Dharmaj Crop Guard Ltd (NSE: DHARMAJ) Q2 2025 Earnings Call dated Nov. 11, 2024
Corporate Participants:
Rameshbhai Ravajibhai Talavia — Chairman and Managing Director
Vinay Joshi — Chief Financial Officer
Vishal Domadia — Chief Executive Officer
Analysts:
Sayam Pokharna — Analyst
Ankit Gupta — Analyst
Pujan Shah — Analyst
Dhwanil Desai — Analyst
Smit Shah — Analyst
Nirav Jimudia — Analyst
Siddharth Agarwal — Analyst
Ketan Athavale — Analyst
Manthan — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Dharmaj Crop Guard Limited Q2 and H1 FY ’25 Earnings Conference Call. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]
I now hand the conference over to Mr. Sayam Pokharna from TIL Advisors. Thank you, and over to you, sir.
Sayam Pokharna — Analyst
Thank you, Michelle. Welcome, everyone. Good afternoon and thanks for joining this Q2 and H1 FY ’25 earnings conference call of Dharmaj Crop Guard Limited. The investor updates have already been uploaded on the Stock Exchange and on the company website. To take us through today’s results, we have with us from the management team, Mr. Ramesh Talavia, Chairman and Managing Director; Mr. Jaman Talavia, Whole-Time Director; Mr. Vishal Domadia, Chief Executive Officer; Mr. Vinay Joshi, Chief Financial Officer. We will start with a brief opening remarks on the business performance from Ramesh sir, followed by opening remarks and financial performance by Vinay sir and then open the floor for the Q&A session.
I would like to remind you all that anything and everything said on this call that represents any outlook for the future that can be construed as a forward-looking statement must be viewed in conjunction with the risk and uncertainties that we face. These risks and uncertainties have been mentioned in our prospectus and our follow up annual reports.
At that side, I would now like to hand over the call to Mr. Talavia. Over to you, sir.
Rameshbhai Ravajibhai Talavia — Chairman and Managing Director
Good afternoon, ladies and gentlemen. Thank you for joining us today for Dharmaj’s Q2 and H1 FY ’25 earnings conference call. I’m pleased to share with you our company’s performance and key developments for the quarter and half year. Dharmaj has delivered a strong performance in Q2 ’25 following a robust Q1. Our revenue from operations registered a robust 21% growth. This growth was primarily driven by our Active Ingredients vertical, demonstrating our ability to capitalize on market opportunity in this segment.
Our formulations remained relatively flat year-on-year, as we faced some headwinds on account of: First, a significant higher rainfalls in August and September across the major geographies, which disturbed the usual insecticide spraying schedule towards the end of the season, leading to slower business momentum across the country and this was contrary to original expectations of the industry at the beginning of the season, wherein a good monsoon was expected to help domestic sales. However, excess rains towards the end of season leads to lesser demand for agrochemicals in the last two months of season.
Secondly, we also observed a price contractions of approximately 10% across the board in September, following promising price trends for agrochemicals from April to August. And these factors contributed to a marginal decrease in our B2B and B2C sales during quarter two. However, it’s important to note that we still achieved volume growth in formulations, however it was offset by lower realizations towards the end of quartet two.
I’m pleased to report that operations at Unit 2 in Sayakha are progressing as expected, with a 12% quarter-over-quarter growth. In the first half of financial year ’25, Unit 2 has registered sales of INR1,180 [Phonetic] million. We are gradually ramping up production activities, and performance in H1 financial year ’25 has been satisfactory.
Looking at the bigger picture, Dharmaj has achieved an impressive 37% top line growth in H1 ’25, with a higher contributions coming from the Active Ingredients segment. Another silver lining is that abundant rainfall across the country has led to record reservoir and water level across the country, which bodes well for a strong Rabi season. We anticipate recovering some of the momentum lost in the formulations business during the Kharif season in the upcoming Rabi season.
Now, I would like to hand over to Mr. Vinay Joshi for a brief on financial performance.
