Dairy Sector Check - Early Signs Of Emerging Stability In Milk Prices: ICICI Securities

ICICI Securities Report

Global skimmed milk powder prices have corrected 35% YoY in Feb-23. Even after adjusting for benefits of Indian rupee depreciation, we believe the profitability in SMP exports is very weak. Lower SMP exports will likely reduce the mismatch between demand and supply of milk in India.

Though the cattle feed prices are still in inflationary zone, we model them to correct with correction in food grain prices.

These data points indicate that the milk procurement prices are expected to stabilise in next two quarters.

However, we believe the dairy companies are likely to report muted profitability even in H1 CY23. Dairy companies may resort to at-least one round of prices before the input prices start correcting by Q3 FY24.

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