Ladies and gentlemen, good day and welcome to the Dodla Dairy Limited Q1 FY 2025 Earnings Conference Call, hosted by ICICI Securities Limited. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded, and I've handed the conference over to Mr. Aniruddha Joshi from ICICI Securities Limited. Thank you, and over to you, sir.
Yeah, thanks, Neha. On behalf of ICICI Securities, we welcome you all to Q1 FY 2025 results conference call of Dodla Dairy Limited. We have with us today senior management, represented by Mr. Dodla Sunil Reddy, Managing Director, Mr. B. V. K. Reddy, CEO, and Mr. Murali Mohan Raju, CFO. Now, I hand over the call to Sunil sir for his initial comments on the quarterly performance, and then we will open the floor for question and answer session. Thanks, and over to you, sir.
Thank you very much, Aniruddha. Good day, good afternoon, everyone. On behalf of Dodla Dairy Limited, I extend a very warm welcome to everyone joining us on our call today. I hope everyone has had an opportunity to go through the financial results and investor presentation, which has been uploaded on the Stock Exchange and on our company's website. After a solid growth in financial year 2024, we are delighted to continue to scale new highs as we begin financial year 2025 with a record-breaking performance. During Q1 of FY 2025, results set new benchmarks, delivering our highest-ever performance both in terms of revenues and profitability metrics. The quarter's performance has been broad-based with all the key segments, including India, Africa, and other fields, surpassing all previous revenue milestones. Further, this growth has been bolstered by higher sales of value-added products, which accounted for 35.4% of our total revenues.
This is again in line with our strategy to continuously improve our product mix. This performance is the result of our team's sheer hard work and continued focus on improving our distribution network, overall efficiency, market reach, and brand recognition. On the gross margin front, we saw an improvement thanks to better efficiency in milk procurement from the farmers, which in turn helps us manage raw material costs. Aligned with industry trends, we implemented a strategic price reduction in milk prices, aiming to sustain robust volumes throughout the year. Additionally, we are also focusing on improving operational efficiency at every level of operation with the help of automation and digital initiatives. With the beginning of the first season, we expect the industry to experience healthy procurements until the end of quarter two.
Going forward, we are focusing on capitalizing the positive momentum by following a multi-pronged strategy, encompassing expansion of our portfolio in terms of product catalog as well as footprint, growth in African markets by gaining more market share by expanding our product reach, strengthening our relationships with our farmer partners while growing our feed. Over time, this will also help us improve our cash flows. Better brand awareness through branding and advertising activities. We are also placing advertisement in high-traffic areas, and we are creating tasting experiences at various trade events. With this brief, I will now hand it over to the CEO of our company, Mr. B. V. K. Reddy, and thank you all very much. Mr. B. V. K. Reddy, you have it.
Thank you, Sunil sir. So, as Mr. Sunil Reddy stated, so this has truly been a phenomenal quarter with the business growing through various initiatives that prioritize the farmer's interests, such as a fair milk pricing, access to quality cattle feed at a competitive price, timely veterinary service, and several additional programs for the dairy farmers. So I would now request Mr. Murali Mohan Raju to share his financials for this quarter.
Okay. Thank you. Thank you, Mr. B. V. K. Reddy, and very good afternoon to all the participants on the call. Talking about our quarterly performance in Q1 FY 2025, the revenue from operations came in at INR 912 crore versus INR 823 crore in Q1 FY 2024. In the quarter, our gross margin improved by 543 basis points to 29.1%, which is mainly driven by lower procurement cost and revenue mix. Employee expenses increased by 13.1%, primarily due to annual increment and addition of employees in Kenya plant and Orgafeed plant in Kuppam. Other expenses increased by 21.1% on a year-on-year basis, largely on account of higher procurement, advertisement, and promotional expenses, and also storage rates of butter and buttermilk. We reported an EBITDA of INR 105 crore, against INR 60 crore during Q1 FY 2024, with a margin expansion of 420 basis points.
Our depreciation for the quarters to date: INR 18 crore versus INR 16 crore in Q1 FY 2024. This increase is largely due to the Kurnool plant expansion and the addition of Orgafeed and Kenya plants. Also, our finance cost for the quarters to date: INR 1 crore versus INR 0.4 crore in Q1 FY 2024. This increase is largely due to the project loan taken to finance the Orgafeed expansion. The net profit for the quarters to date: INR 65 crore on margin of 7.1%, with an improvement of 289 basis points. With this, we conclude the presentation and open the floor for further discussion.
Okay. Thank you, Sunil sir. As Mr. Sunil Reddy stated, this truly has been a phenomenal quarter with the business delivering benchmark performance. Our optimum procurement, coupled with higher contribution from both VAP and Africa business, led to a gross margin expansion of 543 basis points. With the peak summer demand, our ice cream business fueled growth in VAP sales, which increased by 21.4% on a year-on-year basis. During the quarter, we were able to procure 17.6 lakh liters of milk on an average. This was about 10.9% higher than the same period of last year. Our supply chain continued strong performance in the quarter, driving down costs and becoming more efficient. Average milk sales: 11.3 lakh liters per day on an increase of 2.5% on a year-on-year basis. Our curd sales stood at 467.4 million metric tons, which is a decent growth of 6.3% on a year-on-year basis.
