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ICICI Securities Report
While the dairy companies benefitted from lower milk procurement prices in FY21 and H1 FY22, we believe the milk procurement prices are likely to inch higher Q4 FY22 onward.
We model Ebitda margins of dairy companies under our coverage to moderate in FY23. While the companies have the option to pass on the increase in input prices via price hikes, we believe the inflationary impact to be relatively high.
We expect the dairy sector to face both demand led and cost push led inflation due to-
re-opening of schools, hotel-restaurant-cafe and increase in festivities – it will likely result in higher demand for milk and
with increase in animal feed prices, costs for farmers are likely to inch up.
Increase in global skim milk powder prices will also push milk prices in India upward, in our view.
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