Hatsun Agro: Arokya milk for your good health!

Hatsun seems to be undergoing a long time correction. Its been hard holding on to this while almost everything around is going up. Its been range bound and the saving grace(?) is that its not broken the range on the downside.

Agree Valuations look unreasonable, I didnt expect Hatsun will do so better in last 2 years, of course its pace of price run has slowed down a lot in last 6 months. However, one important difference between Hatsun and Kwality is the Ice cream business , may be market is betting big on Hatsuns ice cream retail success. The other obvious reason could be management integrity. My two cents!


I agree with you sunil,cash flow cannot be fudged.But companies which are in big expansion mode usually have negative cash flow from operations,typical example is Pantaloon Retail in early 2000’s had negative cash flow for years.But still it was a huge multibagger for many investors since their sales and EPS were growing 30-50% CAGR.If we compare Kwality with the same theory,its numbers are spectacular.Its current year sales will be around Rs.4500 crores but its market cap is just Rs.1000 crores.May be market is skeptical about the promoter’s ambitious expansion plans proposed by them every year.

Mahesh,Ice cream revenue for Hatsun is not even 10% of their total revenues(around 6-7%).So,betting big on Ice cream may not yield anything big in the near future.Also, i read in Kwality’s AR when they announced bonus shares,they awarded only for minority shareholders .They did not get any bonus shares for themselves even though they hold 75% of stake.Even in 2009-2010,when their share price skyrocketed from Rs.10 to Rs.1300,there was no foul play on the management part.Since they held 83% stake at the time,the free float was around only 30 lakhs shares and it was easy to manipulate by the operators.

May be market knows something we dont know.

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Mahesh,Ice cream revenue for Hatsun is not even 10% of their total revenues(around 6-7%).So,betting big on Ice cream may not yield anything big in the near future.

Hatsun’s revenue from ice creams (and this includes both Arun and Ibaco) is a small percentage of it’s revenue as you rightly point out. However, they are starting Ibaco parlors quite aggressively. They started Ibaco parlours some time in early 2012. By September 2013, they had around 90 Ibaco stores (many of them were Arun parlours re-branded as Ibaco). Currently they have 132 Ibaco stores and 245 Arun ice cream parlours.

The price at which ice creams are sold in Ibaco are higher than in Arun parlours or in Amul/Kwality Walls for that matter. So obviously the margins here will be far higher than in their regular business. So the markets may be pricing Hatsun to what may become a national chain of premium ice creams. But the question still is, will it click?

Just to point out the risks with Hatsun’s move from a pure dairy player, their initial targets of setting Ibaco parlours were far more aggressive and they seem to have fallen far short of it.

(This article was published on February 21, 2012)

The company plans to set up a chain of 250 Ibaco outlets including 70 in Tamil Nadu. As of now, there are 45 Arun Ice Creams Unlimited exclusive ice cream parlours which will be rebranded, and in the next one month 25 Ibaco outlets will be added.

Mr R. G. Chandramogan, Managing Director, Hatsun Agro, says the company plans to establish a strong presence across South India and in stages will enter the markets in the North over the next one year, when 180 Ibaco outlets will be added to gain a national presence.

The company announced to the BSE that it has resolved to sell a new range of ice creams under the Ibaco brand and open 70 outlets in Tamil Nadu and 250 across South India, including select outlets in North India by March 2013.

It’s been a long wait and I probably am going to wait for some more time. I would feel horrible to see it shoot up when I sell it after waiting all this time patiently. As I said earlier, I have a history! :frowning:

Yes - I’m also itching to move to stocks having momentum right now. And how many times have we seen a stock happily take off once we are out of it. This is going to be an exercise in patience.

Looks like the govt. sees a bigger role for pvt. dairies in the overall dairy sector -

With the aim of increasing milk productivity to meet an estimated demand of 200 million tonnes by 2021-22, the Government sees a bigger role for the private sector in the dairy industry and has identified areas for public-private partnerships (PPPs).

aFor us, the private sector is as important as the cooperative sector,a said Rajni Sibal, Joint Secretary, Department of Animal Husbandry, Dairying & Fisheries, at an event on aDairy Vision 2015a, hosted by the Confederation of Indian Industry.

