India's per capita dairy consumption levels are significantly lower than developed markets and with a large consumer base of 1.3 billion people, demand will never be a challenge which gives sufficient opportunity to manufacturers and retailers. India with 134 Mn metric tons of production is world's largest liquid milk producer, which accounts for 18 per cent of total global milk production. Most of the milk produced is consumed domestically.
Kwality Ltd is one of the early entrant and is major player in northern states of India. Kwality limited produces a range of quality milk and milk products. Their Product portfolio includes:
At the CMP of 46, and EPS of 6.23 it is trading at the P/E ratio 7.08. At this price, investors with medium to low risk appetite can invest with long term horizon in this share for good returns.
A key feature of the Indian dairy industry is that it is still predominantly unorganized. Of the total milk produced in India, only 18-20 per cent is channelized through the organized segment. A positive development is that there is a clear shift towards the share of organized segment, increasing from 13 per cent in 2005 to 20 per cent currently. This is driven by an increasing demand for packaged milk and value added products and is now attracting multinational players to India. Even on the supply side, farmers prefer organized channels due to higher price realization.
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| Kwality Ltd - All Dairy Products |
Kwality Ltd is one of the early entrant and is major player in northern states of India. Kwality limited produces a range of quality milk and milk products. Their Product portfolio includes:
- Fat based Products (Fat/Butter/Cream/Ghee)
- Milk Powders
- Curd
- Milk (74% of the revenue)
Their key brands are
- Dairy Best
- Good-Health
- Kream-Kountry
- LivLite
The major demand drivers for the milk products in India are:
- Economic growth and poverty alleviation leading to increased share of dairy products spend in household income.
- Urban population fast shifting to packaged food products
- Increasing literacy levels raising awareness about health benefits
- Increase in organized retail penetration
With the removal of ban on the export of skimmed milk powder in June, 2012 and whole milk powder & dairy whitener in November, 2012. Kwality Ltd started export of Dairy products and achieved the export turnover of Rs. 183.45 crores as compared to Rs. 71.74 crores in the FY 2012-13. In the next fiscal year the Company has estimated an increase in export sales based upon the rising demand of dairy products in the international market and the acceptance of their products from existing and prospective buyers.
To increase its international presence and cater to the new markets, Kwality Limited has established its wholly-owned subsidiary, Kwality Dairy Products FZE in free trade zone of UAE. The subsidiary is mainly involved in the trading of various milk products and imports skimmed and whole milk powder and various derivatives of milk, ghee, butter & other dairy products. The products are sold both domestically and export to other countries.
The key achievements of the company is the past few years is consistently giving a Consolidated profit growth of 68.73% in last five years, Compounded return on Equity (ROE) from last 3 yrs is 45.49%, Compounded sales growth of 51.02% in last years. Promoters hold 75% stake in the company, which clearly shows the confidence of the promoters in the business.
At the CMP of 46, and EPS of 6.23 it is trading at the P/E ratio 7.08. At this price, investors with medium to low risk appetite can invest with long term horizon in this share for good returns.
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