Lastly, VAP sales were INR 314 crore, with a growth of 21.4% on a year-on-year basis. We continue to observe better performance at consolidated level vis-à-vis our standalone business. Our newly added capacities in Kenya, Orgafeed have boosted consolidated revenue growth. Having said that, both businesses are yet to achieve their optimum utilization levels. Given the inherent seasonal nature of our business, we anticipate these plans to achieve peak utilization levels: 60%-65% by year FY 2026. Lastly, our Orgafeed business also has done very well on the back of recently expanded production capacity. With this offering, we are able to maintain good relationships with the farmers and improve procurement costs as well as working capital cycle.
Overall, the company is committed to growing its farmers' network through various initiatives that prioritize the farmer's interests, such as fair milk pricing, access to quality, quality cattle feed at a competitive price, timely veterinary service, and several additional programs for the dairy farmers. With this, I hand over to Mr. Murali. Murali, I think he's already done his briefing. Thank you, Aniruddha.
Thank you so much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Nuvama. Please go ahead.
Thanks and congrats on a very good set of numbers. My first question will be in terms of the competitive intensity, if you could comment in your states, is there any change? I'm asking this because in Andhra, there is a new government, so any change in policy, etc., especially because they do have one more dairy company, which is a competitor to you, close to the people in the government. So if any comment you can make on the competitive intensity in Andhra and other markets, that will be the first question. Second question would be on the pricing of milk. You did say that some strategic price cuts have been taken. Given flush season is expected, do you see more price cuts likely? Even in Maharashtra, we have seen a lot of dairy companies have taken price cuts.
I wanted to understand in terms of outlook, how do you see in terms of pricing?
Abneesh, this is Sunil here. I'll take this question. Basically speaking, on top of competition intensity from Andhra with our competitors coming in, which is nothing new to us. I think we have been going through this for the past 25 years, since the regime coming to power, regime going out of power. It does not majorly impact us at all. The policies continue to be almost the same, and it goes on the same trajectory, and it doesn't affect us much at all. Coming to the competition intensity, we see a lot more of the consolidation happening. Milk procurement prices are at an all-time high. We have enough production going on.
And regarding the pricing correction that we have taken, it's more in the name of trying to keep both the consumers and the farmers at a happy state instead of trying to maximize in terms of profitability. We are maintaining healthy profits and trying to bring down the inflation that in the previous years had gone up very high in comparison to the cooperatives we used to have a huge margin. Now it is beginning to become corrected. The cooperatives have taken a price increase, and we have taken a slight price decreases. So I think the gap is beginning to reduce, which should help us in the future in terms of gaining more market share.
One follow-up question on the pricing bit. So in spite of price cuts, you have seen good sales growth. So I wanted to understand how much pricing cut till now you would have taken. And because your gross margins have also expanded, I wanted to understand, could there be more price cuts even without any further increase in terms of the supply? Given current gross margins, can there be more cuts in terms of the consumer pricing?
We will try to maintain current gross margin levels, and if we are getting a higher margin more than these, we will try to pass it on to either the farmers or the customers.
How much cut you would have?
We will comfortably maintain the current gross margin. Pardon?
How much price cut you would have taken till now?
It depends on all the product ranges because we are a whole range of products. Maybe a couple of rupees here and there.
Okay. Understood. That's very helpful. That's all from my side. Thank you.
Thank you. The next question is from the line of Aditya from Securities Investment Management. Please go ahead.
Yeah. Hi sir. Thanks for the opportunity. Sir, were there any inventory losses this quarter?
Come again, Aditya.
Were there any inventory losses this quarter?
No losses as such. I think we have been keeping the same policy of whatever we do for our NRV. We are continuing with the same policy. So we are just maintaining that there's no losses in inventory.
Understood. And now, sir, if I look at the standalone P&L, so there has been a decrease in gross margins between Q3 of last year and current quarter. The procurement prices from then to now have come down, and the share of VAP in this quarter is higher than the December quarter. So ideally, the gross margins should have increased. Also, if I compare the same with other two South-based players, their gross margins have also increased during the same period. So if you could explain why the gross margins for us have seen a drop, you have mentioned that you have taken some price cuts. So it would be helpful if you could just help us understand what would have been the decrease in procurement prices from Q3 to Q1 and decrease in realization price from Q3 to Q1.
So I think the specifics Murali will give you in terms of the procurement price and the sales realization. But also, there is a difference in terms of the product mix that takes place, which sometimes shows the reflection in the margin in terms of there are multiple ranges of milk or full cream milk, whole milk, and others. So I think with that also, you will find a slight difference. But I think Murali will give you the specifics in terms of the procurement price and the sales price. Murali, can you please go ahead?
