Introduction:- Modern Dairies is engaged into the business of producing dairy products like packed liquid milk, skimmed milk powder, whole milk powder, infant milk food, pure ghee and butter.The company offlate has also diversified in the production of value added products like edible grade casein,WPC,edible grade lactose etc.
Industry growth:-The dairy industry in India is growing at a rapid pace. With India maintaining its status as largest producer of milk in the World with annual growth rate of 3-4%, the dairy industry in India is poised for major development.It is expected that 15-20% of the total milk produced in the country is processed by organized sector.
Triggers:-Internationaly casein market has increased a lot and is further set to increase.Globally also there is a shortage of milk solids and milk is diversified away from Casein manufacturing towards the manufacture of other dairy products.
Clientele:-The company caters to its topline clientele which includes majors like Mother Dairy (Delhi),GlaxoSmithKline Consumer, Britannia, Hindustan Unilever, Domino's and Pizza Hut.
Expansion:-Moden dairies has undertaken a major Expansion Project at the cost of Rs.91 Crores for the manufacture of edible grade casein, WPC and edible grade lactose.These products are targeted for the Export Market.The Company has successfully commissioned its 1st Line and 2nd Line of production.The new products has got good acceptance by the international buyers in USA, Europe, Middle East and China.To strengthen the operations of the Company, it has further undertaken the investments to manufacture Pharma grade lactose, Cogeneration of power and Milk procurement infrastructure etc with an enhanced capex of Rs.155 Crores.
Concerns:-Like any agro based industry,the dairy industry is also dependent on the vagaries of nature which affect the production of milk.
Outlook:-The company processed 12 crore kg of milk in FY07, which is expected to jump to 25 crore kg in FY09.It would be prudent to note that the nutritional ingredients business is expected to contribute 220 crores of turnover in the present fiscal which was 15 crores in FY07.
Conclusion:-The promters recently took 30 lakh shares at rs 81 by way of warrants which speaks about the confidence of them in the company.Some couple of months back the company rewarded the shareholders with a 1 for 1 bonus issue which entails more confidence.One of the large FII,AMAM AC AMAS INDIA INVESTMENTS MAURITIUS LIMITED recently entered the counter at 101rs by purchasing 225000 shares.The company conservatievely is expected to finish the year with a turnover of over 400crs resulting in an bottomline figure of around 14crs.Its not a Valuation play the company is all about growth,potential is immense here and its not a milk business but nutritional ingredients business.At 85 odd levels i would hate to miss a counter which is all set to do wonders with its stock prices in the months to come.
STRONG BUY RS 80-82