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Dairy shares surge as India drinks more milk to improve immunity during lockdown

Workers unload packets of milk from a truck early morning during a government-imposed lockdown as a preventive measure against the COVID-19 coronavirus in New Delhi.Premium
Workers unload packets of milk from a truck early morning during a government-imposed lockdown as a preventive measure against the COVID-19 coronavirus in New Delhi.

Heritage Foods Ltd. and Parag Milk Foods Ltd. are almost doubling in market value as sales of packaged milk pick up pace with Indians stocking up to survive the world’s biggest lockdown.

Heritage Foods Ltd. and Parag Milk Foods Ltd. are almost doubling in market value as sales of packaged milk pick up pace with Indians stocking up to survive the world’s biggest lockdown.

The nation is the largest producer and consumer of milk, pouring it liberally into sugared teas and coffees, as well as using derivatives like ghee, curd, and cottage cheese in everyday cooking. Shares of the companies have surged about 90% since March 24, when Prime Minister Narendra Modi suspended public transport and stopped the sale of almost all products except food and some other essential items, in an all-out effort to contain the coronavirus.

“Demand for daily essentials such as fresh milk remains unaffected, not to mention its immunity-boosting properties amid the Coronavirus scare," Shradha Sheth, a Mumbai-based analyst with Edelweiss Securities Ltd., wrote in a recent note.

She estimates supply of packaged milk has risen by 15%–20% as dairy that was until recently used to produce goods such as sweets have now been diverted to daily consumption.

Rakesh Roy, an analyst with Indsec Securities & Finance Ltd., says continued demand for milk has allowed the companies to retain prices while input costs have dropped. However, this benefit may wane once the lockdown eases a bit, he added.

Production of milk in India has risen more than 6% since 2014 and the government aims to raise the output to 254.5 million tons by fiscal year 2022 from 187.8 million in 2019.

Heritage Foods has gained 93% amid the lockdown, and Parag Milk Foods 84%, compared with the 19% advance in the benchmark index. Heritage Foods has five buy calls this year and one hold, while the latter has similar ratings.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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