Yeah. Sure. So the prices, the margins, like we mentioned, 30% or earlier, we have at 29.1%. Basically, the reason is the product mix. And as you see, historically, Q2 and Q3 have a better margin than the Q1. That's one thing there. Apart from that, the product mix also matters. And also, we have a geographical mix. It also matters. So we have operations in Kenya, Uganda, and also in India. So combined, all these things also, product mix will have a difference. That's why the gross margin will have a minor variation. We won't see any major shift in these things. That's all.
Yeah. Yeah. And added to that, sir, one more issue also. See, if you see, last year, quarter one, quarter two, quarter three, quarter four, sales realization keep on increased. Even compared to quarter one, quarter two, sales realization is more compared to sales second quarter two. So quarter three also more. And quarter three, quarter four, more or less the same.
Yes, sir. So Aditya, I'll just explain. Q1 of earlier, our gross margin 23.7% increased to 29%. So second quarter is 26.8%. Third quarter is 30%. Fourth quarter is 27%. So when you are comparing the peak, so that will not be repeated in all the quarters of the subsequent year because it is based on the seasonality. Quarter on quarter, the variation will be there.
Product mix majorly.
So, I thought that Q1, where the share of VAP is higher, so I believe the gross margin is the highest in that quarter. So, sir, if you could just provide me the realization and procurement price in Q3 of last year and Q1 of this year for India business.
I'll do. But procurement of last year you want to have Q3, it is 37.67 sir. And realization is 57.49.
No, no. Murali, see, we are asking standalone. Standalone Q3 is 38.71, sir.
Yeah.
Okay.
So Q2 is 39.07.
Hello?
Answered your question, sir? Yes, sir. Last year, standalone, Q2 was 39.75. Q3 is 38.71.
Q1 of this year? Current quarter?
Q1 of this year, I'll just tell you. Q1 of this year, 35.45.
Yeah.
This is standalone.
Okay. And realization?
Realization, no. So Q1 is INR 59.56 crore.
Okay. And sir, how the procurement price is trending now? So generally, we see a spike in Q2. So this year, have you seen similar spike or the procurement prices have been stable?
See, if you see last year, more or less, first quarter, second quarter, third quarter, more or less, very close. There's only INR 10.25 of a variation. Except for fourth quarter, slightly it is down. This year also, the first quarter, INR 35.45. Now, more or less, it will remain same.
Understood, sir. And sir, now, our Africa and our Orgafeed have seen good growth this quarter. So what is the revenue outlook for both of these businesses in FY 2025?
FY 2025 first quarter revenue in Africa is INR 83 crore, INR 83.6 crore.
Yeah, sir. I was asking about the revenue outlook for the whole year. What kind of growth are we anticipating for both these businesses?
Yeah. See, last year, I think we have done.
Yeah. Last year, around 82.8 crore, approximately like 83 crore. We are expecting this year it will be almost double, Aditya, keeping you for.
Aditya, I will tell you, last year we have ended here INR 218 crore. This year, we are expecting roughly about INR 360 crore.
So that is for Singapore, sir.
Singapore Consol, that's what I'm talking. Africa means Singapore Consol.
Okay. Sure. Okay. This is also okay.
This year, Aditya?
Yes.
We have ended last year. Ended March, we have done Africa consolidated revenue. And this year, we are expecting INR 360 crore.
INR 360 crore. So we are seeing about.
INR 145 crore jump.
Understood, sir. And for the Orgafeed business?
Orgafeed, we have done INR 82 crore ended March. And this year, we are expecting around INR 160 crore. Double almost. 100%.
Understood, sir. And sir, what is the?
Aditya, I request you to come back for a follow-up question. Thank you. The next question is from the line of Rishabh Gang from Sancheti Family Office. Please go ahead.
Hello sir, am I audible?
Yes.
Yeah. Thank you, sir. So my question is more on the procurement side, right? I want to understand some qualitative insights on what has been the key steps and initiatives in the past and also going forward on how to increase on how you have increased your scale of procurement, right, and how you plan to increase it going forward. Yes, sir.
See, going forward, earlier, we used to have always shortage between sales and procurement. Summer months, we used to run short of milk, and we used to buy from third party. That now we have geared up. We have increased the procurement. Now we are, see, even in the peak summer also, we have a procurement equivalent of slightly more than the sales.
Okay.
Now, in tandem with the sales, our procurement always 2 lakh-3 lakh higher than the sales.
How have you been able to do this?
Tell me, sir. [crosstalk]
[crosstalk] initiatives?
Initiative, see, depending upon the initiative, depending upon our requirement, we will plan well in advance. See, we are there in Andhra, we are there in Tamil Nadu, we are there in Karnataka, we are there in Maharashtra. So depending upon the price structure, depending upon our closer market proximity, we make a plan well in advance, six months. We'll keep things ready as and when requirement is there, we will start.
So it.
So where we increase is either we increase the area by the spread or go into depth, the depth. It's mostly spreading depth that we do as a tandem, depending on prices. So certain areas where we have more strength, we try to get more into increasing at the per village level by doing more activity, like you were saying, when we are giving better service to the farmers. Our depth is increasing. And certain areas, we go by more of it. We have a lot more areas to cover. For example, Maharashtra, which was not there a couple of years ago, we went into Maharashtra. This is how we grow by also spreading the area of operation.
