DODLANSEQ1 FY23August 03, 2022

Dodla Dairy Limited

7,162words

146turns

11analyst exchanges

4executives

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Management on call

Sunil Reddy

MANAGING DIRECTOR - DODLA DAIRY LIMITED

B.V.K. Reddy

CHIEF EXECUTIVE OFFICER - DODLA DAIRY LIMITED

Anjaneyulu Ganji

CHIEF FINANCIAL OFFICER - DODLA DAIRY LIMITED

Aniruddha Joshi

ICICI SECURITIES

Key numbers — 40 extracted

INR 717 Crore

are doing well. I am glad to announce that we have reported the highest ever quarterly revenue of INR 717 Crores, registering 40% year-on-year revenue growth on the back of strong volumes and operational num

40%

announce that we have reported the highest ever quarterly revenue of INR 717 Crores, registering 40% year-on-year revenue growth on the back of strong volumes and operational numbers. The milk procu

20%

evenue growth on the back of strong volumes and operational numbers. The milk procurement grew by 20% YoY to 14.8 lakhs liters per day in Q1FY23. Our average milk sales also increased by 26.2% YoY to

14.8 lakh

th on the back of strong volumes and operational numbers. The milk procurement grew by 20% YoY to 14.8 lakhs liters per day in Q1FY23. Our average milk sales also increased by 26.2% YoY to 10.4 lakhs liter

26.2%

grew by 20% YoY to 14.8 lakhs liters per day in Q1FY23. Our average milk sales also increased by 26.2% YoY to 10.4 lakhs liters per day. Our geographical expansion of operation into new markets are vi

10.4 lakh

YoY to 14.8 lakhs liters per day in Q1FY23. Our average milk sales also increased by 26.2% YoY to 10.4 lakhs liters per day. Our geographical expansion of operation into new markets are visible through gro

Rs. 200 Crore

ndirect distribution channels. Despite the challenging macro environment, our VAP sales surpassed Rs. 200 Crores milestone, demonstrating a strong recall of Dodla brand. The VAP sales have surged by 51.1% Yo

51.1%

00 Crores milestone, demonstrating a strong recall of Dodla brand. The VAP sales have surged by 51.1% YoY to INR 229 Crores during Q1FY23. The VAP share of overall revenue expanded by 248 bps YoY to

INR 229 Crore

ilestone, demonstrating a strong recall of Dodla brand. The VAP sales have surged by 51.1% YoY to INR 229 Crores during Q1FY23. The VAP share of overall revenue expanded by 248 bps YoY to 32.5% in the Q1FY23.

248 bps

rged by 51.1% YoY to INR 229 Crores during Q1FY23. The VAP share of overall revenue expanded by 248 bps YoY to 32.5% in the Q1FY23. The integration of Sri Krishna Milk is shaping up well. We look forwa

32.5%

YoY to INR 229 Crores during Q1FY23. The VAP share of overall revenue expanded by 248 bps YoY to 32.5% in the Q1FY23. The integration of Sri Krishna Milk is shaping up well. We look forward to enhanci

rs,

of Dodla Dairy vision. We anticipate a strong demand recovery in the coming quarters, along with expected softness in procurement cost as we enter the flush season of milk procurement.

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Guidance — 20 items

Sunil Reddy

opening

“We anticipate a strong demand recovery in the coming quarters, along with expected softness in procurement cost as we enter the flush season of milk procurement.”

B.V.K. Reddy

opening

“We aim to adapt to state of art processing technology with focus in automation, which will help us in reducing operational costs and increase efficiencies.”

Sunil Reddy

“See, between gross and EBITDA margins there will be variations depending on which milk is going to where in the product mix which that we have because each location we will have a different product mix in terms of effectiveness and what we otherwise operate, but it would not be a huge margin, there will be a fluctuation of maybe 1% to 2% in terms of the EBITDA margins.”

Sunil Reddy

“So, there were different things in pricing depending on the product mix, so the difference would not be much, it will be marginally different.”

Sunil Reddy

“We will maintain the same as our CAGR of what we were doing earlier coming back to the current number of on our growth CAGR because Africa being also hit by COVID, but we will be regularizing the pre-COVID numbers and having a growth rate from that may be 10% to 15% or above that.”

