Dodla Dairy Q3 Results Review - Ebitda Margin Highest In Past 12 Quarters: ICICI Securities

ICICI Securities Report

Key observations from Dodla Dairy Ltd.'s Q3 FY24 results:

1. Highest-ever milk procurement of 1.75 mnpd on favorable flush season.

2. The gross margin has expanded with correction in milk procurement prices. Margin recovery is likely to continue in Q4 FY24 and H1 FY25.

3. Dodla has prudently used the ongoing deflationary trend in commodity prices for brand building.

4. The capacity addition is likely to act as the key growth trigger in FY25-FY26.

Aggressive investments in capex will help expand geographical reach. We maintain our positive stance on Dodla due to its strong competitive advantages and free cash flow generation.

We believe favorable commodity prices, capacity and geographical expansion and strong growth momentum in value added product sales shall together likely be key growth triggers for FY25-FY26. Maintain 'Add'.

We cut FY24E/FY25E earnings by 5.6%/1.7% to factor in Q3 FY24 results. We have revised our discounted cash flow-based target price to Rs 920 (earlier: Rs 740; implied price/earning 21 times FY26E).

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