Prabhat Dairy Q3FY17 Concall Summary

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 Financial Highlights

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  • Total revenues increased by 34.5% year-on-year to Rs.4081 million in Q3 FY17.
  • Gross profits increased by 26.6% year-on-year to Rs.790 million in Q3. However, gross margins have decreased by 122 bps from 20.6% to around 19.4% year-on-year.
  • The share of our value-added products increased from 76% to 86% on year-on-year basis.
  • Q3FY2017 EBITDA increased by 37% year-on-year to Rs.376 million.
  • EBITDA margin increased by 16 bps year-on-year to 9.2% in Q3.
  • PAT increased by 280% year-on-year, PAT margin increased by 534 bps year-on-year to 8.3% in Q3 FY2017.
  • Receiving of Rs.256 million this quarter as a part of megaproject income, which pertains to FY2015, FY2016 and H1 of FY2017, boosted profitability significantly.
  • Inventory for the quarter end stood at around Rs.110 Crores and debtor number stood around Rs.300 Crores for this quarter.
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Business Performance

  • Milk procurement cost has particularly gone up to around Rs.27.20 in Q3 FY 17 from Rs.22 in FY2015-16 and Rs.25.6 in Q2 FY 17.
  • Purchase price rise is around 6% to 10% of the overall milk because it is the percentage procured by print channels and 65-70% of milk is procured from the company’s channel.
  • Value-added product category, which includes the specialty dairy powders, cow ghee, condensed milk, and cheese,comprises more than 80% and out of total revenue, around 30% comes from the consumer segment. Of the 20% liquid milk, 86% is for pouch milk business. This mix will continue to be there as it is takenat anoptimum level.
  • Price of Skimmed milk powder (SMP) significantly increased because there was also alot of inventory in the country. Now the inventory has gone down,and prices are expected to remain stronger in the years to come.
  • Current cheese capacity is around 30 tonnes per day, which includes raw and processed cheese.
  • On a per day basis, only8.5Lacs liter milk is procured in Q3, as compared to 7.5Lacs Liter in Q2 FY16, because of the draught situation.
  • Out of Rs.256 million, total benefit accounted for till this quarter is around Rs.29 Crores out of which around Rs.3.17 Crores are for current quarter Q3 and Rs.25.60 Crores is for FY2014-2015, FY2015-2016,and H1 of FY2017. The company has received Rs.4.50 lakh till the date, as a first refund and in the process of getting another refund of around Rs.12 Crores, which pertains to FY2015-2016.
  • The company has around 18% to 20% utilization of the capacity for cheese manufacturing. And it targets 40-50% for the next year.
  • Around 65-70% of the procurement is sourced directly from the farmers and the rest is sourced from the third party agent.
  • In B2B, contact duration depends on the product, ranges from 3-6 months to 2-3 years.

Future Prospects

  • The company aims to scale its B2C business and grow its share from around below 30% to around 50% in terms ofrevenues by 2020.
  • It has recently started modern trade in Gujarat and by this quarter and plans to expand the modern trade presence across India.
  • The company anticipated that in the couple of years it would be able to get around Rs.100 Crores plus of tax as a refund depending on what sales and how much amount of sales happens in the states, outside state and all.
  • As of now, the company is new to cheese industry. In the next two years, the company tends to go in high value-products of whey when it will be handling enough quantity of cheese.
  • Since the company has a lot of un-utilized capacities, its major focus is fully utilize the capacities and to grow in the regions where it has already started selling products.