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    Hatsun Agro

    HATSUNStrong
    Fast Moving Consumer Goods·1 Apr 2024
    Management Summary

    Hatsun Agro is entering FY25 with a bullish outlook, focusing on 15% volume-led growth and significant margin expansion. Management is prioritizing deleveraging, aiming to slash debt from nearly ₹1,600 crores to ₹500 crores within 15 months. The company expects to benefit from stable raw material prices and high capacity utilization across all divisions, particularly in the high-margin ice-cream and curd segments during the summer season.

    Highlights

    8

    • Targeting 15% volume growth for FY25 compared to FY24

    • Current EBITDA margins holding steady between 11% and 11.5%

    • Guidance for 150 basis points margin improvement in the coming fiscal year

    • Aggressive debt reduction plan: current debt of ~₹1,583 crores to be reduced to ₹1,200-1,300 crores by June 2024

    • Long-term debt target of ₹500 crores by June 2025

    • Topline growth projected at 15% with a 1-1.5% increase in bottom-line margins

    • Milk arrivals have improved significantly over the last 7-8 months

    • Positive outlook for Ice-cream and Curd divisions driven by expectations of a hotter summer

    What Changed1

    vs Q1 FY26

    Guidance items3 → 5 (+2)

    Key financials

    Single quarter

    04 metrics
    1. 01EBITDA Margin11.3%
    2. 02Total Debt₹1,583 Cr
    3. 03Volume Growth Guidance15%+15%YoY
    4. 04Topline Growth Guidance15%+15%YoY

    Segment breakdown

    • Ice-cream1 Positive50.0%
    • Curd1 Positive50.0%
    Donut· Share of Outlook

    Guidance & targets

    5
    CategoryTargetPriority
    Volume
    Volume Growth
    15%
    		High
    Margin
    Margin Improvement
    150 bps
    		High
    Debt
    Debt Reduction
    ₹1,200 - 1,300 crores
    		High
    Debt
    Debt Reduction
    ₹500 crores
    		High
    Revenue
    Topline Growth
    15%
    		High

    Risks & concerns

    2
    RiskSeverity

    Competitive Intensity

    Amul and new-age D2C brands are becoming very aggressive in the ice-cream and dairy space. — Analyst acknowledged

    medium

    Seasonality Dependence

    Growth in ice-cream and curd is heavily dependent on the intensity of the summer season and timing of school holidays. — Management acknowledged

    medium

    Q&A highlights

    3

    “Around 2025 June you can expect the debt to come down to five hundreds.”

    Management provided a very specific and aggressive deleveraging roadmap, which is a key concern for investors given the current debt levels.

    asked by CNBC-TV18 Interviewer

    2 min read5 chapters

    Detailed Narrative

    01

    FY25 Growth and Margin Expansion Strategy

    Hatsun Agro has set a clear target of 15% volume and topline growth for FY25. Management expects to expand EBITDA margins by 150 basis points, moving from the current 11-11.5% range toward 13%. This improvement is underpinned by better capacity utilization across all divisions and a stable raw material environment, with milk arrivals showing consistent improvement over the last eight months.

    02

    Aggressive Deleveraging Roadmap

    A central theme of the call was the company's plan to significantly reduce its debt burden. From a current level of approximately ₹1,583 crores, management expects debt to fall to ₹1,200-1,300 crores by the end of the June 2024 quarter. Looking further ahead, the Chairman committed to bringing total debt down to roughly ₹500 crores by June 2025, funded by strong internal accruals and consumption demand.

    03

    Summer Season Tailwinds for Ice-Cream and Curd

    The company is highly optimistic about the upcoming summer, citing forecasts of higher temperatures which historically drive demand for ice-cream and curd. Management noted that school holidays are aligning favorably starting April 7th, and they expect strong momentum to build by mid-April. Unlike the previous year, raw material prices are currently under control, and the company has built sufficient inventory to meet the seasonal surge.

    04

    Technological Differentiation and Competition

    To counter aggressive competition from Amul and new-age brands, Hatsun is leaning on its technological investments. The company highlighted its 'extruded technology' and its latest plant in Hyderabad as key drivers for producing unique, premium products. This focus on high-end manufacturing allows the company to maintain a 'premium profile' and command better pricing in a crowded market.

    05

    Operational Efficiency and Supply Chain

    Management emphasized that the 'base is now set' for efficient growth. Capacity utilization is improving across all divisions, and the constraint of high inflation seen in previous years has eased. With milk arrivals having improved for nearly three quarters, the company feels well-positioned to grow in the coming year without the supply-side difficulties that previously hampered margins.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.