DODLANSEQ4 FY22May 20, 2022

Dodla Dairy Limited

5,589words

68turns

6analyst exchanges

4executives

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Management on call

Aniruddha Joshi

ICICI SECURITIES LIMITED

Sunil Reddy

MANAGING DIRECTOR – DODLA DAIRY LIMITED

Bvk Reddy

CHIEF EXECUTIVE OFFICER - DODLA DAIRY LIMITED

Anjaneyulu Ganji

CHIEF FINANCIAL

Key numbers — 40 extracted

15%

pe all of you are doing well today. I am glad to announce that we have delivered a strong year of 15% year-on-year revenue growth on back of strong volumes and VAP sales numbers. Our milk volumes in

12.2 lakh

nue growth on back of strong volumes and VAP sales numbers. Our milk volumes in FY2022 are around 12.2 lakh liters per day which is around a growth of 12% year-on-year. Our average milk procurement now sta

12%

mbers. Our milk volumes in FY2022 are around 12.2 lakh liters per day which is around a growth of 12% year-on-year. Our average milk procurement now stands at 12.5 lakh liters per day which is also a

12.5 lakh

per day which is around a growth of 12% year-on-year. Our average milk procurement now stands at 12.5 lakh liters per day which is also a growth of around 16% year-on-year. Moving on to our quarterly nu

16%

average milk procurement now stands at 12.5 lakh liters per day which is also a growth of around 16% year-on-year. Moving on to our quarterly numbers we have delivered yet another quarter wherein ou

11%

d yet another quarter wherein our milk volume growth and healthy VAP numbers buoyed us to achieve 11% year-on-year and 3% quarter-on-quarter revenue growth in the Q4 of FY2022. Our average milk procu

wherein our milk volume growth and healthy VAP numbers buoyed us to achieve 11% year-on-year and 3% quarter-on-quarter revenue growth in the Q4 of FY2022. Our average milk procurement in Q4 FY202

12.3 lakh

-quarter revenue growth in the Q4 of FY2022. Our average milk procurement in Q4 FY2022 was around 12.3 lakh liters per day as compared to 10.8 lakh liters in the same quarter last year. Geographical expans

10.8 lakh

022. Our average milk procurement in Q4 FY2022 was around 12.3 lakh liters per day as compared to 10.8 lakh liters in the same quarter last year. Geographical expansions of our operations and inroads and n

1.2 lakh

cquisition of Shri Krishna Dairy is a good example of the same. Today we procure milk from around 1.2 lakh dairy farmers daily and providing a regular direct payment to the bank accounts, our direct procu

20 lakh

oss all states in India supported by third largest procurement network, 14 processing plants with 20 lakh liters capacity per day capacity. We currently have 110 chilling plants as against 104 in the pre

Rs 22,434 million

k glance at the financial highlights for the year ended March 31, 2022 operating revenues were at Rs 22,434 million in FY2022 compared to Rs 19,440 million in FY2021 registering a growth of 15%. Profit after tax w

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Guidance — 19 items

Sunil Reddy

opening

“Now we aim to speed up this growth further and enter into new unexplored territories to consolidate our traditional products and our VAP sales.”

Sunil Reddy

opening

“With this will be carrying on a journey of growth as such acquisitions will always help us reach new places and share synergies with the business model and I would also like to take this opportunity to thank all our stakeholders for supporting us through this journey wherein we close our first financial year as a listed entity.”

Sunil Reddy

opening

“This has been a special one for us and we hope to add value to all of you through our strategy and execution.”

BVK Reddy

opening

“Our Orgafeed revenues have almost doubled this year the details of which will be shared by our CFO, Mr.”

Anjaneyulu Ganji

opening

“Having said that I would also like to mention that we are confident that this will be offset partially by price increases going forward.”

Anjaneyulu Ganji

opening

“Sunil mentioned becoming a formidable player in the dairy industry and this year we also shifted from a new tax regime from the old tax regime so we shifted from a 30% tax bracket to 22% tax bracket for the dairy industry, so with that we no more can claim 80AB deduction, so we will be getting that effective tax rate decrease from this year onwards.”

BVK Reddy

“Earlier also we said couple of times, that we will be looking at margins between 10 plus or minus 1% so this year as you see we have done already 9.4% average EBITDA and on the same similar lines we are expecting in this coming financial year also, in spite of diesel price hike and all that.”

