Will these stocks get white revolution in your portfolio?
India is the world's largest milk-producing country, with a daily production capacity of 12.6 crore litres and contributing to 24% of global milk production
The dairy industry in India is growing rapidly. The domestic dairy market is expected to expand from $124.93 billion in 2023 to $227.53 billion by 2030. In 2022, the dairy industry was valued at $115.57 billion, with an expected growth rate of 8.9% in the dairy market. Currently, India is the world’s largest milk-producing country, with a daily production capacity of 12.6 crore litres and contributing to 24% of global milk production.
Furthermore, India is also counted among the largest exporters of dairy products. This industry contributes 5% to our economy, providing employment to more than 8 crore people. The top five states in milk production are Rajasthan, Uttar Pradesh, Madhya Pradesh, Gujarat, and Andhra Pradesh, accounting for 53.11% of the country’s total milk production.
According to government data, in the last 8 years (from 2013-14 to 2021-22), India’s milk production has increased by 61%, reaching 22.11 crore tons. There has been a 5.3% growth in milk production in the following year (2020-21) compared to the previous year. Due to substantial milk production, India exported 6,757 cr tonnes of dairy products in the financial year 2023, with a value of $284.6 million. Over the last 5 years, the dairy sector has witnessed a Compound Annual Growth Rate (CAGR) of 6.4%, indicating consistent annual growth. The listed companies in this sector have shown robust quarterly results, partly due to the increasing prices of milk, which have been beneficial for these companies.
Despite a high base in the festive season of the previous year, most companies have seen an increase in volumes in the second quarter of the financial year 2024.
In fact, companies are benefiting from innovative branding and expansion in the distribution base. Milk production in India is increasing at a rate of 6% every year, while the global growth rate is only 2%. Additionally, there are attractive opportunities in value-added dairy products, organic/farm-fresh milk, and exports. To facilitate the development of the foundational framework of this sector and attract investments, both central and state governments have announced various incentives.
According to Market Expert Ambareesh Baliga, “Dairy consumption in India is linked to per capita income, so the growth is promising. Improvement in the margins of the Indian dairy sector is due to the surge in value-added products.”
The question at hand is whether it’s a good opportunity to invest in dairy sector companies.
According to Ambareesh Baliga, in the last few months, most dairy shares have performed well, so it might be better to wait for a dip before making new purchases. Companies like Parag Milk, Hatsun Agro, and Dodla Dairy should be kept on the radar. Purchasing Parag Milk at a target of Rs 250, Dodla Dairy at Rs 980, and Hatsun Agro at Rs 1220 with a target of 8-10% dip could be considered for a period of 6 to 9 months, he adds..
While the dairy sector has shown impressive growth, and the outlook for the coming quarters appears promising, experts are suggesting buying opportunities in select companies of this sector with a medium-term perspective, especially when there is a downturn, indicating lower valuations.