Dodla Dairy Q2 Net Profit Drops 44% to Rs 36.6 Crore on Cost Pressures as Analysts Trim Earnings Estimates
Dodla Dairy Limited (NSE: DODLA) reported its financial performance for the second quarter ended September 30, highlighting strong top-line expansion offset by severe operational margin compression due to elevated raw milk procurement costs.
The South India-based dairy processor posted a consolidated net profit of Rs 36.59 crore for the quarter, declining 44.3% year-on-year from Rs 65.67 crore recorded in the corresponding quarter of the previous financial year. Total revenue from operations advanced 17.4% year-on-year to Rs 1,196.02 crore compared to Rs 1,018.82 crore in the same period last year. Total income stood at Rs 1,206.96 crore, up from Rs 1,030.20 crore.
Raw Milk Costs Squeeze Operating Margins
The sharp drop in profitability stemmed from a mismatch between input inflation and retail price realizations. The company's average milk procurement price jumped 15.7% year-on-year to Rs 43.2 per litre, whereas its realization price rose by only 8% to Rs 61.9 per litre. Additional overheads, including a 41.6% rise in packaging material expenses, contributed to squeezing the operating spread.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped 30.9% to Rs 64.1 crore, pulling EBITDA margins down to 5.4% from 9.1% in the prior-year period.
Key Operational and Segment Highlights:
- Average milk procurement rose 9.3% year-on-year to 21.3 lakh litres per day (LLPD).
- Daily milk sales volume grew 8.4% year-on-year to 14.2 LLPD.
- Value-added products (VAP) grew 11.7% to Rs 327 crore, supported by a 23% jump in curd sales volumes to 444.7 tonnes per day.
- Overseas operations in Africa (Kenya and Uganda) maintained rapid growth, with quarterly revenue surging 55.9% year-on-year to Rs 179 crore.
To counter input inflation, the company implemented a retail price hike of Rs 2.5 per litre in September. Because the price hike took effect late in the quarter, management indicated that the full margin benefit will become visible in the third quarter, guiding for an EBITDA margin recovery toward the 7.5% to 8% range.
New Joint Venture Approved
Alongside the results, Dodla Dairy’s board approved the formation of a joint venture with Meadow India Holdings Ltd (MIHL). Dodla Dairy will hold a 40% equity stake, with MIHL holding the remaining 60%. The venture will focus on marketing and distributing high-quality dairy ingredients to the business-to-business (B2B) segment in India, subject to definitive agreements and regulatory clearances.
What Analysts Are Forecasting
Following the results release, research consensus gathered by Simply Wall St showed that the four covering analysts updated their outlook on the stock:
Revised Financial Estimates:
- EPS Revision: The consensus earnings-per-share forecast was revised downward to Rs 33.45 from Rs 38.48, reflecting near-term raw material headwinds.
- Revenue Projections: Consensus revenue projections were raised slightly to Rs 48.1 billion (Rs 4,810 crore) from Rs 47.8 billion, indicating confidence in top-line demand and volume gains.
- Target Price: The consensus average share price target was maintained at Rs 1,253, with individual analyst price targets ranging between Rs 1,118 and Rs 1,304.
On an annualized basis, analysts project Dodla Dairy's revenue growth at approximately 15%, exceeding the 11% projected average for the broader Indian dairy industry. While margin volatility remains an overhang, analysts expect volume traction and expanding value-added product penetration to support the company's operating profile as raw milk prices stabilize.
