India Dairy - Steep Inflation In Milk Prices Continues: ICICI Securities

ICICI Securities Report

Wholesale milk prices pan India continue to increase both month-on-month and YoY. Dairy companies have also raised milk selling prices by 8-10% in the past ten months due to sustained rise in milk procurement prices.

While we note the global skim milk powder prices are down YoY, weak flush season as well as inflation in cattle feed prices are chief reasons for the higher milk prices.

We continue to factor contraction in dairy companies’ Ebitda margin by 50-100 basis points in H2 FY23E.

We believe dairy companies need to:

1. raise prices again in H2 FY23, and

2. focus on increasing the share of Indian -added products to protect their (the companies’) profitability.

However, with higher inflation and likely better volumes (higher sales to hotel-restaurant-face), revenue growth is likely to remain strong.

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