Sunil Reddy

“Basically we do not give no specifics, what we have already taken permission from it will be broadly the capex will be in terms of two the new ones that were doing, I think B.”

Nitin Awasthi

“Okay, so then total capacity will be 14,000 per month metric tons per month?”

Anjaneyulu Ganji

“For Q1FY23, we have reached INR 10 Crores revenue for Sri Krisha milk with the volume of around 22,000 liters per day., We acquired it on April 13, 2022, so April 13, 2020 onwards weighted average was around 25,000 liters per day from Sri Krishna so all the adjustments are being done for the current quarter, so we did the break even already we reach the break even for the Q1FY23 in terms of EBITDA and going forward we will further improve our EBITDA margins and extra volumes.”

Dheeral

“And Sir, lastly as of value-added segment revenue contribution has grown to almost 32%, so maybe in the next two to three years, is there any guidance to reach maybe 40% or even more than that any chance of that?”

Sunil Reddy

“If you go and look at our historical CAGR, whatever we have been doing, doing on a historical CAGR of going by 1% to 2%, normally the summer quarters are substantially larger than the other quarters, but we will grow as per expected CAGR of 1% to 2% year- on-year.”

Risks & concerns — 5 flagged

We had started in May 2022 and we have taken even later in the end of June 2022 also in certain areas we have corrected prices, the impact of all that will start coming in from second quarter onwards.

— Sunil Reddy

more in terms of reason wise, but I think the prices will not soften dramatic, so we have to wait and watch for another ten days when we will know, but if not then will take a price increase, so B.

— Sunil Reddy

The prices are still in higher side only and the last 10 to 15 days everywhere every day and maybe now we are expecting that prices will very soon began to soften, so now you will have to take a price hike in the sales side.

— B. V. K. Reddy

It is not that growing for the 6% to 7% of the overall means that we will continue to grow there also, Sir, so between two countries that we have a Uganda manufacturing in Kenya, we do not want a new point of time to get some disruption in sales in Kenya because of countries and border and border dispute, so to mitigate that is what we are putting up this plant there, so it will mitigate the risk of the Africa business of cross border between Uganda and Kenya.

— Sunil Reddy

Because in Uganda and Kenya, we are still very small market share, we not even got a sizeable market share, procurement wise in Uganda there is lot available, Kenya we entering the new plant a lot more available, our market shares are not substantially large in Uganda and Kenya because there is not headroom for growth, we are only cautious in keeping the growth in a consistent manner rather than trying to push an aggressive growth.

— Sunil Reddy

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Q&A — 11 exchanges

Good morning, Sir. Thanks for the opportunity. My first question is, can you share some highlights on the region wise revenue and procurement?

Sunil Reddy

Region wise revenue and procurement? Yes. We will just give you the state wise procurement and sales. So, the procurement overall for Q1 FY23 for India we had about 13.78 lakhs liters per day overall, so I am taking the India business procurement and we have around 1.2 lakhs liters in Africa, so for India in the region wise, so AP we have around 4.8 lakhs liters per day procurement and Karnataka around 2.7 lakhs liters, Tamil Nadu around 4 lakhs liters per day, and Telangana around 1 lakh liters and Maharashtra 1.4 lakhs liters per day in terms of procurement. And also sales, right, Mr. Garg?

Thanks for the opportunity. Sir, my question was on the milk procurement cost, can you call out on what kind of milk procurement cost we had during this quarter and inhouse milk procurement cost going ahead?

Sunil Reddy

I will just give you the brief and Anjan will give you the specifics, so the procurement cost this quarter has been higher in terms of comparison with the same period last year. We have entered into the flush season, the procurement cost should come down, in case if it does not come down then we will have to go ahead and pass it onto the consumer, so that is the reason why we were waiting for the flush and the rains have to come, but if it does not come then we have to take a call increase in the selling prices. Anjan will give the specifics of the increase in price. For the current quarter, w

Sir, I had two questions, one on the company and one of the industry, I will start with one on the industry first, just wanted to get your thoughts on the news articles that some of us have been reading on Lumpy skin disease and its impact on the industry and the upcoming flush season?

