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Systematix Research Report
Dodla Dairy Ltd.’s Q2 FY25 results with revenue/Ebitda/profit after tax growth of 30%/37%/45% YoY were ahead of our high expectations, led by strong performance from the Africa and Orgafeed subsidiaries (which have seen recent capacity additions) coupled with strong uptick in value-added products sales which now make up ~38% of revenue.
Revenue growth was supported by growth in VAP sales (93% YoY) and international business (81% YoY). On consolidated basis, milk sales volumes were up by 6% YoY and procurement volumes were up 1% YoY, indicating some inventory drawdown during the quarter.
Management stated that with the flush season coming to an end, there would be further inventory drawdown going forward, but the company will maintain its strategy of aggressive milk procurement to keep fat/SMP reserves.
It expects procurement costs to remain stable nearterm. Gross margin contracted by 135 bps YoY to 25.5% due to an increase in milk procurement costs in Africa (which has now reversed) and higher volume sales of butter and SMP (lower-margin) in the VAP segment.
Dodla currently has sufficient inventory for the remainder of the year. Ebitda margin improved 50bps YoY to 9.6% despite higher other expenses (+16% YoY) and employee cost (+17% YoY) mainly on account of capacity expansion in Kenya and Orgafeed businesses. PBT and PAT grew 45% YoY.
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