Got it. Okay. Also on the branding and marketing strategy, what have been your initiatives, right, for spreading the awareness for making people move buying milk from unorganized sector to buying from organized sector? And also, how does your brand differentiate as compared to other private sector brands or cooperative brands in your main region, such as Telangana and Andhra Pradesh?
See, for certain areas where we are already a brand in terms of Tier 2, Tier 3 cities , we have a large presence some places where we have 30%-40% market share. It is basically done to reinforce the brand and to keep it going. Predominantly, differentiation in milk is done on basis of, I guess, not more than we said because milk people will compare milk as such. But the amount of work that is done in terms of the backend of procurement, microbial quality, microbial loads, it is only that our job is to get the product into the customer and new customer to try it out first. Because once that happens, then the product speaks for itself in terms of flavor profile and consistency of quality and consistency of service. So that message is what we try to carry on by saying, "Look, the products are cleaner.
The products are healthier. "Please be private." And then we leave it to the customer's choice, and we are very confident that the quality of the product speaks from there.
Okay. So also on the distribution touchpoints, right, so how has the growth been over the years? And how is your qualitative initiatives for that and incentive to distributors in terms of monetary incentives? Are you doing something different from the overall industry? How do you think about it, sir?
I think the overall industry always maintains a similar pattern, but it's more in terms of the efficiency and ground reality of delivering the operation. We have multiple chains of distribution. We have our own outlets, which we call DRPs, which I think Murali will give you the specifics in terms of numbers. We also have distributors. We have retailers and then the modern trade. We are now trying to move a lot more of the product into the modern trade profile coming from more of a visibility standpoint of view and use a blend of all these. So it depends on certain areas if we're not able to get penetration for whatever the reason be. We use what we call as regular retail points as our ability to go get our penetration in there.
Certain areas where we have now become stronger, we hand over the operations to distributors who then take care of the operation, monitor the growth, and see how we are able to penetrate. If you need specifics or things, Murali will be able to give you the numbers.
Yeah. So we have a distributor channel, agent channel, DRP, and modern trade and institutional and direct. So 50% of our business will come from the distributor channel. 26% comes from the agent. And our own distributors, DRPs, what we call regular retail products is around 17%. Balance around 2%-3% from the institutional.
Market profile will maintain almost the same feature. Private sector will be higher compared to the cooperators. I think the structure in terms of commission among all the channels remains the same. With the competitors also, it's only the product that has to be there on time, delivered on time, and available to you.
Also for new markets, right, do you think about going through B2B way first or maybe going through a quick commerce strategy? Do you also send products through platforms like Swiggy, Instamart, or Blinkit? And it can help in building a brand in a locality first, and then maybe you can start building the distribution there. What do you think about that, sir?
So basically, online as a channel is not yet big for milk per se because of the perishability. The numbers are still smaller. We are presenting those online channels also. Majority of it, because the dairy industry per se has been one of the few industries way before even a Blinkit came into play, was doing deliveries at home. I mean, most of the milk packets to the consumer are delivered to their doorsteps in an older overall system. The newer online channels are made more in terms of convenience that has come forward. As we go forward, I think it will further improve in terms of online distribution being handled not only by the only channels, but I think the dairy industry also trying to make it become more customer-friendly in terms of consumer being order placement and taking it forward.
But we will prefer going a lot more to the B2C rather than the B2B because we try to differentiate on quality and try to command a bit of mass premium on the product that we are selling. So our concentration is more on B2C and less on B2B.
Just last question from my end. What do you think about the attractiveness, right, of eastern states of the country, like West Bengal, Jharkhand, Bihar? Do you think these are markets which deserve our attention?
As we go forward, yes, sir. But normally, when you look at it, the south and the west of the country where there is more of a GDP income coming in, people do not mind paying a little bit of a premium for the product quality or what they want it as in terms of convenience. The eastern part of the country is still the GDP front is a bit lower. So people there are more price conscious. So we cannot command that kind of premium to increase margin. The strategy is the future growth for the country as that part of the country starts to improve. It will also come and give us the margin. So we will be entering into those markets as and when opportunities arise.
All right. Thank you so much, sir. I will come up in the follow-up. Thank you.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address the questions from all the participants, please limit your questions to two per participant. Thank you. The next question is from the line of Arpit Shah from Stallion Asset. Please go ahead.
Hello.
Yes, sir.
Hello. Am I audible?
I am. Yes, yes.
Yeah.
Yes, sir.
I'm just a little new to the business. Just wanted to understand, let's say the difference between the procurement and the sales, that is the part which we divert to VAP, right?
That's the part. That's the part which we divert to VAP.
Yeah. Which we divert to, that is for our captive consumption for VAP products. Is that right?
No, no, sir. See, the surplus milk, always milk, we have a low-fat milk, medium-fat milk, this and that, whatever surplus fat in between we take out, that we will sell as a ghee or butter. And during flush season, when you get a surplus milk, because day to day, you can't precisely collect the same milk for the equivalent of your sales. So always you could be more milk during flush season. That will convert into powder. Some will consume for internal consumption. Excess will sell it in the market.
