MODERN DAIRIES ( BSE CODE: 519287 ) - CMP Rs. 25
Everyone has certain angles when it comes to investing. One of the angles that has worked extremely well for me in the past is "Investing based on peer valuations". You are not going to find this in any theory books. But here is how it works. Identify a sector which you think has really good growth potential given the macro economics of the region or global.
1. One of the sectors that I have identified is Dairy sector. Australia which is a major player in the global Dairy market has experienced drought conditions leading to thinning supply of dairy. So the global Dairy prices looks BULLISH.
2. Next thing is regional. India is facing a huge demand for dairy. Hence prices are going higher and higher helping companies in this sector.
3. When I looked at the Dairy sector, I really liked Heritage Foods hence I made my last call. Heritage Foods has doubled (100% return in a few weeks) and still going up.
4. Now I'm greedy (The famous quote from Gordon Gekko in Wall Street Movie, "Greed is good", when it comes to investing). I want to get into dairy players with solid potential and not too expensive. Modern Dairies fits that bill.
5. Modern Dairies has a small quity too around Rs. 8.7 Crores. Current Market Capitalization at CMP around Rs. 24.1 Crores.
6. Modern Dairies reported a revenue of Rs. 50 Crores for the latest quarter ending Dec 2006. If you annualize it it works out to be around Rs. 230 per share in revenue. EPS for the latest quarter: Rs. 1.84, if you annualize that around Rs. 7.36 (Note: Modern Dairies is going through expansion, hence the profitability is better than it looks on paper)
7. Here is Modern Dairies website: http://milkplus.com
They produce a wide varieties of Dairy products including some premium products like speciality cheese (which is growing heavily in India). Check out the website.
8. Modern Daries is based in Haryana, very close to Delhi. It is located in a region which produces one third (33%) of India's dairy output. So supply is always good.
9. These are Modern Dairies customers from their website:
Glaxo SmithKline Consumer Health Care
Nestle
Britannia - New Zealand Milk
Mother Dairies
Domino's Pizza
Pizza Hut
Britannia Industries
Coca Cola - India
Raptakos Brett
Hindustan Lever Limited
Cadbury
Modern Dairies also sells Dairy products under their brand names: 1. Shweta , 2. Cow Bell, 3. Milkplus, 4. Modern
10. Now coming back to my original concept of PEER VALUATIONS angle. Modern Dairies is trading at Rs. 25. So it works out to be an annualized P/E of 3.4 . Price to Revenues annualized works out to be: 0.12 . Compare with companies like Milkfood at CMP Rs. 320 (they are based in the same region) and in the same line of products, their P/E is 320/ 8.49 = 37.69 . Thier Price/ Revenue is 1.35. There is huge FII buying interest in Milkfood. Last quarter Religare invested and acquired 14% of Milkfood. My last call Heritage Foods, is doing excellent and their P/E is much higher.
So hopefully I have given some insight into why I made my next pick MODERN DAIRIES.
Good luck!!!
Everyone has certain angles when it comes to investing. One of the angles that has worked extremely well for me in the past is "Investing based on peer valuations". You are not going to find this in any theory books. But here is how it works. Identify a sector which you think has really good growth potential given the macro economics of the region or global.
1. One of the sectors that I have identified is Dairy sector. Australia which is a major player in the global Dairy market has experienced drought conditions leading to thinning supply of dairy. So the global Dairy prices looks BULLISH.
2. Next thing is regional. India is facing a huge demand for dairy. Hence prices are going higher and higher helping companies in this sector.
3. When I looked at the Dairy sector, I really liked Heritage Foods hence I made my last call. Heritage Foods has doubled (100% return in a few weeks) and still going up.
4. Now I'm greedy (The famous quote from Gordon Gekko in Wall Street Movie, "Greed is good", when it comes to investing). I want to get into dairy players with solid potential and not too expensive. Modern Dairies fits that bill.
5. Modern Dairies has a small quity too around Rs. 8.7 Crores. Current Market Capitalization at CMP around Rs. 24.1 Crores.
6. Modern Dairies reported a revenue of Rs. 50 Crores for the latest quarter ending Dec 2006. If you annualize it it works out to be around Rs. 230 per share in revenue. EPS for the latest quarter: Rs. 1.84, if you annualize that around Rs. 7.36 (Note: Modern Dairies is going through expansion, hence the profitability is better than it looks on paper)
7. Here is Modern Dairies website: http://milkplus.com
They produce a wide varieties of Dairy products including some premium products like speciality cheese (which is growing heavily in India). Check out the website.
8. Modern Daries is based in Haryana, very close to Delhi. It is located in a region which produces one third (33%) of India's dairy output. So supply is always good.
9. These are Modern Dairies customers from their website:
Glaxo SmithKline Consumer Health Care
Nestle
Britannia - New Zealand Milk
Mother Dairies
Domino's Pizza
Pizza Hut
Britannia Industries
Coca Cola - India
Raptakos Brett
Hindustan Lever Limited
Cadbury
Modern Dairies also sells Dairy products under their brand names: 1. Shweta , 2. Cow Bell, 3. Milkplus, 4. Modern
10. Now coming back to my original concept of PEER VALUATIONS angle. Modern Dairies is trading at Rs. 25. So it works out to be an annualized P/E of 3.4 . Price to Revenues annualized works out to be: 0.12 . Compare with companies like Milkfood at CMP Rs. 320 (they are based in the same region) and in the same line of products, their P/E is 320/ 8.49 = 37.69 . Thier Price/ Revenue is 1.35. There is huge FII buying interest in Milkfood. Last quarter Religare invested and acquired 14% of Milkfood. My last call Heritage Foods, is doing excellent and their P/E is much higher.
So hopefully I have given some insight into why I made my next pick MODERN DAIRIES.
Good luck!!!
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