Presentation on Kwality Limited, FMCG Dairy Products Company- Report By Sanjay Prajapat. Growing company in Dairy Industry expanding its product portfolio and improving financials.

1. KWALITY LIMITED
Sector: FMCG-DAIRY PRODUCTS
By: Sanjay Prajapat,
Equity Research Analyst,
Market Hub Stock Broking Pvt. Ltd.
11th March, 2017

2. Industry Dynamics:
400 MLPD milk
produced
160 MLPD
retained for own
consumption
240 MLPD
available
70 MLPD-
Organized
Sector
170 MLPD-
Unorganised
Sector
• Only 20% of the sector is organized
• Overall growth of the sector - 15%
• Growth of organized sector – 19%
• Growth of Value added segment – 25%

3. About the Company:
• Largest private player with strong presence in North India
• 6 processing facilities in Haryana, UP and Rajasthan
• Current capacity – 3.4 MLPD, expanding further by 0.9 MLPD for
Value added products
• Procurement markets: Haryana, UP, Rajasthan
• Sales Market: Haryana, UP, Rajasthan, Delhi, NCR Region, Punjab

4. Business Reengineering Plan
Brand Products S&D
Sourcing of
Milk
Quality
Framework
IT
Framework
People

5. Higher Revenue
and Margins
More Value
Added Products
Higher Direct
Procurement
Moving from B2B to B2C
• Company has planned to roll out value added products through its Haryana Plant in the next 12-18
months in phased manner
• Margins from Value Added products are 20% and above compared to institutional sales generating
margins on an average of only 4.5-5%
• In the last 5 years, direct procurement has reached from 0% to 20%. Company is planning to take this
ratio to 50:50 and topline from VAP has gone from zero to 1800 cr. in the last four years
• Plan is to reverse the revenue mix of institutional sales to retail sales from existing 68:32 to 30:70, i.e.
70% of sales coming from value added products

6. Peer Comparison:
Company Name Kwality Hatsun Agro Heritage Foods Vadilal
Net Sales(FY16) 5724.23 3444.59 2380.58 444.48
PBIDT 380.82 309.32 138.89 58.94
PBIDT % 6.44 8.97 5.83 12.94
ROCE 18.77 23.31 28.76 22.99
ROE 21.47 36.89 25.99 23.46
TTM PE 23.01 105.61 35.97 28.34
Mcap/Sales 0.62 2 1.01 1.25

7. Moving towards the Goal
• Strategic launch of VAP like flavored milk, lassi, yogurt, butter, cream etc.
• Signed Akshay Kumar as brand Ambassador and Promotion of dairy
products under the brand name “Kwality”
• Signed contracts with top organizations for IT management, social media
marketing and Media interaction
• KKR investment in the company for 520 cr.
• MOU with Bank of Baroda to provide loan to 1 lakh farmers
• 1st dairy company to issue ESOPs

8. Latest Financials:

9. Conclusion:
• With the changing business strategy from B2B to B2C player and growth
prospects, considering the company’s focus on direct procurement,
developing Value added products and brand development, even if we
consider a modest 10% growth in coming 3 years, Kwality Limited is
expected to post significant improvement in margins and bottomline.

10. Thank You