So that difference is what we sell outside or how is it?
We'll sell outside. Whatever after internal consumption, we'll sell outside open market.
Okay. Because if I see the procurement, that is 17.6 lakh liters per day, and I will say 11.3 lakh liters. So difference is about 5 point something or something more. So that is what we want to use for VAP, right?
Yes. The curd also we call it the VAP. So basically, curd, 4.67 tons in the curd is there. It means 11 lakh milk, 4.67. It means it has become 15.6, 15.7 lakh.
Okay. So we sell the total product in the procurement. And also in the sales in variety, like 4.2% average of what we procure. We sell around 4.5% because we have a full cream milk sale and curd and all this stuff. Even solids, that is, we call as solids-not-fat, that we procure around 8.5%. And we sell this around 9%. That's how the solids will go high.
Got it. Got it. Not a problem. And just wanted to understand the kind of margin that you have done. That is probably one of the highest margins that you have done over a lot of quarters. How should we see the margins and revenue growth for FY 2025?
We will maintain the same standard for what we are looking at. Comfortably, our top line will grow in the same double digits that we have in the first quarter, and similar pattern will follow for the bottom line also. We are confident that for the year FY 2025, the bottom line will be healthy as it is in the first quarter, and we continue to go forward in the same manner.
So you think we'll be able to report INR 10 crore PAT for FY 2025?
How much is that?
INR 300 crore PAT for FY 2025. Is that the right estimate, or do you think it's more aggressive?
The specific numbers not yet, sir, but we are confident we'll maintain current PAT number as a percentage of the top line growth attempted.
The first quarter, sir.
Sorry, I missed the last part. There's a lot of disturbance.
We cannot give a specific number, but see, the first quarter, what we have seen, the first quarter results, similar lines. So we will continue to do in the second, third, fourth quarter also.
Got it. Got it. Thank you so much. Best of luck.
Thank you.
Thank you. The next question is from the line of Mythili Balakrishnan from Alchemy Capital Management. Please go ahead.
Hi. Two questions, sir. One, I wanted to get a sense of the milk volume growth because that still seems to be stuck in a low 2.5% kind of a range. So just wanted to get a sense from you as to how are you thinking in terms of volume. And when will that grammage reduction which happened, when will it reverse and we see that a stronger growth emerge on the volume side?
Yes, ma'am. [crosstalk]
Yeah. See, milk, you have seen only 2.5% growth, but whereas you've seen growth of 6.6%, especially curd. So milk and curd, we should see together. See, sometimes what is happening more than milk nowadays, curd growth is higher than the milk growth, number one. So number two, see, the overall growth, see, mostly it is growing only on curd and value-added products.
Okay, and when you say value-added product?
Milk will also be muted because the surplus in the system, when you have this, always happens when you have excess production in the system. We get a lot of the cheaper players coming in, smaller tank players who come in and try to enter into the market, which normally means when you get back into the summer.
Got it. Got it. Also wanted to check with you on the consolidated, if you could give us a number for milk procurement and milk selling?
For the first quarter?
For the first quarter, yeah.
First quarter consolidated volume, you're asking, madam? Or revenue?
Consolidated milk procurement price and milk selling price.
Okay. Milk procurement consolidated procurement price is INR 34.15. Selling price is INR 59.17.
Got it. So the gap which has come is almost like a INR 5 gap as compared to what it was in the previous last three quarters. Is this sort of sustainable, or do you think you will have to sort of see, as you have sort of reduced prices, you see some reduction in this spread?
We will continue now because we will balance it between procurement and selling prices, and we'll try to maintain similar margin trends.
Got it. Thanks. That's all from my side. Thank you very much.
Thank you. The next question is from the line of Resha Mehta from Green Edge Wealth. Please go ahead.
Yeah. Thank you for the opportunity. So on the international business, if you can just elaborate that what is because we have guided for almost a 65% kind of growth for FY 2025. So if you can just talk about what is driving this kind of growth, what are the sustainable growth rates there, sustainable gross margins and EBITDA margins there, and do we have any CaEex plans there?
I will answer individually, but now it's basic, yeah. CapEx, we have already done. See, last year we acquired one plant in Kenya, and that commenced production in the month of January FY 2025. So mostly the CapEx is done. Right now, not much of CapEx, very minor maintenance CapEx in the coming year, and the market expansion. Maybe see, since last couple of years, we had a lot of issues, permit issues. See, from Uganda to Kenya because since we are having a plant only in Uganda, we were exporting to Kenya. So during COVID time and subsequent COVID time also, there were permit issues there. So in particular months, we used to get permits in certain months, we used to put a break and all. Now, since we acquired a plant in Kenya, so I think we will have stability and some kind of numbers going forward.
Okay. And what are the growth rates, sustainable growth rates there and sustainable gross and EBITDA margin?
