Kwality (formerly Kwality Dairy) is trading higher by 1.8% at Rs. 39.20 per share, with current market cap at Rs. 800 crore. Share has cooled down from high of 39.85 made on NSE a while back.

Company has announced revenue of Rs. 1,142 crore for Q3FY14, up 6% QoQ, while PAT stood at Rs. 32 crore, up 7% QoQ. Besides strengthening EBIT margins to 5.8% in Q3FY14 from 5.5% in FY13, company is also on track to report 20-25% growth in FY14 with expected EPS of over Rs. 6. This maker of ghee, skimmed milk, dairy creamer, paneer, flavoured milk, yogurt and dairy mix, for both domestic and export market is currently ruling at a PE multiple of just 6.6 times. However, high debt (in excess of Rs. 850 crore, as of 31^st March 2013) and resultant heavy interest burden (Rs. 100 crore annually) are big drags on the company’s financials.

To meet growing demand, this company with four milk processing plants in Haryana, Rajasthan and Uttar Pradesh has acquired additional unit in Uttar Pradesh as also awarded job work to third parties in the recent past. To strengthen its brand and marketing, company has roped in Bollywood diva Bipasha Basu as its brand ambassador.

With rising PE as well as strategic interest in Indian dairy industry as also rising milk consumption (partly responsible for fuelling domestic food inflation), dairy business remains an attractive opportunity. Give promoter shareholding of 74.88% and negligible institutional holding, the company can be a good target in the future. Company is looking to raise Rs. 1,000 crore of debt or equity in the near term.