Sunil Reddy

Today, that was thing is that starting to spread from Gujarat, I think we already had one doubt of lumpy skin disease two years ago in Tamil Nadu, where I think at that point of time people had got vaccinated, if the lumpy skin does progress, yes, it will definitely affect the milk productivity, last when it affect the south it did not affect the north that much, this time we hope that it has already been aware in the southern procurement centers, people are aware of it, we see the symptoms everywhere due to fast reaction and segregate the animals and hopefully it will be contained. Let us hop

Good morning, Sir and congratulations for the good set of numbers. My question is that whatever growth that we have seen in Q1, how much growth has came from the core market and how much the new region?

Sunil Reddy

Basically, 2% to 2.5% can from the new acquisitions; others are core market and basically strengthening in the core market also. So, incremental 2% to 2.5% that will come form the new market and 37% to 38% come from the existing market? Yes, core markets. Sir, on a quarter-on-quarter basis, how much milk procurement prices have gone up and as we taken price hike to protect our margin? Anjan will give you the details. The procurement prices from last year to this quarter had gone up substantially roughly from INR 31 to INR 35, quarter-to-quarter not much but we have translated that in increase

Thank you for the opportunity. Just a couple of questions, so I just wanted to know when did we actually increase the prices, so we though that we have increased by 6%, so when did we take this price hike?

Sunil Reddy

We started it during the mid of May 2022 and they got increase in different locations, different products. We had started in May 2022 and we have taken even later in the end of June 2022 also in certain areas we have corrected prices, the impact of all that will start coming in from second quarter onwards. So, do we anticipate that by the end of second quarter, we will be at the rate of around 10% margin, whatever we have guided for? Closer to those, it might be in the 10% range. Right, but it would definitely improve from here on whatever we showed in the quarter? Because the question was as

Anjan, could you help me with the selling price per liter data for this quarter?

Sunil Reddy

Selling price per liter, Anjan will give you, one minute, Sir. So around overall INR 50.9 was the selling price per liter for this quarter and that is the net realization, not selling price, so it is a net realization at the company level INR 50.9 per liter of sales out of which milk contributed around Rs.49, and remaining weighted average value added products around Rs.126 contribution came from in terms of per liter per kg from value added products and curd around INR 48.2 from the curd so the overall weighted average was INR 50.9 per liter compared to Rs.48.2 in the previous year same quart

Thank you for taking my question. Sir, regarding the price increase that are continuing in July, so we had so far not taken a price hike, now suppose if we take a price hike, etc., should it continue to have an impact on our margins for the coming quarters?

Sunil Reddy

No, we gradually have started taking the price hike, so we discussed earlier in the call, so last year, we started taking the price hike in the last January 2022 we had one price hike, recently we took one price hike, but slowly and gradually we are taking the price hike inline with increase in procurement rises and other crops, see month-on-month it will improve if you see from April to May, May to June, June to July month-on-month see the margins are improving because so based on the procurement prices we have keep on collecting so it will improve. Sir, next can you share percentage contribu

Thanks for the opportunity again. I have just one question, Anjan highlighted that we will be doing some capex in Kenya to grow our business in Africa, but as far as I can recall in one of the earlier calls the company has highlighted that you do not want to grow the business further from 6% to 7% of the total business, but has changed in the market that is attracting in the management's attention to go there?

Sunil Reddy

Thank for taking the followup. For this Africa business are we hedged on the currency or how are we going about it?

Sunil Reddy

So, currency I think between Uganda and Kenya or India we are doing everything on dollar basis because Uganda is the freely traded the currency for dollar so whatever money that we make for the month is all converted to dollars and when there is a buildup of money that is transferred to our holding in Singapore is where we hold surplus money. Got it and from a three to five-year perspective let us say on the base of FY23, what will be the annual revenue growth numbers for us? So, earlier our annual revenue growth we are a CAGR of almost 15% to 17% CAGR growth, annual revenue CAGR growth, I thi

Sir, thanks for taking my question. I just heard that you said Africa, the growth rates will be similar to India, I just wanted to understand that India will have the levers of distribution expansion, new procurement expansion into adjoining areas states. I would assume Uganda, Kenya, we would have already exhausted those opportunities largely right, so how is the growth rates going to be similar to India?

