DBOL - Dhampur Bio Organics Limited Share Price

In the earnings conference call for Q1 FY'26, Dhampur Bio Organics Limited's management provided a cautious yet optimistic outlook. They highlighted that the sugar production for the upcoming sugar season '25-26 is expected to increase to approximately 34 million to 35 million tons, driven mainly by improvements in Maharashtra and Karnataka. The management noted a government adjustment of the Fair and Remunerative Price (FRP) to Rs. 355 per quintal.

Management also discussed challenges faced due to decreased recoveries attributed to pest infestations, particularly red rot, which impacted net recovery rates. They emphasized ongoing cane development initiatives and a focus on pest management, expecting these efforts to result in better productivity by Q3-Q4 FY'26.

Key forward-looking points include:

1. Ethanol Production: Ethanol production in Q1 FY'26 reached 21.67 million liters, showing substantial growth from 13.7 million liters in Q1 FY'25, aligning with government blending targets.
2. Dual-feed Facility: The conversion of a 100 KLPD molasses-based distillery to a dual-feed facility is expected to enhance operational flexibility and improve output.
3. Country Liquor Segment Growth: Moderate growth was noted, with sales increasing to 11.24 lakh cases in Q1 FY'26, up 45.16% year-on-year.
4. Financial Performance: Revenue from operations grew by 28.75% to Rs. 821 crores, although a loss after tax of Rs. 19.37 crores was reported, contrasting with a profit of Rs. 1.11 crores in the prior year.

Management emphasized that with controlled improvement in operational efficiencies, they are optimistic about reversing recent disappointing trends and look forward to a productive season ahead.

Question and Answer Summary from the Q&A Section

Question: Thank you for the opportunity. It's a pretty disappointing number. What has gone wrong? Can you please elaborate on that point? You talked a lot about what is currently going on but I wanted to understand what is going wrong with the company and why continuously we are having a disappointing set of numbers while we are having sales numbers going up but the EBITDA margin is down. And when things are going to come on track for the company?

Answer: Yes, Mr. Dharmawat, while our numbers are not as expected, they reflect challenges we highlighted earlier. Sugar recoveries from our factories have decreased, particularly due to pest infestations in our main cane-producing area. Combined with sugar prices failing to rise despite lower production, our costs increased. We are implementing cane development strategies that we hope will improve performance in Q3-Q4.

Question: We are again going for Q3-Q4 because last con-call also I attended. You mentioned that by August-September we will come to know about the cane availability and yield and looks like better compared to last year because last year we were hit by the disease. So this year looks better and you mentioned during that period that will be clear by August-September but now you are pushing it to Q3-Q4 then it is again disappointing. Don't you think so?

Answer: I understand your frustration. The current sugar crop has been harvested, and we expect the challenges of this past season to resolve by November. Ongoing surveys indicate improvements in cane health, and we are aggressively focusing on developing cane and managing pests. This year's efforts should yield better results moving forward.

Question: But there have been reports of a new pest outbreak, black bug or something like that. So, has that been contained or do you have a spillover effect towards the next sugar season as well?

Answer: The black bug has been present for some time, and we successfully managed its early emergence with appropriate pesticides. As of now, we see no significant damage or spillover effects from black bugs affecting our operations. Hence, we are optimistic about the upcoming sugar season's cane quality.

Question: Are we like focusing on, are we like shifting our production towards ethanol, increasing the capacity utilization, or are we looking at the export quota given the sharp fall we have seen in the international markets?

Answer: Our focus remains on value addition based on the government's pricing for ethanol. We can adjust our feedstock to maximize ethanol production. While exports are a potential avenue, North India currently faces challenges due to market conditions, which are out of our control. However, Western India may still have export opportunities.

Question: What is our cane acreage looking like considering that the planting will be complete by now?

Answer: The cane acreage in our Mansurpur unit is similar to last year, with yield improvements expected. In Asmoli and Meerganj, we've seen a 4-5% decrease in cane acreage, partly due to shifts to other crops and issues from past outbreaks. However, we believe enhanced productivity will help mitigate this decline.

Question: So, is there any further roadmap from 20% ethanol blend, or are we currently locked at this 20%?

Answer: The government is exploring increases in ethanol blending percentages beyond 20%, with discussions around E22, E25, and more. The exact timelines for implementation are still being finalized, but there's a clear intent to progress.

Question: Any CAPEX plan that we have in this current financial year?

Answer: Our plans for this year are largely limited to necessary replacement CAPEX, and we do not anticipate any major expenditures. Our spending will be notably lower than our depreciation, focusing on maintaining our existing operations efficiently.

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