Dodla Dairy shares trade at 37.04% premium; should you hold or sell?

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After listing at a premium of 28.50%, shares of South India-based Dodla Dairy extended gains to quote Rs 586.55 apiece at 1:00 pm, marking a premium of 37.04% in its debut trade on June 28. On an intraday basis, the counter hit a high of Rs 633.60 and a low of Rs 528.

Commenting on strong listing Hemang Jani, Head Equity Strategist, Broking & Distribution, Motilal Oswal Financial Services explained that investors need to be cautious as listed companies in this space have not done well so far. “Dodla Dairy is one of the leading dairy firm in Southern India and is the third-largest player in terms of milk procurement per day. It derives about 30% of its revenue from value added products, the share of which is likely to accelerate going ahead. The issue was reasonably priced at 16.4x FY21 P/E vis-à-vis its peers, which also led to strong interest in the counter apart from its presence in niche space,” added Jani.

Dodla Dairy Limited is an integrated dairy company that is engaged in the procurement, processing, distribution, and marketing of milk and other dairy products. It processes and sells milk including standardized, toned, and double toned milk, and produces dairy products like curd, butter, ghee, ice cream, flavoured milk, etc. The company’s operations in India are primarily across four states — Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu. Its international operations are based in Uganda and Kenya.

The dairy has a total of 13 processing plants to process raw material into packaged milk and manufacture dairy-based value-added products. The firm has a strong distribution network of 40 sales offices, 3336 distribution agents, 863 milk distributors, and 449 product distributors across 11 states in India.

Given its strong network and reach Saurabh Joshi Research Analyst at Marwadi Shares and Finance suggested investors can remain invested in the company. “The company is one of the largest dairy company in the branded consumer market with a strong distribution network and is quoting at a reasonable valuation compared to its peers. A good upside is possible in this company due to valuation comfort and recommend investors to continue holding it from a medium-term perspective.”

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