Hatsun Agro Q1 Results Review - Strong Margin Expansion Led By Lower Milk Procurement Prices: ICICI Securities

ICICI Securities Report

Hatsun Agro Products Ltd. reported strong Q1 FY25 numbers led by volume-driven revenue growth and a 14-quarter high Ebitda margin. We reckon the deflationary trend in milk procurement prices persisting Q1 FY25 and is likely the chief driver of gross/Ebitda margin expansion.

We also believe there is likely strong revenue growth in ice cream sales YoY. We model the margin expansion to continue through FY25 led by:

1. lower input prices;

2. utilisation of low-prices skim milk powder inventory; and

3. better capacity utilisation at Govindapuram/ Solapur plants.

Hatsun, in June-24, also cut prices for some of its milk and curd variants – may result in market share gains in FY25-26E, in our view.

We remain positive on Hatsun due to its competitive advantages, mainly, established brands, distribution and direct milk procurement. We raise FY25E/26E earnings by 4.4%/4% to factor in the better-than-expected Q1 FY25 results. Maintain Buy.

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