PARAGMILK - Parag Milk Foods Limited Share Price

Management highlighted a strong start to FY26, reporting the highest first-quarter revenue of INR 852 crores, a 12% year-over-year growth. This growth was primarily driven by significant volume expansion in core categories such as cheese, ghee, and paneer, which saw a 9% increase in volume and a 14% rise in value, contributing to 57% of total revenue. The company retains its leadership with Gowardhan ghee holding a 22% market share and Go cheese capturing 35%.

Despite an 18% increase in average milk prices to INR 37 per litre, management maintained margins, achieving a 6% EBITDA growth with an EBITDA margin of 7.7%. Average milk procurement improved to 16.5 lakh litres per day, representing a 10% increase over the previous quarter. The gross profit margin improved sequentially from 25.1% in Q4 FY25 to 27.4% in Q1 FY26, aided by better product mix and pricing power.

A noteworthy point was the growth of the new age business, which contributed approximately 9% to total revenue, up from 6% last year, with both Avvatar and Pride of Cows growing 57% and 36% year-over-year, respectively. The sports nutrition market is expanding rapidly, with Avvatar positioned as a leading player amidst a valued INR 1,600 crore market, growing at a 30% CAGR. The company aims to capitalize on India's protein revolution through innovations and comprehensive marketing strategies.

Looking ahead, management reiterated their focus on transitioning from a dairy-centric model to a comprehensive FMCG and health platform, confident of sustainable, profitable growth, and targeting INR 10,000 crore revenue in the next five years. Their strategic investments and marketing efforts aim to strengthen brand presence and leverage the growing demand in health and nutrition sectors.

1. Question: Can you elaborate on your Whey protein and sports nutrition strategy? Are you planning any international partnerships or D2C brand expansions in this space?

Answer: Our Whey protein segment has rapidly scaled, driven by our brand Avvatar, which we developed meticulously over five to six years with expert collaboration. We're expanding into functional snacks like Whey protein bars. Currently, 75% to 80% of our sales come from our website and Quick Commerce. We're focused on the Indian market, addressing protein deficiencies, and do not require international partnerships, ensuring quality through our in-house operations.

2. Question: On core categories, we see INR 487 crores this quarter. What amount of seasonality should we consider given this decline from INR 530 crores last quarter?

Answer: It's crucial to understand that seasonality impacts our core categories, with higher sales in Q3 and Q4 during festivals. Our reported numbers reflect this natural fluctuation. Although Q1 saw a decline in revenue, overall growth in the core segment has been strong year-on-year. We expect our core business to remain robust despite seasonal cyclicality.

3. Question: Can you provide a percentage split between Avvatar and non-Avvatar within the new age business?

Answer: We have not disclosed specific revenue splits between Avvatar and non-Avvatar products. Both are integral to our new age business and show strong growth"”Avvatar has seen an eightfold increase over three years, while Pride of Cows has grown 36% year-over-year. Our focus remains on promoting both brands collectively within our new age business segment.

4. Question: Can you talk about the unit economics of the cows from your BhagyaLakshmi Farm? What is their typical lifetime value?

Answer: We breed our own cows and have about 4,500 in our herd. Our cows yield an average of 26 litres of milk, three times the yield from conventional farms, and can give birth 8 to 10 times in their lifetime. We expect to sell cows after 5-7 cycles for INR 1 lakh to 1.5 lakhs, which reflects a robust return on our investment in biological assets.

5. Question: Can you provide a breakup of revenues in terms of regional splits?

Answer: Providing a precise regional revenue breakdown is challenging due to our varied routes to market. Each category performs differently across regions. For context, we've maintained market shares of 22% in branded cow-ghee and 35% in cheese. Regional differences are pronounced; for detailed market share insights, we encourage sourcing industry reports.

6. Question: What's your perspective on our higher reliance on agents for milk procurement?

Answer: Currently, 40% of our milk procurement is direct, with 60% sourced through established agents. These agents have been partnered with us for many years and consistently deliver quality milk. We are increasing our direct procurement through initiatives like bulk milk coolers, aiming to enhance sustainability and quality in our supply chain.

7. Question: Is there a seasonality impact on your business, and how does it affect revenue flow throughout the year?

Answer: Yes, seasonality does impact our business. We generally see higher sales in Q2 and Q3 due to robust demand during festive seasons. The monsoon season also influences consumption patterns. Historically, our performance excels in the latter half of the fiscal year, aligning with industry trends where dairy consumption peaks in winter months.

8. Question: What are your aspirations for EBITDA margins in the coming future?

Answer: We aim to consistently improve our EBITDA margins; we've increased from 5% to around 8.5% recently. Looking ahead, we aspire to reach double digits within the next 12-24 months. Our focus is on balancing operational efficiencies with brand-building investments to achieve this goal while maintaining our growth trajectory.