Parag Milk Foods Limited Q3FY17 Concall Summary

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Performance Highlights

Parag Milk Foods Q3FY17 Performance


Developments in 3Q FY 2016-2017

  • Launched new marketing campaign for the flagship ghee product with new positioning “Pyaar ka Rang Sunehra"
  • Veer Das signed to promote new product “Spice up”
  •  Efforts made in ramping up Pride of cows business by extending its reach to Surat.
  • Distribution system expanded by establishing new depot in Chennai.
  • Increase in milk procurement by around 27% during the quarter
  • Company launched Whey protein absolute named “Avataar” on February 1st.
Parag Milk Foods Distribution Network

Impact of Demonetization

  • During Q3, which starts from October and ends in December, marks as the flush season. Milk prices stay increased in this quarter and settle down by next quarter
  • Flush season resulted in procurement of ~1.2 million liters of milk per day.
  • Demonetization did not provide the right window to increase the consumer product prices and the company had to wait for its effect to settle
  • During Q3 FY17 SMP grew by 273% YOY due to better realization in the market
  • Gross margin declined by 770 basis points from a 29.8 % margin in Q3 of last year to 22.1% in this quarter of the current year
  • Increase in the share of skimmed milk powder from a mere 4% last year to 12% this year
  • Have incurred an operating loss of Rs.14.4 Cores in Q3 of this year as compared to Rs.38.3 Crores positive profit in the December quarter of the last year.
  • Significant operating profit margin drop from 9.9% in the last year being positive to a -3.2% in the current quarter of the current year
  • Company’s net loss is minus Rs.37.9 Crores in Q3 of FY2017 as compared to the net profit of Rs.14.5 Cores in Q3 of FY2016.

Decline in PAT and EBITDA Margin

  • PAT margin decline from a positive 3.7% in Q3 of the last year to a negative 8.5% in the Q3 of the current year.
  • PAT growth impacted due to expense of Rs.16.5 Crores pertaining to prior year.
  • The negative PAT for the current is minus 4.8%
  • The EBITDA margin has declined and has gone into a negative territory of minus 3.2% and the PAT margin has gone down with an exceptional expense to minus 8.5% and without an exceptional expense to minus 4.8%

Revenues and Strategy of The Company

The revenue from the operations for Q3 of FY17 has grown up by 15.1%to Rs.446.1 Crores in this quarter of the financial year 2017 which is Q3 from Rs.387.5 Crores in the similar financial quarter of the last year which is Q3 FY16.

Parag Milk Food Q3FY17 Revenue Breakup
  • Contribution of Fresh milk remained at 21% in Q3.
  • Revenue of fresh milk increased by 15%
  • The share of the skimmed milk powder has increased by 800 basis points Y-o-Y to 12% as a share of pie in the revenue along with an increase in its revenue by 273% from a sale.
  • The long-term strategy of the company is to focus on milk and milk products.
  • Modest growth observed in revenue of milk products which increased by 5% from Rs 281.4 crores to Rs 295.3 Crores
  • Advertising expense runs up to about 8% to 8.5% of the revenue.
  • Money raised from IPO is Rs.300 Crores, Rs.100 Crores is for repayment of debt, Rs.50 Crores is for working capital and Rs.150 Crores is for Capex
  • Total of Rs.150 Crores is laid down in the IPO document.
  • Increase in the prices of milk roughly by 14%