MILKY MIST- Doubled in Just ~2.5 Months from Listing; What is Working for Them?
Milky Mist got listed in mid-August at a price of ~Rs165 and in just ~2.5 months the stock price has nearly doubled with current stock price at ~Rs306 with stock making a high of ~Rs340 in early October.
This strong gain has been on the back of extremely strong business performance over Q1 & Q2FY27 wherein the revenues have growth at >40%, EBITDA by >60% and PAT is up ~4x over the base of Q1 & Q2FY26.
And this strong performance has come at a time when all the other listed dairy companies have seen sharp contraction in profitability due to milk price inflation; while Milky Mist has improved margins on all fronts- gross, EBITDA and PAT.
So, what is Milky Mist doing different? Well, the whole differentiation lies in the business model itself.
To begin with, dairy as a business is not a true FMCG business as what most people might think it to be. For a business to qualify as a true FMCG, it needs to test true on two important aspects;
The reason why these two checks are important is because;
If you are selling a commodity derived from a commodity (without much value addition or differentiation), then there is surely going to be a lot of unbranded products in that category, simply because it is easier to produce the product.
If the end consumer is buying something in terms of quantities (kgs, liters), they are informed & conscious about the price per kg or liter that they are paying and with easy availability of unbranded products, it becomes very difficult to charge a premium for the product, over & above the underlying cost of commodity itself.
This is primarily the reason why some of the biggest consumer staple categories like spices, pulses etc still lack national level players with strong market dominance. These categories are still driven by regional players and/or unorganized players.
Dairy as a business also cannot be construed as a true FMCG business because liquid milk, which is the core of any dairy business does not qualifies the above mentioned two checks.
Milk has an even bigger challenge than most of the other staple categories because of its low shelf life which results in dairy being mostly a regional business with Amul being the only exception.
The challenges associated with liquid milk can be overcome by moving towards value added products in the diary business like cheese, panner, ice-cream etc. In fact, Amul’s journey of becoming a national level brand has been on the back of these value-added products wherein Amul has massive market dominance in segments like cheese and butter.
Value added products have relatively higher shelf life, offers higher profitability and thus the potential to invest & build a national level presence. Further, most of these value-added segments are either still heavily dominated by unorganized players and/or are growing at much higher pace in terms of consumption vs liquid milk wherein the consumption is sort of saturated.
Most of the dairy companies do have & continue to strive to build these value-added categories, however the share of value-added portfolio is still <50% of overall business mix for most and thus dynamics of liquid milk business still drives their overall business.
A good example of how this liquid milk dynamics plays out was the period of H2 FY23 wherein raw milk procurement prices rose by ~17-19% however dairy companies were not able to pass on this entire increase and thus saw sharp correction in margins in H2 FY23. We have seen same thing play out in Q1FY27 wherein raw milk prices have increased by ~10% and all dairy companies (with liquid milk business) have seen sharp correction in margins;
Milky Mist on the other hand is 100% value added products business with no exposure to liquid milk and thus it is a True FMCG business.
This 100% focus on value added products has allowed Milky Mist to grow at strong rates and also command much higher profitability than other dairy companies.
Readers can access our full research report on Mikly Mist below to understand more about company’s business and the potential step-up increase in its profitability going ahead;
Readers can access more of our detailed research and resources here;
Shared Research 🔗- https://www.surgecapital.in/sharedresearch
Knowledge Base 🔗- https://www.surgecapital.in/knowledge-base
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