PREMA sells ~5-6 tons of cream cheese in Karachi every month.

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· At-Tahur Limited (PREMA) held its corporate briefing session, hosted by AKD Securities, to discuss 1QFY22 results and future outlook of the company.

To recall, the company posted NPAT of PkR221mn (EPS: PkR1.11) in 1QFY22 in contrast to PkR51mn (EPS: PkR0.26) during the same period last year, swelling 4.27x.

· The company started with a herd size of mere 500 animals which has now grown to ~4.5k animals (~50% of them fully mature to produce milk) as of 1QFY22. The indigenous growth in the herd size ~7-8%YoY whereas ~400-500 animals are imported each year to further enhance the growth rate. The cost of each imported animal is ~US$2,800-3,000.

· The milk production in 1QFY22 stood at 4.6mn liters (12.3%YoY). Due to the legislation to curtail the sale of unpasteurized milk in Punjab, the company has landed in a sweet business environment where it can easily increase its footprint in the current vacuum.

· The company has introduced a wide range of products in the span of 2-3 years which includes packaged milk (pasteurized), low fat milk, yoghurt (plain, sweetened & flavored) and newly added flavored milks which are also marketed as healthy substitutes to carbonated drinks.

· The gross margin of the company has exceeded 30% in the last 2 quarters due to the rising proportion of high margin value added products in the product portfolio. The proportion of value added products in the product portfolio has increased from 10% to 30% as of FY21.

· The company incurs higher cash outflow in the first quarter of each reporting period as it procures the silage in these months for the entire year.

· The company has also made partnerships with online e-commerce platforms, such as Foodpanda, Airlift, and Cheetay etc. to increase its market share.

· The company is also selling its products in Karachi as currently they are available at around 200 shops in Karachi. According to the management, logistics has always remained a key challenge to expand in Karachi but with the road network improving, the logistical issues are toning.

· According to the management, some products are in very high demand in Karachi, such as the newly launched cream cheese which is a high margin product. The company sells ~5-6 tons of cream cheese in Karachi every month.

Courtesy – AKD Research

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