Dodla Dairy Q4 Results Review - Muted Flush Season Impacts Margin; Model Recovery In H2FY24: ICICI Securities

Muted flush season and heat wave have impacted the milk production and milk procurement prices. While Dodla reported healthy growth of 9.8% in milk procurement, we note the steep increase in input prices contracted the gross margins by 416bps YoY to 21.4%, lowest level in past 12 quarters. With correction in global SMP prices and stable cattle feed prices, we model the milk procurement prices to correct in H2FY24 and also model margin recovery in H2FY24. We model EBITDA margin of 8.4% in FY24E (vs 6.8% in FY23).

We model Dodla to report PAT CAGR of 31.4% over FY23-25E with: (1) high singledigit growth in milk procurement and market share gains and (2) distribution expansion. We remain positive on Dodla due to its competitive advantages and strong growth opportunity in South India. Maintain BUY with a DCF-based revised TP of Rs600 (implied P/E of 17x FY25E; Earlier TP: Rs620).

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