Gaurav Jogani

“Sir what kind of annual revenues you possibly looking there in the next three to four years not talking about a short term but a longer term how much you see their profitability wise, do you expect it to take to the company levels any clarity on that front?”

Anjaneyulu Ganji

“The turnover wise we are doing around 50,000 liters per day from Sri Krishna currently so the plant has a milk capacity to produce almost 1.2 lakh liters per day and in the next four years we are planning to increase the sales capacity utilization to take it to almost 80% in the next four years so we will send around the one lakh liters per day from Sri Krishna that is our target.”

Gaurav Jogani

“Okay and so that will be gradual scale up what you are seeing like from 50 to 1.2 so you are expecting it to increase by 20000 liters per year would that be a fair assumption?”

Q&A — 6 exchanges

Hi good morning, Sir and thanks for taking my question. I just have one actually, so we are seeing inflation across the Board but when it comes to Dodla we are hardly seeing any so in fact I was just doing a back calculation where your milk procurement is up from 13%-14% Y-o-Y but your RM costs are only up 11%, also other expenses of 3% my sense was that freight is a large cost for us and we all know what is happening with the fuel prices, so how are we managing this, are we taking more price hikes, even with the price hikes there is hardly any RM inflation so is milk procurement not increasin

Anjaneyulu Ganji

As you rightly said we started taking the price hikes because for the fuel price increase and also these milk prices are seasonal so we are waiting for the prices for this month and they started already coming down so for the fuel prices increase we already take the price increase in Q4 of the last year that is where there is a margin improvement compared to the previous quarters and we will wait and watch and see Mr. BVK Sir will give an update on the sales price if we want to take it because it is a seasonal thing for the raw material procurement. Yes see I want to add something to this actu

Thank you for taking my question Sir and congratulations on the resilient performance in the tough environment, Sir my first question is with regards to the margins even if you see for the full year the EBITDA margins are trending above the historical levels of around 6%-7% odd and is now at around 9%-9.5% so one would like to take your perspective on the same on how the margins can trend forward going ahead, considering the inflation and our growth plans?

BVK Reddy

Earlier also we said couple of times, that we will be looking at margins between 10 plus or minus 1% so this year as you see we have done already 9.4% average EBITDA and on the same similar lines we are expecting in this coming financial year also, in spite of diesel price hike and all that. If you can help me with what is the current procurement price for you that you are seeing and how much of the inflation are you seeing Y-on-Y basis in Q1 FY2023 for now? Q1 FY2022 our procurement price was only Rs.31 now in Q4 it is Rs.34 and in fact now Q1 of 2023 it has gone up further Rs.1 it is now Rs.

Thanks for the opportunity. Congrats for a decent performance in a challenging scenario. Sir my question was regarding the value-added products that we do so currently curd is a bigger contributor in this and I want to just know like how are you planning to take the VAP sales going forward and any product addition after the Sri Krishna acquisition or especially on the VAP side if the company is able to do and kind of scale up so just trying to understand from that point of view?

BVK Reddy

Sri Krishna also the same similar kind of VAP we have what Dodla has got same buttermilk, lassi, curd, sweets, and all, so percentage wise that is the same percentage slightly now see earlier also we said so overall including all VAP put together we are 28%-29% so we are projecting 30%-31% VAP in coming days. Our focus is to increase continuously on value added products sale so last year we have achieved around 27% for FY2022 and going forward for the next year our projects need to reach 29% and 2% year-on-year increase and the next year forward we want to achieve around 31%, what is our targe

Thanks for the opportunity. Sri Krishna did Rs.60 Crores of annual revenue for the past two years but before COVID it was doing something around in the range of Rs.100 Crores and you plan to take it back to that scale Sir I wanted to ask what are the low hanging fruits which the company would like to take advantage initially to take the scale back?

Anjaneyulu Ganji

So the low hanging fruits are majorly the direct procurement so which we are stronger so as of now we are 100% direct procurement so we will implement our procurement model over there and also it is adjacent so we will utilize the current synergies which are available through our salesforce and the procurement network those are the immediate low hanging fruits that are there and also utilization, our efficient team from the Koppal will go there and handle the plant from there so those are some increasing efficiencies which will give us some certain cost savings in the long-term so those are lo

Sir just two questions from my side now the company also has got good cash on the balance sheet so what would be the strategy with that? We have done one acquisition Sri Krishna but can we see more acquisitions in the pipeline and if the company is going to have an executive strategy over next one to two years what will be the type of company that they are looking at and whether that we are looking at acquiring brands or manufacturing or milk procurement and in which regions whether it will be AP, Telangana or it will be closer to Maharashtra or Odisha and second question is on how does the co