Yeah. This year, maybe the growth rate, volume growth rate, we have shown a little higher side because since we have started new plant, but the coming years, maybe 15% minimum, 10%-15% minimum revenue growth rate will be we can achieve.
Sustainable margins then?
Margin rate, see, it varies. But on average, it is almost double than India margin.
Okay. So last quarter, I think it was almost like around 25%. So is that also one?
Yeah. That's it. Quarter to quarter, we'll have some variation in African countries. But by and large, if I am doing 10% margin in India, see, Africa overall, it is giving around 20% margin.
Got it, and secondly.
That's what last experience, couple of years.
Got it. Secondly, on your cattle feed business, so you said that 60%-65% utilization is what we can achieve in FY 2026. So currently, what are the utilization levels? What are the peak revenues possible at optimum utilization?
Yeah. Last year, we have done only INR 82 crore top line. And last year, in the last year end only, we commenced another plant in a bigger feed plant. So now that is running now. See, and this year, we are expecting our turnover will be double compared to last year. It's basically 12,000 tons a month. We have a 2,000-ton per month capacity. The target 10,000. The capacity now is 10,000 tons.
Yeah. 12,000 tons. Plus the old plant is roughly about 2,000 tons. Total, 14,000 tons. Now we are already doing 4,500-5,000 tons capacity.
Okay. So we are at 4,000, 4,500 volume levels, right?
Yeah. Yes. Plant capacity is 12 to 13,000 capacity overall, 100%.
Right. And liquid milk, can you just mention what was the price taken for liquid milk specifically?
Liquid milk, we are talking about standalone water? We didn't take a price tag.
Sorry, I didn't get that. Hello?
No, no. Standalone water this year, we have not taken a price tag. Standalone.
Okay. Standalone Q1, not taken any price hike, right?
Yeah. From Q4, we have not taken any hike. But when you compare year on year, there is a 1.9% of growth is there in the milk prices. Currently, current quarter we have done 65.9. I'm talking about only milk. And last year, during the same quarter of Q1, we had 54.9%. Yeah.
Right. So the last price hike taken in milk was when?
Interrupt you, ma'am. I requested to ask a follow-up question.
Thank you. The next question is from the line of Nikhil Upadhyay from SIMPL. Please go ahead.
Hi. Thanks for the opportunity and congrats on good set of numbers. Just two questions. One is, when we see the cooperatives increasing the prices while private players cutting down the prices, is it like the cooperatives are passing it to the farmers, or are they covering their operational costs through this price increase? What's your sense?
I believe they're covering their operational costs. Yeah.
Okay.
Because of two fronts, we also have a surplus of milk which we are handling, which we'll have to offset by increasing the prices and because of operational costs also. So earlier, the difference was so large, they wouldn't be finding it to be very comfortable now. So they have to start moving up. And we had already taken it earlier, but we are able to manage it with the lower pricing now.
Okay. And second question. Now, most of the private dairies, I think four companies which have reported results, everyone is getting the benefit of low cost. And I think someone did ask this earlier also. But at the competition level, are you seeing price cutting or increasing grammages in order to gain volume share? Because volume growth for all the players had been very little. So are you seeing increasing competition through price increases or grammage price decreases or grammage increases in the markets where we are operating?
The competition intensity will always remain there, but it's more of, like I was saying earlier, when you have a lot of surplus in the system, you will find a lot more of the smaller players coming into the play to make use of the low prices and try to undercut much larger in terms of pricing, which in terms of seasonality come another year when there will be shortage of milk, you will see the upsurge in volume growth. This always follows that pattern. But whenever there is a huge surplus in the system, we will find muted growth, and that will automatically translate a lot more milk in the system. So this is a normal phenomenon which goes on. Competition intensity continues to remain the same. We are looking at more consolidation happening.
But sir, in this environment, how will consolidation happen when everyone is making money? And whenever consolidation happens, the asking rates will also go very high. So how do you see consolidation happening now?
It will become more and more in terms of more efficient players will survive. So like the four that are existing, we have a lot more of smaller players who are there all over the states that we operate. It is either due to management fatigue because of not having proper systems of people in place, coming to variations and volatility of the pricing that will happen. And third comes in also with the working capital. For example, if there is a surge in the current year when we were able to hold on because we have capital with us, we're able to deploy our working capital well and efficiently. It helps us. Whereas a person who doesn't have that ability, you will find it will be strenuous. So in a multiple of reasons, it will start to consolidate.
Okay. Sure.
Thanks a lot, Nikhil Upadhyay.
Thank you. The next question is from the line of Vineeth Lambu from HSBC PMS. Please go ahead. Mr. Vineeth, your line has been unmuted. Please go ahead with your question. Mr. Vineeth, your line has been unmuted. Please go ahead with your question.
Sorry. My question is regarding the EBITDA margin for the milk, plain milk, and the value-added product play. What would be the margin? And the.
Value-added will be higher, but would you be able to give me a specific answer, Murali?
Yes, sure.
Value-added product margin?
Yeah. Milk, generally, it ranges from 7%-8%. And value-added products, the EBITDA will be around 15%. And in that, the buttermilk, lassi, and the curd will have a higher margin. And the ghee and butter will have a moderate margin around 5%-6%.