)- HG


Hatsun is going for preferential allotment of securities -

Hatsun Agro Product Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on September 23, 2014, inter alia, to consider the proposal for issue and allotment of Securities on Preferential Basis to select persons/entities on such terms and conditions and on such price not lower than the price to be determined by SEBI (ICDR) Regulations, subject to the approval of the members.

Wonder if this deal is with Jwalamukhi Holdings (like Mayur did recently) - though Jwalamukhi already holds 1.23% of the shares

This business/stock looks very good long term buy/hold, it can be a good 25 % compunder, It is the only listed quality play on dairy/ice cream/milk related product. It is mkt leader in TN, KArnataka and acquired some in Andhra. It can be very good FMCG stock for long term, ethical promoter, ROE 60 +, good brands, pricing power, huge opportunity size, market cap is already 2000+ Cr so, may not be a multi bagger in short term, but could be a 25 % compunder for long term.

disc : invested, views are probably biased !

Preferential allotment details will be interesting on 23rd !

Patience paid off…its finally made a decisive move today :slight_smile:

Last 2 Quarters OPM has significantly fallen (by half) any reason ??

from what I know it’s because of fall in skimmed milk powder prices globally and also in India. going forward, the company does not expect to focus too much on it

that said, I do not know if it will fall further though -

Milk procurement has been good for dairy players and input costs seem to have stabilized:


Dairies across the major milk producing zones like Maharashtra, National Capital Region (NCR) and South said that there were no plans to raise prices of milk at the moment as there was sufficient supply of skimmed milk powder (SMP) in the country.

Down South, the dairies are currently flush with milk supplies, as RG Chandramogan, managing director of Hatsun Agro said that there were no immediate plans to raise milk prices.

Disclaimer: Sold out of Hatsun Agro.

Reason for sale: Don’t have one! It continues to be as expensive as it always has been while its future still promises a lot. I guess I got bored of holding it for all these years and it took a toll on my patience by staying in a narrow band for a long time. Going by my track record though, this should start shooting up anytime soon now! :frowning:

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I was reading this thread. Just after you had exited this counter(mid of June) this stock has rallied by a good 25-50% in the next 10-15 days. Next time if you are exiting some stock please write a note(on the lighter note) :wink:

What are your views on this stock now? Their Q1 is excellent, but they have had a sub-par 2015. Was their poor performance on operations front only due to fall in Skimmed Milk Powder prices?

Ravi S
Disc - No positions.

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Even though I have sold it, I still think highly of the company. Ibaco has reduced prices of their ice creams but still very expensive at Rs 499-999. A negative is that they are trying to build too many brands which could probably have waited but management seems to be think that they are extensions to existing business utilizing capacity and so they are confident of having the necessary bandwidth.

Rise in skimmed milk prices internationally wont help Indian exporters yet as those prices are still below Indian rates.

Link: http://www.thehindubusinessline.com/economy/agri-business/dairy-exporters-gear-up-as-global-smp-prices-edge-up/article7633758.ece


Industry sources pegged the current SMP inventory at 70,000-80,000 tonnes with negligible exports having taken place last year on account of low prices.

In 2013-14, however, Indian companies exported about 125 lakh tonnes when global prices were between $4,000 and $4,800/tonne.

“Prices had crashed to ₹90/kg and have since risen to around ₹110. But this is not viable since domestically it is between ₹140 and ₹150/kg. It’s difficult to say if the rise will continue, but if it does, perhaps some of the intervention stocks could be released,” said Sandeep Aggarwal, Director, SMC Foods Ltd.

Chandramogan said exports of SMP will have no impact on domestic milk prices, since overseas sales had never exceeded 0.6 million tonnes (mt) in any year.

This was a fraction of the estimated 140 mt of milk produced, unlike New Zealand, which exports almost 95 per cent of its dairy produce.

25% is nothing… Eicher shot up many times in a year after I sold it! :stuck_out_tongue:

Disclaimer: Sold out few months back.