Sunil Reddy

So, thank you very much everyone and taking your time to ask us whatever questions you require, if anything else that you guys needed and always reach out to our CFO Anjan that his e-mail is on the portal and the website and will be more than happy to answer your questions. Thank you again so much for coming out for the call.

Management

Speaking time

Sunil Reddy

Moderator

Anjaneyulu Ganji

Nitin Awasthi

Ankit Shah

Dheeral

Nikhil Jain

Pranjal Garg

Sanjay Bembalkar

Vivek Tulsyan

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Opening remarks

Aniruddha Joshi

Thanks, Michel. On behalf of ICICI Securities, we welcome you all to Q1 FY23 Results Conference Call of Dodla Dairy Limited. We have with us today the senior management of Dodla Dairy represented by Mr. Sunil Reddy – Managing Director, Mr. B.V.K. Reddy – CEO and Mr. Anjaneyulu Ganji – Chief Financial Officer. Now, I hand over the call to the management for their initial comments and then we will open the floor for question and answer. Thanks and over to you Sir!

Sunil Reddy

Thank you, Aniruddha. This is Sunil here. Thank you very much everybody. I welcome you all to Q1 FY23 Earnings Conference Call. We hope all of you are doing well. I am glad to announce that we have reported the highest ever quarterly revenue of INR 717 Crores, registering 40% year-on-year revenue growth on the back of strong volumes and operational numbers. The milk procurement grew by 20% YoY to 14.8 lakhs liters per day in Q1FY23. Our average milk sales also increased by 26.2% YoY to 10.4 lakhs liters per day. Our geographical expansion of operation into new markets are visible through growth in the numbers of our facilities direct and indirect distribution channels. Despite the challenging macro environment, our VAP sales surpassed Rs. 200 Crores milestone, demonstrating a strong recall of Dodla brand. The VAP sales have surged by 51.1% YoY to INR 229 Crores during Q1FY23. The VAP share of overall revenue expanded by 248 bps YoY to 32.5% in the Q1FY23. The integration of Sri Krishna

B.V.K. Reddy

Thank you so much, Sunil, Sir. A very good morning to all the participants. We have delivered a healthy quarter showing a growth in revenue and other parameters. Our constant push towards expanding our footprints across India is progressing well. So, as on June 30, 2022, we procured milk around 1.2 lakhs dairy farmers daily of which 85% provide with the regular direct payment in bank accounts. Our direct procurement model has further strengthened wherein we are buying almost all the milk directly from the farmers across more than 8,000 villages as compared resulting in cost saving and establishing a deep- rooted relationship with them. Our Orgafeed operations wherein they provide a high quality to the dairy farmers to help us strengthen these relationships with them and I also ensure both parties to get benefited. Orgafeed revenues surged by 33.4% YoY to INR 14 Crores in Q1 FY23, EBITDA grew by 15% YoY to above INR 1 Crores in Q1FY23. In terms of our presence, we continue to have third

Anjaneyulu Ganji

Thank you, Sir. Good morning everyone. I would like to briefly touch upon the key performance parameters for Q1FY23. We have also submitted a detailed presentation of our financial performance on the stock exchanges and also have also uploaded the same on our website. Now, taking a glance at the financial highlights for the first quarter ended June 30, 2022, the financial highlight for the quarter ended was, the operations revenue stood at INR 717 Crores in Q1FY23 as compared to INR 512 Crores in Q1FY22, a robust growth of 40% YoY. The Company’s domestic business surged by 34.6% YoY to INR 657 Crores whereas the international business grew exponentially by 150.6% YoY to INR 60 Crores. EBITDA was at INR 44 Crores in Q1FY23 as compared to INR 51 Crores in Q1FY22. Profit after tax was at INR 24 Crores in Q1FY23 as compared to INR 36 Crores in the same period last year. The earnings per share for Q1FY23 stood at INR 4 per share as compared to INR 6.1 per share in the previous year same qua

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