DODLA - Dodla Dairy Limited Share Price

In the Q3 FY26 Earnings Conference Call, management provided an optimistic outlook for Dodla Dairy Limited, indicating a strong focus on maintaining revenue growth despite facing challenges. The company achieved a revenue of INR 1,025 crores, reflecting a year-on-year growth of 13.75%. EBITDA margin was noted at 7.7%, while the PAT margin stood at 6.7%. The management explained that this growth comes amid a challenging operating environment, including weather impacts and elevated procurement costs.

Key forward-looking points from the management include:

1. Procurement Cost and Pricing Strategy: The average procurement cost increased sequentially to INR 39.8 per liter due to a limited milk supply. Management anticipates a price hike of INR 2-3 per liter in light of higher procurement costs, aiming for an average selling price of INR 63-64 per liter.

2. Expansion in Africa: The company reported a remarkable revenue growth of 34.5% in Africa, fueled by expansion in Kenya and plans for a greenfield project in Uganda, with an expected capex of INR 50-60 crores over two years. This is projected to enhance market share in East Africa significantly.

3. Value-Added Products (VAP): Value-added products grew from 23% to 25% in the revenue composition. Management aims to boost this percentage to around 30-32% over time, emphasizing growth in products like paneer and ice cream as markets continue to evolve.

4. Maharashtra Project: The Maharashtra project is on track for commercial operations by the end of FY27, with an investment of INR 280 crores, of which INR 69 crores has already been spent. This initiative aims to increase procurement capacity to support expansion.

5. Operational Efficiency: Management is optimistic about improving operational efficiencies post-acquisition of OSAM, expecting revenue growth without a significant increase in fixed expenses, thereby enhancing profitability.

Overall, the management expressed confidence in their strategies to navigate the current challenges and take advantage of growth opportunities in both India and the African market.

Q&A Section from Dodla Dairy Limited Q3 FY26 Earnings Conference Call:

1. Question: When are you expected to take the price hike to safeguard from higher procurement prices? What quantum of price hike would you require in the near term?

   • Answer: We plan to take price hikes as summer sales volumes increase. We are currently considering a price increase of INR2 to INR3, adjusting our selling price to INR63 or INR64 to address the procurement cost pressures.

2. Question: How is the value-added product segment expected to grow over the next few years?

   • Answer: Our value-added product sales have grown from 23% to 25% year-on-year. We anticipate reaching 30%-32% of total sales in the future, driven by products like paneer and ice cream. This growth will not significantly impact working capital as most sales occur through distributors.

3. Question: What are expected procurement prices in Q4, especially considering El Niño?

   • Answer: Q3 saw higher procurement prices, and we expect only marginal increases in Q4 unless there's a significant drop in supply. We plan to manage costs carefully depending on market conditions.

4. Question: In relation to the Africa expansion, can you clarify the capacity and target markets?

   • Answer: The new Uganda plant will have a capacity of 3 lakh liters, focusing on fresh milk sales primarily in Uganda, with future expansions for yogurt and Indian products anticipated.

5. Question: What was the revenue and EBITDA for Orgafeed in Q3 FY26?

   • Answer: Orgafeed revenue for the quarter was INR41 crores and EBITDA was INR5.8 crores. We expect continuous growth despite current market pressures affecting feed costs.

6. Question: How have milk prices in India changed, and what does this mean for margins?

   • Answer: Our average procurement cost increased to INR39.8 per liter. The current pricing strategy aims to balance costs while maintaining market share, resulting in pressure on margins but improved revenue predictions over the next quarters.

7. Question: Can you provide clarity on the revenue split between Uganda and Kenya for the past nine months?

   • Answer: For nine months, Uganda generated INR229 crores, while Kenya accounted for INR142 crores. Uganda operates with higher margins due to its product offerings.

8. Question: Given the current competitive landscape, how do you foresee future price hikes affecting market share?

   • Answer: While we've avoided price hikes to maintain market share, competitors have similarly held prices steady. As we approach summer, price adjustments will be necessary, and we are confident in our brand's resilience and market position.

9. Question: How much capex is planned for the new Maharashtra plant, and how will it be funded?

   • Answer: We have a total capex of INR280 crores for the Maharashtra plant, of which INR69 crores has been spent. Financing will primarily come from internal accruals.

10. Question: Will there be a significant impact on working capital due to the increase in value-added product production?

    • Answer: Currently, our working capital remains stable, as sales primarily occur through distributors. Increased production of value-added products will not materially affect our working capital management strategy in the near term.