INDUSTRY ...
QUALITY AND SAFETY MONITORING IN DAIRY INDUSTRY NOTES 1.pdf. QUALITY AND SAFETY MONITORING IN DAIRY INDUSTRY NOTES 1.pdf. Open.

Dairy Farm International Holdings Limited
or your J.P. Morgan representative, or email [email protected]. ... J.P. Morgan Cazenove is a marketing .... address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE. Country ...

meat and dairy production & consumption
Direct energy inputs are in fact low for the livestock sector on average5 (as is ... these resource streams; equally though they may have alternative potential as.

IPO Lottery Result of United AirWays (BD) Ltd.
27 North brook Hall Br, Dhaka. 28 Pragati Sarani Br.Dhaka. 29 Rokeya Sarani Br.Dhaka. 30 Savar Bazar Br. Savar. 31 Sheikh Muzib Road Br.Chittagong.

Shurwid Industries Limited ipo Form for resident bangladeshi.pdf ...
500 10/- each per share. 5000/- Five Thousand Only. 500 SHURWID INDUSTRIES LTD. Form generated by: www.ipobd.com. Powered by TCPDF (www.tcpdf.org). Page 1 of 1. Shurwid Industries Limited ipo Form for resident bangladeshi.pdf. Shurwid Industries Limi

IPO MARKET SEGMENT Download Ref No : NSE/CMTR/25986 Date ...
Feb 26, 2014 - Live URL for Banks : http://www.nseindiaipo.com/eipo/gui/index.html ... 1,41,687.85 Lakhs aggregating to ` 2,91,687.85 Lakhs. Security Type ...

DAIRY MICROBIOLOGY NOTES 1.pdf
inconclusive as Antoine-Laurent Lavoisier demonstrated in 1775 that oxygen (discovered by Joseph. Priestley) was essential to life. In 1836, Franz Schulze demonstrated that no microorganisms could arise in meat broth when air. was allowed to pass thr

DAIRY ENGINEERING NOTES 1.pdf
... or study the role of milk and dairy products in human nutrition. Csíkszereda, 21. st May 2011. The authors. Page 1 of 1. DAIRY ENGINEERING NOTES 1.pdf.

Book dairy free delicious pdf free download
Book dairy free delicious pdf free download

DAIRY MICROBIOLOGY NOTES 1.pdf
decomposition (through fermentation or putrefaction) of plant or animal tissue. This is the concept of. spontaneous generation which believes that life originated ...

SOW FTF Children's Dairy Products.pdf
Mongolia has more meat breeding cows than milk breeding ones thus milk production of. cows is very low at 367 liters per year. Currently Mongolia counts around 839,400 cows. In July the average Mongolian milk cow reaches a peak of 8.2 liters. Milk fr

DAIRY FARM INSTRUCTOR-2017June@PSC WINNERS.pdf ...
Page 1 of 12. Page 1 of 12. Page 2 of 12. Page 2 of 12. Page 3 of 12. Page 3 of 12. DAIRY FARM INSTRUCTOR-2017June@PSC WINNERS.pdf. DAIRY FARM INSTRUCTOR-2017June@PSC WINNERS.pdf. Open. Extract. Open with. Sign In. Main menu. Displaying DAIRY FARM IN

Dairy Management and Entrepreneurship.pdf
(e) Conversion cost. (f) Factory over head. (g) Marketing channels. (h) Marketing Intelligence System. (i) Targeting. (j) Entrepreneur. (k) Net worth. (1) Controlling.

IPO MARKET SEGMENT Download Ref No : NSE/CMTR/31184 Date
Nov 20, 2015 - Members can call between 8:00 hours and 19:30 hours on all working days. Members may also call on alternative number 022-62157600.

Open 01 Dairy 2017.pdf
There was a problem previewing this document. Retrying... Download. Connect more apps... Try one of the apps below to open or edit this item. Open 01 Dairy ...