So curd typically has the same margins, or else it belongs to value-added products?
No, same as a moderate. Yeah. Curd is a value-added product, which has a higher margin. It is almost 60%-70% higher than the liquid milk margins.
So can I assume that this would be the share would be the same value-added product 35% and plain liquid milk at 65% for overall FY 2025, or it would vary on average for FY 2025?
Yeah. There will be a little variation with it because of the Q1, generally, our Q1 value-added products will be a little higher, right, but in keeping with our future strategic plan and all that stuff, we'll try to maintain that.
Can you give me the number on an average, not a vertical number, but a range of maybe with 3%-4% for the plain milk and liquid milk?
Yeah. Like FY 2023,
Maybe a little bit higher than the year in this financial year. Since we are holding, see, enough stocks, especially butter and SMP, definitely the value-added portion will be higher than the last year. So plus or minus 1% this way, that way, your value-added portion will be roughly about 33%-34% this year.
33%-34% with 15% EBITDA margin for the value-added product?
Yeah.
Can you give me a range for this 33%-34%, or 15% is a right assumption?
Yes. Yeah. It might be slightly lower than 15% because we are including butter and ghee into it. It will maintain the range of between higher than milk, but maybe at a 12%-13% gross margin.
12%-13% is a right assumption for whole FY 2025?
Yeah, yeah. Yeah.
Okay, and 7%-8% remains similar for the liquid for the whole year?
Yes.
Yes. That would be the range here.
Okay. Thanks. What would be the growth rates on revenue?
We'll maintain the same numbers of the first quarter. Although we'll have a little bit of product mix variation. I think for the overall year, we can guide on the same what we have seen in the first quarter.
Okay. And same remains for the profitability? So 40%, 45%, or?
Same will remain for the profitability also. It will be slightly maybe lower by 0.5% this way, that way, but it will maintain the same.
I couldn't get it. You are talking about the PAT or EBITDA?
EBITDA margins will maintain the same. EBITDA and PAT for us will almost go in the same sense.
I'm talking about the growth. For the PAT and EBITDA.
Growth?
FY 2025.
For PAT and EBITDA growth, if you compare year over year, we'll grow with around 10%-15%, I mean, high double digits.
I didn't get you. 10 to?
Yeah.
[Crosstalk] Probably 20% will be EBITDA and plus or even the PAT also similar number.
Okay. So 20% EBITDA growth for FY 2025. And PAT, what? Similar range, 20%?
Yeah. Similar range. 18%-20%, you can take a ballpark number. For both EBITDA and PAT, revenue will be around 10%, which will be a mix of volume and the price and also the product mix.
Okay. Thank you. Thank you.
Thank you. The next question is from the line of Falguni Dutta from Mansarovar Financials. Please go ahead.
Yeah. Good afternoon, sir. Sir, could you just repeat the milk procurement prices for Q4 and Q1? And also the milk realization?
Yes. Yes. Is it consolidated or it is standalone, sir?
Standalone.
Yeah. Standalone Q4 procurement price is INR 36.91, sir. And Q1 is INR 35.45.
Just a sec. INR 36.94 Q4.
Q4 of procurement, INR 36.91. Q1 of procurement price is INR 35.45, sir. With regard to the sales realization, we have INR 55.45 versus INR 56.54 in the current quarter.
INR 55.45 in Q4?
No. No. Q1 would be INR 57.86, Q4 INR 57.82 of Q4 versus INR 59.56 of the current quarter.
INR 59.56 current quarter.
Yes.
Yeah.
Okay. Sir, one more question is this is the first time that I'm following a milk company, so pardon me for the basic question. Is there a seasonality in the milk procurement prices if we go by Q1, Q2, Q3, Q4? Is there any trend?
Yes. [crosstalk]
Yeah. Normally, we'll have a trend. Last year, if you see, more or less, first quarter is INR 39.62. Second quarter also INR 39.07, roughly about 50 paisa first quarter to second quarter. Second quarter to third quarter also, there is a 50 paisa variation. So third to fourth quarter, there is only 20 paisa variation. Slightly, there will be some variation quarter to quarter.
Normally, there is not a big change, generally, quarter to quarter.
Yeah. Last year, if you see, last year, only INR 0.50 was the variation from quarter to quarter.
Okay. Okay. And sir, can you just refer me to someone in your company from whom I can just get a handle of the basic activities in the milk industry? I mean, operationally, I mean, if I have some basic questions, whom can I get in touch with at Dodla?
Yeah. Mr. Murali.
Sir, I'm the right person. You can contact me.
Mr. Murali?
Yeah, yeah.
Sir, can you just give me any landline number so that I'll just get in touch with you?
Okay. I will message you.
Okay. Fine.
The investor presentation you have. Otherwise, if you want the landline, you can note down 4546 7777.
Sorry, sir. 45?
46.
7777. 4546 7777.
Thank you so much, sir. Thank you.
