Recommendation From Packaged & Marine Port Sectors

The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.

PARAG MILK
CMP - Rs 311.35
BSE CODE 539889 
Volume 139826
Face Value Rs 10
Target Rs 348 
Stoploss Rs 293

The FMCG diary company, known for its brands Go, Gowardhan, Avvataar, is engaged in dairy farming. The company enjoys 33% market share in processed cheese and stands second in the country. The company generated its major revenue in FY17 from the sale of liquid milk (21%), cheese/paneer (21%), ghee (20%), butter (9%), whey (4%) etc. The company is seen reducing exposure from skimmed milk powder and fresh milk with gross margins ranging from 5-12% to other value-added products (VAP) with gross margins ranging from 25-40% to enhance its operating margins to 10-11% in couple of years.  Further, its whey protein, a pure veg protein powder made purely from milk protein, is the first in India and can become a substitute to the whey protein majorly dominated by imported brands. Further, the company would fund its capex through internal accruals and IPOs and reduce debt. Financially, the TTM operating profit margin stands at 9.95% as against 5.13% in FY17 and the TTM PAT growth stands at 430%.

A company promoted by APM Terminals Mauritius, Gujarat Pipavav Port is engaged in Pipavav port development, maintenance and operations. It acts as a principal gateway on the West coast of India and provides access to shipping lines through international and northern region of India. With support from the parent, the company was able to post revival in container volumes in December 2018 quarter after four consecutive declines. Further, it has added liner from the parent, plus the Cosco+Wan Hai liner are together expected to enhance company’s capacity utilisation to nearly 75%. The company’s focus towards the high margin liquid and Ro-Ro cargos would offset passive performance from container and bulk cargos suffering from high competition. The company’s FY17 revenue and PAT reported a growth of 3.5% and 30.7%, respectively. It has maintained zero debt since FY15. In terms of revenue, it fetches 75% in USD and hence, dollar appreciation would help boost its revenue. The company is attractively priced in terms of P/E and cash flow yield.