Milk Price Hikes By Co-Operatives; Pvt Companies To Gain Market Shares By Maintaining Prices: ICICI Securities

ICICI Securities Report

Milk prices trends in June 2024:

1. Amul and other co-operatives have raised prices by Rs 2/liter. As private companies have not yet raised prices, they are likely to gain market shares, in our view. We also believe the private companies are likely to raise prices when milk prices start inching upwards.

2. The milk procurement prices have declined by Rs 1/liter in June-24 as per our checks and with possibility of normal monsoon in FY25, we model milk procurement prices to remain lower.

3. SMP prices have increased 14.3% YoY/5.9% month-on-month.

Most dairy companies are likely to benefit with inflation in global SMP prices as they accumulated large SMP inventory at lower prices in Q4 FY24. Thus, we believe, buoyant Ebitda margin trajectory for dairy companies may sustain in H1 FY25E.

We remain constructive on the sector led by its strong return ratios (>cost of capital) across cycles and likely higher margins in H1 FY25E. We have Buy rating on Heritage Foods and Hatsun Agro while Add on Dodla Dairy.

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