                                             Mar-15		         Mar-16	 

Sale 2933 3444.6 17.4

Raw Material consumed 2341 74.5 2531.0 72.3
Purchase of goods 0 0.0
Inventory +/- -156 -41.8
Employee cost 93 3.2 110.2 3.2
Depreciation 94 3.2 107.1 3.1
Other exp 457 15.6 540.7 15.7

operation profit 104 3.5 197.4 5.7

Other income 6 0.2 4.6 0.1
interest 63 2.1 68.2 2.0
tax 8 0.3 73.4 2.1

Net profit 39 1.3 60.4 1.8

Food for thought.

  1. Good growth…… one of the best by private dairy. As informed by RG Chandramogan in last AGM, he expects milk as major growth driver.
  2. Will Co-op dairy’s inefficiency improve private dairies margins in future, as witnessed arokya sells where aavin is not able to or is sold out. Arokya is priced higher than aavin and is considered better in quality.
  3. OPM increased by 2.2% , IT for six assessment years paid by company , total IT payment increased by 1.8%… OPM increased to adjust IT or better margins made them think of paying up ???
  4. Promoter and his right hand man is likely to reduced holding by apprx. 4% in calander year 2017

Disc:- Invested


attended AGM on 18th (regret delayed posting) at chennai

main points.

RG Chandramogan continues to impress with his low profile and confident talks. Was wearing normal shirt pant with 290 Rs. batatype sport shoes.( have also met him accidently in mall wondering with wife and couple friend on sunday evening last year, no fuss, cant say from looks that he owns india’s largest private dairy)

he continues to emphasis that milk procurement and selling is most important. (hatsun is largest pvt dairy, with 25 lakh lpd collection)

cheese according to him is very small market and already getting saturated.

on sidelines of AGM gave guidelines of 17% to 24% growth in revenue and specifically mentioned that margins will not improve dramatically as his major revenues come from low margin milk.

to summarize , he expect to continue what he is doing without much change.

we also visited competitor aavin’s marketing officer and got some confirmation of hatsun milk selling figures. also visited four of hatsun daily shops in different areas of chennai , avg sale from each such shops could be rs.10000 per day and hatsun is planning 3000 such shops in future. it gives hatsun and arun more visibility.

fail to understand logic in getting into frozen vada and samosa business. but fresh milk products business like curd and paneer is picking up as per AR figures.

contrary to general belief , ambit has come up with report mentioning milk procurement as key driver , but working done of AR of hatsun 15 and 16 shows something else…

that even hatsun makes major money by selling milk products and can not survive only on milk.


Hi All,

Any news about Hatsun Agro? And how does this stock justifies its CMP which is 22 times its book value ?

Yes interesting. I own a very small number of shares and while I am delighted with the price movement I find it difficult to understand. Incidentally the CMP is 32 x Book Value. In July this year, Hatsun signed an agreement with a German Company for a greenfield project development. Now SBI Mutual fund has bought 10.5 lakh shares on October the 3rd 2017. Quarterly sales up by 12% or so - which does not explain the price rise. Would be interested in anyone who can analyse this.

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DSP Blackrock and Malabar Funds picked up stake in Hatson Agro on 10th Nov via NSE bulk & block deal.

Gaining institute coverage. A good stock to discuss. Any idea?


Trying to understand business model of Hatsun’s (HAPL) various retail outlets of brands like IBACO, ARUN, Hatsun Daily, etc. Below are few questions that come to my mind:

  1. How many of HAPL retail outlets are fully owned vs leased? Looking at balance-sheet it seems like most of them are leased, but would be great if someone can confirm.
  2. How much would it cost to start a leased retail outlet? I know it depends on size of the outlet - but looking for ballpark investment amount that goes into opening a new outlet. I read in an old article where MD mentioned that it would cost roughly ~Rs. 25 lakh to open a new IBACO. Is it still a good ballpark estimate?
  3. Does HAPL give franchisee of any of its outlet or all of them are corporate run?

Went through last few years of annual report but didn’t find answer for above question.