Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dhanuka Agritech Ltd (BOM:507717, Financial) reported a 6% growth in revenues from operations for Q2 FY25 compared to the same period last year.
- The company achieved a 13% growth in EBITDA for the quarter, indicating improved operational efficiency.
- New product launches, such as Lani and Micro Super, have been well-received in the market, contributing positively to sales.
- Dhanuka Agritech Ltd has a strong R&D division and international collaborations, which help in introducing the latest agrochemical technologies in India.
- The company has a robust distribution network with a pan-India presence, reaching over 10 million farmers, which supports its market penetration and sales growth.
Negative Points
- Sales returns increased significantly in Q2 due to less consumption of insecticides caused by continuous rainfall, impacting revenue.
- There was a 5% price reduction impact on revenue compared to Q2 of the previous year, indicating pricing pressures in the market.
- The company's B2B segment reported a negative EBITDA contribution, highlighting challenges in achieving profitability in this area.
- Inventory levels were higher due to continuous rain and sales returns, which could affect cash flow and working capital management.
- The company revised its revenue growth guidance for the full year from 18% to 16%, reflecting a more cautious outlook.
Q & A Highlights
Q: How is the agriculture scenario post-monsoon, and what is the demand outlook for H2?
A: Rahul Dhanuka, Joint Managing Director, noted that reservoir levels are at a decade high, which is positive for agriculture. Despite some crop damage due to heavy rains, overall Kharif production is expected to be higher. The Rabi season looks promising with increased acreages expected for various crops, including paddy and pulses.
Q: Are there any seed shortages anticipated for the Rabi season?
A: Rahul Dhanuka mentioned that while there might be shortages in onion and potato seeds, major crops like wheat and paddy are not expected to face seed shortages. Farmers are generally proactive in managing seed availability.
Q: Can you provide details on the sales contribution from new product launches and the pipeline for the next 12 months?
A: Rahul Dhanuka highlighted successful launches like Mico Super, Lane, and Pure, which have been well-received. The company recently launched Roxa and Maco Mitie and plans to introduce more products, although specifics for the next year were not disclosed.
Q: What factors contributed to the margin expansion, and will this trend continue?
A: The margin expansion is attributed to a favorable product mix and new introductions. The company expects at least a 100 basis point improvement in gross margin for the full year, driven by growth in high-margin products.
Q: How did the manufacturing business perform in Q2, and what was its impact on EBITDA?
A: The manufacturing business contributed INR8 crores in revenue but had a negative EBITDA impact of INR4.7 crores. This was due to subscale operations and significant investments in R&D.
Q: What is the outlook for pricing trends in the agrochemical market?
A: The company expects prices to stabilize, with a potential 2-3% reduction in some molecules over the next six months. However, the overall pricing environment is expected to remain stable.
Q: Can you provide a breakdown of revenue from partnership, specialty, and generic products?
A: Approximately one-third of the revenue comes from partnership products, one-third from specialty products, and one-third from generics. The company expects the partnership product revenue to remain in the range of 33% to 36%.
Q: What is the guidance for revenue growth and EBITDA margin for the full year?
A: The company revised its revenue growth guidance to approximately 16% for the full year, with an expected 100 basis point improvement in EBITDA margin over the previous year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
