Umang Dairies Posts 80 Per Cent Jump In Its Net Profit

Umang Dairies, which has been one of our recommendations, has seen a fantastic price appreciation with over 40 per cent returns. The company, which was in trouble due to higher operating costs, has reported impressive results for the September quarter with its topline witnessing growth of 29 per cent to Rs 25 crore while its net profit has jumped by a whopping 80 per cent to Rs 2.6 crore. 

The company has also reported positive net worth of Rs 17 crore which may lead to removal of the company from the Board for Industrial and Financial Reconstruction (BIFR). The key highlights of the results include the jump of 185 basis points in its EBITDA margins to 11.59 per cent. The finance cost also saw a sharp decline to a negligible sum of Rs 93,000. The drop in the finance cost as well as the waived off taxes led to a net profit margin of 10.33 per cent as compared to 7.38 per cent a year earlier. 

On the balance-sheet front, the company has seen its net worth rising to Rs 17.10 crore. Its total debt has declined from Rs 7 crore to Rs 5.66 crore in a six-month period of this fiscal. The cash position of Rs 5.5 crore makes the net debt of the company nearly zero, which is also good for the stock. The results are quite decent and one can see good price appreciation in the future. We recommend buying the scrip at its CMP which will yield good returns in the future. We also expect the scrip to be a multi-bagger in the future. 

The company is in the business of dairy products and also has some exposure to the retail sector and hence all the positives applicable to the retail sector will benefit the company. Also, dairy products will always be in demand. The current gap between production and consumption will see growth in the revenues of Umang Dairy. It also has the capability of passing on the prices to the customers and therefore we remain bullish on the stock.