Umang Dairies: Recommendation Review

We had recommended Umang Dairies in Issue No. 21 (dated 24th September, 2012) at a price of Rs 44.70. The stock has performed as per our expectations and has given a 25 per cent return as it touched a high of Rs 56 after we recommended it. In fact, it outperformed our price target of Rs 51.

Umang Dairies mainly remains an untracked company, hence, our readers got a chance to invest in it at a lower valuation. The company is backed by a reputed management of the JK Group. It is coming out of financial restructuring after facing difficulties in FY10. It has posted profits in the last two years, indicating that it has lived up to the expectations of the Board for Industrial and Financial Reconstruction.

Engaged in the business of milk products, the company has a presence in 12 states. It produces items such as ghee, butter, milk powder, etc. and has brands like White Magik, Dairy Top, Milk Star, etc. Umang has two factories in UP and a milk collection network of 300 villages and 12000 farmers. Milk products have a robust market in the country, and Umang is benefitting from the same. Besides, the company has started to pass on the higher costs to its customers, due to which its margins have improved over the last two years. It also enjoys exemption from certain electricity-related duties from the Uttar Pradesh government, and hence, going ahead too , the margins will remain intact.

At a CMP of Rs 52.90, the scrip is still up 18 per cent, and those who missed our initial call should book profits at this price.