All the details are available. Contact details in the investor presentation also. You can mail it also if it is possible. Yes.
Thank you. Thank you. That's all from my side.
Thank you. The next question is from the line of Binoy from Sunidhi Securities & Finance Limited. Please go ahead.
Yes, sir. Thank you for the opportunity. Could you help me with the milk procurement volume for the India business in quarter one FY 2025?
Quarter one FY 2025, you want the overall milk volume?
Yes.
Yeah. Procurement volume.
Yeah. 1,596,000. 1,596,000 is standalone India first quarter procurement.
Understood.
Consol is 17.6.
Sorry. Consol is 17.6, right?
6. Yes.
Yes.
Okay. Sir, so in quarter four of FY 2024, we took an inventory write-off of roughly about INR 23 crore. Is there any write-back of this inventory in this quarter?
Murali, not write-off.
No.
There's not a write-off. I think that we actually wrote the.
Market value. Yeah. Continue, sir.
Go ahead, Murali.
Can I go ahead? Okay. Thank you. When we compare with the market value, because whatever we use internally, that we will not have any write-down value. But if we are having any excess stock, which we are marked to market when you do it, there is a provision we made for INR 23 crore in the Q4. And for that, we have further increased by another INR 10 crore, keeping in view of the latest rates and latest stock availability. Yeah.
So you're saying essentially you provided another INR 10 crore in this quarter?
Yes.
Yes.
Another INR 10 crore we provided. As a conservative approach, we can keep the.
Understood. Understood. Sir, Maharashtra state government has actually announced some INR 5 subsidy to the cooperatives and private dairies. So if you could just help me understand the mechanism of this subsidy and when does this start?
Yeah. We started this month 11th onwards. July 11th onwards only we started. See, earlier, all the private dairies, they were paying procurement price to the farmer only INR 27. But the government said, "You make minimum INR 30 as a basic price, and then the government will give you INR 5 subsidy." So subsequently, after a couple of discussions with the government, all the dairies also started paying INR 30, and the government will be adding another INR 5. See, that is effective from July 11th onwards.
Understood. And so INR 5 will be paid by the government to the farmer directly, or will INR 5 be paid by the government to the farmer?
No, no. Farmer, see, they pay directly to the farmer account. And people who are having direct farmer account only are eligible to get this.
We have to upload all the bank statements, the payments, farmer-wise details in the portal. So based on that, they are there. They could be able to get the INR 5 from the government. So like Sir mentioning, when you procure directly from the farmers, then those people only will get a benefit. Who are buying through the agents.
People who are only getting.
They will not get.
Yeah. Murali, people who are getting milk direct through farmer account and making payment to direct farmer account only, it will help to get that government amount.
Yes. Yes.
Understood. So net realization, I mean, net realization to the farmer will stay at 35. If the understanding is correct, right?
Yes. Yes.
Understood. Okay. So second is that on observation. So this quarter one is typically more or less lean season, right? The flush season is just about begun or yet to begin in quarter one. So when we look at the milk procurement volume for the India business, sequentially also, there is a higher milk procurement volume. So anything to read in the con call, you made a statement that the milk procurement prices will stabilize at these levels while the actual flush season is yet to start or has just, I mean, in July would have just begun. So shouldn't the milk procurement prices fall further from these levels? And you will also have a very good flush season going forward in terms of the total volumes?
Yeah. This year, unlike last year and previous years, this year, flush season started a little early because the monsoon onset started from May 10th onwards, especially in the southern part of India. So that's why instead of second quarter, the first quarter itself, the procurement volume has gone up. And subsequently, the second quarter may not be more than the first quarter procurement average. If you see, last year, my second quarter procurement to third quarter procurement, there is a variation of 70,000 liters. Second quarter, 15.93. Third quarter is 16.66. Then the fourth quarter has become 15.46. So now, see, the first quarter is 15.96. And the second quarter, see, you may have a slight variation, not more than INR 16.5 lakh.
Okay. Okay. And do you also see the flush season peaking out in the second quarter, or will it run down to the third quarter?
It will run down to third quarter.
Okay. So overall, net net, you'll have a longer flush season?
Yes.
Okay. Okay. Sir, my last question. Could you help me with the overall sales volume for consolidated and India business for quarter one of FY 2025, quarter one of FY 2024, and likewise, quarter four of FY 2024?
Yeah. See, if you take consolidated, if you see quarter one of 2024, 15.75, and quarter two 14.15, 13.77 quarter three, and Q4 14.68, and FY 2025 Q1 is 16.45.
Okay. And likewise for the India business?
India business, if you see, last year, FY 2024, 14.53, 13.14, 12.81, 13.41, and FY 2025, 14.80.
Okay. Thank you so much. That's all from my side.
Okay.
Thank you. Ladies and gentlemen, we'll take this as a last question. I would now like to hand the conference over to the management for closing comments. Management.
Sir, sir.
Yeah. Thank you, everyone, for joining the investor conference and wishing you all a great day ahead. Thank you very much.
Thank you, Aniruddha. Thank you, everyone.
Thank you, Aniruddha. Thank you all.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.