BVK Reddy

The first point is that this year we have already started one new feed plant. This new feed plant we will be spending around Rs. 45 Crores and that is 12,000 metric tonnes capacity because the existing feed plant now we have 100% capacity utilization, so now we already see that the land has been identified and everything is settled and now already work started so it will take another 10 to 11 months to commence a new field plant basically the new food plant is going around Rs.45 Crores number one. Number two now you see we have identified a land in Kenya to put up a plant in Africa because bet

Thank you Mike. Thank you everyone so this year with everybody’s support, all the employees and everyone so we have done really well, and we are continuously working on as we have reiterated good opportunities and continuously grow and thank you for all your support and advices. Thank you everyone. So please write to us in case of any queries so would be glad to answer that.

Management

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Speaking time

BVK Reddy

Anjaneyulu Ganji

Gaurav Jogani

Moderator

Pranjal Garg

Aniruddha Joshi

Sameer Gupta

Bharat Gianani

Sunil Reddy

Opening remarks

Aniruddha Joshi

Thanks Mike. On behalf of ICICI Securities we welcome you all to Q4 FY2022 results conference call of Dodla Dairy Limited. We have with us today Senior Management represented by Mr. Sunil Reddy, Managing Director; Mr. BVK Reddy, CEO and Mr. Anjaneyulu Ganji, CFO. Now I hand over the call to Mr. Sunil Reddy for his initial comments on the quarterly performance as well as FY2022 performance and then we will open the floor for question and answers. Thanks and over to you Sir!

Sunil Reddy

Thank you very much Aniruddha. Hello everybody I welcome you all to the Q4 FY2022 earnings conference call and I hope all of you are doing well today. I am glad to announce that we have delivered a strong year of 15% year-on-year revenue growth on back of strong volumes and VAP sales numbers. Our milk volumes in FY2022 are around 12.2 lakh liters per day which is around a growth of 12% year-on-year. Our average milk procurement now stands at 12.5 lakh liters per day which is also a growth of around 16% year-on-year. Moving on to our quarterly numbers we have delivered yet another quarter wherein our milk volume growth and healthy VAP numbers buoyed us to achieve 11% year-on-year and 3% quarter-on-quarter revenue growth in the Q4 of FY2022. Our average milk procurement in Q4 FY2022 was around 12.3 lakh liters per day as compared to 10.8 lakh liters in the same quarter last year. Geographical expansions of our operations and inroads and new markets are visible through the growth in numbe

BVK Reddy

Thank you so much Sunil Sir. A very good morning to all the participants. As mentioned by our MD Sir we have delivered a healthy quarter showing a growth in revenue and other parameters. Our constant push towards expanding our footprint across India is shaping up well and the acquisition of Shri Krishna Dairy is a good example of the same. Today we procure milk from around 1.2 lakh dairy farmers daily and providing a regular direct payment to the bank accounts, our direct procurement model has further strengthened wherein we are buying more almost all the milk directly from the farmers across more than 8000 villages as compared to last year 7000 villages. Resulting cost savings, establishment of deep routed relationship with them and our Orgafeed operations wherein we provide high quality feed to the dairy farmers help us to strengthen these relationships with them and ensure that both the parties get benefited. Our Orgafeed revenues have almost doubled this year the details of which w

Anjaneyulu Ganji

Thank you BVK Sir. Good morning, everyone. I would like to briefly touch upon the key performance parameters for the full year and fourth quarter of FY2022. We have also submitted a detailed presentation of our financial performance on stock exchanges and we have also uploaded the same on our website. Now will take a quick glance at the financial highlights for the year ended March 31, 2022 operating revenues were at Rs 22,434 million in FY2022 compared to Rs 19,440 million in FY2021 registering a growth of 15%. Profit after tax was at Rs. 1,328 million in FY2022 compared to Rs. 1,260 million in FY2021 showing a growth of 5%. Earnings per share for FY2022 was Rs.22.43, this is in line with what we had in FY2021. Our Africa revenue stood at 1,467 million in FY2022 versus 1069 million in FY2021 witnessing a growth of 37%. Financial highlights for the quarter-ended March 31, 2022, are the operating revenues are at Rs. 5,897 million in Q4 FY2022 compared to Rs. 5,305 million in Q4 of the p

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