Milky Mist Dairy Food shares were locked in the 5% upper circuit at ₹298.75 apiece on the BSE on Tuesday, 27 October, taking the stock’s gains to 113% over its initial public offering (IPO) price in just over two months.Against this backdrop, Nuvama Institutional Equities has initiated coverage on Milky Mist Dairy Food with a ‘Buy’ rating and a target price of ₹330, citing the company’s strong growth outlook, premium value-added dairy portfolio and improving cash flows as it transitions from a phase of heavy capital expenditure to a period of stronger returns.Nuvama believes the stock could continue to command a premium valuation, supported by its growth profile and focus on value-added dairy products (VADP).
The brokerage has valued the company at 50 times its estimated September 2028 earnings per share (EPS), a premium to peers.The brokerage expects Milky Mist to deliver a compound annual growth rate (CAGR) of 27% in revenue, 35% in EBITDA and 57% in earnings per share over FY26–FY29. Growth is expected to be driven by its core categories of paneer, cheese and curd, expansion in yoghurt and ice cream, and a wider geographical presence beyond South India.However, Nuvama flagged risks arising from milk price volatility and the company’s geographical and manufacturing concentration.
Around 95% of its milk procurement comes from Tamil Nadu, while approximately 69% of sales are generated in South India. The company also relies on a single plant, making operational concentration a key risk.Milky Mist aims to outgrow listed dairy and food peers Nuvama described Milky Mist as India’s only pure-play value-added dairy company and a high-growth consumer business. The company’s revenue grew at a CAGR of 31% between FY24 and FY26, while EBITDA expanded at a 41% CAGR.
In the first quarter of FY27, revenue increased 43.6% year-on-year, accompanied by a 275-basis-point improvement in gross margin. Milky Mist has a portfolio spanning more than 20 categories, entirely focused on value-added dairy products, with no liquid milk business. According to Nuvama, the company is the largest private packaged brand in paneer, with around 19% of the organised market, and holds approximately 12% of the South Indian cheese market.
It is also among the top two private packaged yoghurt brands, with a market share of about 13%. The brokerage sees further growth opportunities in protein-rich categories such as curd, paneer, cheese and whey, where demand is supported by increasing consumer interest in higher-protein foods. Paneer, cheese and curd to remain core growth driversNuvama estimates that paneer, cheese and curd account for approximately 60% of Milky Mist’s revenue and expects these categories to grow at a combined CAGR of around 28% over FY26–FY29.Paneer, which contributes approximately 30% of revenue, is expected to grow at a CAGR of 29%.
The brokerage believes the shift towards organised players, supported by restrictions on analogue paneer and zero GST, could benefit the company.Cheese revenue is projected to grow at a CAGR of 29%, aided by capacity expansion in cheddar, while curd is expected to record a 24% CAGR over the same period.Yoghurt and ice cream to drive expansion into new categoriesNuvama expects yoghurt and ice cream to grow at CAGRs of 45% and 35%, respectively, over FY26–FY29.
Their combined contribution to revenue is projected to increase from 13% to 17%.The brokerage highlighted Greek yoghurt and Skyr as key products in Milky Mist’s premium, high-protein portfolio. Capacity expansion in yoghurt is expected to support the company’s plans to scale these categories.50,000-plus coolers and freezers to support expansion beyond South IndiaMilky Mist plans to deploy more than 50,000 coolers and freezers over the next three years, compared with an existing base of approximately 41,000.
Nuvama believes this investment will help improve product availability and strengthen distribution in markets beyond South India.The brokerage expects revenue from non-South markets to grow at a CAGR of 32% over FY26–FY29 as the company expands its distribution network.Scale to improve EBITDA margins by 280 basis pointsNuvama expects Milky Mist’s EBITDA margin to increase to 16.5% by FY29 from 13.7% in FY26, an improvement of 280 basis points.
Gross margin is projected to rise to 35.2% from 33% over the same period.The brokerage estimates that the company’s existing manufacturing capacity can support revenue of 3–3.5 times its FY26 level, providing room for growth without a proportionate increase in capital expenditure.IPO proceeds to support debt reduction and cash-flow improvementNuvama expects Milky Mist’s gross debt to decline by more than half, from ₹1,670 crore in FY26 to ₹720 crore by FY29, supported by IPO proceeds and stronger cash generation.The company is expected to retain approximately ₹700 crore in lower-cost borrowings that benefit from a government interest subsidy of around 3%.The brokerage also expects return on capital employed (RoCE) to improve to 20.4% from 13.4%.
Free cash flow is projected to reach approximately 64% of profit after tax by FY29, compared with negative free cash flow in FY26.Nuvama’s positive outlook rests on Milky Mist’s ability to sustain strong growth in value-added dairy products, expand its presence beyond the South and improve profitability as its capital expenditure cycle moderates. However, milk price fluctuations and the concentration of procurement, manufacturing and sales remain key risks to monitor.Disclaimer: This story is for educational purposes only.
The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
