Kwality Dairy - Rs.16.00

Incorporated in 1992, Kwality Dairy (India) Ltd. (KDIL) is a premier dairy foods company manufacturing a wide range of dairy products like skimmed milk powder, dairy whitener, whole milk powder, ice cream mix powder, butter & ghee both in bulk as well as in consumer packs. It is operating under the brand name of ‘INDANA’, ‘KREAM KOUNTRY’ and ‘GOOD HEALTH’, having niche markets. The other activities of the company comprise pasteurising and packing of fresh milk on job work basis. It has supplied its goods and won appreciation from renowned companies like Nestle India Ltd, Hindustan Lever and Mother Dairy, Vadilal Industries, Cadbury, Britannia, Parle Products and Smith Kline Beecham to name a few. It also exports its products to various countries.

Its ISO 9001-2000 and HACCP certified manufacturing facility is spread across 6.5 acres in Faridabad, Haryana near New Delhi has ultra modern dairy machinery and has incorporated the latest technology and key equipment from Alfa Laval (India) Ltd. a Tetra Pack Group, with design back-up from APV Anhydro Pasilac AS, Denmark. The plant has a capacity to process 4,50,000 litres of milk per day and 1000 MT of ghee per month. Being in a rich milk belt, the company follows a well-formulated and comprehensive strategy for the procurement of milk on a daily basis. For additional revenue, KDIL has developed and leased out packing facilities to Gujarat Milk Co-operative for packing ‘AMUL’ fresh milk. KDIL is undergoing an expansion to increase its milk processing capacity by another 4,00,000 litres per day and proposes to launch new items like sugar free Rasgulla and Gulab Jamun, Fresh Paneer, Flavoured milk, Malted foods etc. India accounts for half of total milk output of Asia, and is sustaining its position as the world's largest milk producing country. With the growing awareness about health, the increasing urbanization and the rising standard of living, the dairy industry is expected to witness the fastest growth at over 20%-30% as reported by the Ministry of Food Processing Industries, Government of India. Moreover, the international demand for dairy products continues to grow particularly in Asia, North Africa, the Near East, Central America and the Russian Federation in Europe.

For FY06, KDIL’s sales increased by 35% to Rs.99 cr. but net profit jumped 135% to Rs.4 cr. (after deferred tax) posting an EPS of Rs.2 on its equity of Rs.18.20 cr. For the June’06 quarter, also it reported a healthy set of numbers with Sales rising 60% to Rs.28 cr. and net profit up by 22% to Rs.0.96 cr. Hence, it may end FY07 with total revenue of Rs.135 cr. and profit of Rs.5.50 cr. after deferred tax i.e. EPS of Rs.3. Besides, it has wiped out all its accumulated losses in FY06 and its book value stands at Rs.10 now. With a 52-week high/low as Rs.27/Rs.10 and quoting at the P/E of 5, this scrip is a value buy at current market cap of less than Rs.30 cr. Investors are advised to buy it at sharp declines with a price target of Rs.24 in 15-18 months.