Vinay Joshi — Chief Financial Officer
Hi, good afternoon, everyone. Firstly, I would like to touch upon top line growth. For Q2 we have managed a growth of 21% year-on-year, despite some impact of lower realizations. However, growth in Q2 has been more Active Ingredients driven. For H1 as whole, we have registered an impressive 37% year-on-year growth. It is important to note, while comparing growth year-on-year in FY ’25 versus FY ’24, there has been a broadbased fall in realizations from the previous half year to this. So in effect, our volume growth is in fact higher.
Coming to the profitability front, our gross margins remained healthy and in line with Q1, we experienced some compression in EBITDA margins year-over-year due to a few factors, as communicated earlier in our Q4 call as well. These are higher operating expenses associated with Unit 2 operations, increased employee benefit expenses resulting from annual appraisals in July and new hirings, higher depreciation and finance costs. These factors led to a decrease in PAT on a year-over-year basis, both in Q2 and H1. However, we expect the costs associated with Unit 2 to normalize as revenues from the unit increase.
Further, on the working capital front, you will notice an increase in our inventories, which is on account of operations ramp-up at Unit 2 where manufacturing lead time and inventories are higher than our formulation operations. The increase in receivables in September ’24 versus September ’23 is in line with the H1 FY ’25 versus H1 FY ’24 revenue growth.
You will also see that increase in inventories has been offset by higher trade payables. Since last year, we had higher cash reserves which have now been deployed in our Unit 2, we made higher cash purchases in 2023. While this year we have limited cash purchases to very attractive deals, and made standard credit purchases, in the case of some imported raw material for Unit 2. We have also received longer credit purchases.
I would also like to share that the Board has approved the incorporation of a wholly-owned subsidiary in Brazil. This is keeping in our mind our plans to grow export business in Latin America now that Unit 2 has been commissioned. The outlook for the upcoming Rabi season remains positive, supported by expectations of bumper sowing. We are making concentrated efforts to ramp-up production at Unit 2, positioning it as a key growth engine for our future expansion.
Thank you for your attention. We’ll now open the floor for questions.
Questions and Answers:
Operator
Thank you very much, sir. We will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Ankit Gupta
Yeah. Thanks for the opportunity. And my question was on both the branded as well as domestic formulations. [Foreign Speech]
Vishal Domadia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Vishal Domadia
15% [Foreign Speech]
Ankit Gupta
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Ankit Gupta
Okay, okay. [Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Ankit Gupta
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Vinay Joshi
[Foreign Speech] 30% capacity utilization will happen, but it is almost more than 50% utilization we had in this H1. So, it is above expectation. However, Rabi, the second-half we have to see because normally it is lower than H1, but now we have to see how Rabi season is going on. So, we are expecting the overall capacity utilization will be around 50% to 60% for whole year. What we are expecting as of now. And expenditure wise, if you see the fixed overhead for H1, we can see it is around INR9.5 crore other than financial and depreciation cost. So, this will be same for the next part of year also and in our earlier call…
Ankit Gupta
[Foreign Speech]
Vinay Joshi
INR9.5 crore, which is fixed overhead for H1. It is other than finance and depreciation cost because finance and depreciation cost is around INR20 crores for Unit 2 only.
Ankit Gupta
[Foreign Speech]
Vinay Joshi
See, gross profit it depends on certain products, it is high and it is more than 20%, but — because initially we are finding it around 20% GP for this quarter. And the major reason is the reduction in the pricing realizations.
Ankit Gupta
[Foreign Speech]
Vinay Joshi
From EBITDA level it is around INR15 crore EBITDA level — sorry, PBT level INR15 crore losses are there.
Ankit Gupta
[Foreign Speech]
Vinay Joshi
EBITDA level, yeah. And this year EBITDA level, we will be achieving our breakeven.
Ankit Gupta
Sure.
Vinay Joshi
The PBT level, we are targeting next year only once we reach the revenue of INR225 [Phonetic] crores, INR230 [Phonetic] crores.
Ankit Gupta
Sure. Thank you and wish you all the best. I’ll come back in the queue.
Operator
Thank you. We’ll take the next question from the line of Pujan Shah from Molecule Ventures. Please go ahead.
Pujan Shah
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Pujan Shah
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Pujan Shah
Okay, sir. Thank you.
Rameshbhai Ravajibhai Talavia
Okay. Thank you.
Operator
The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Dhwanil Desai
Good morning. [Foreign Speech]
Vishal Domadia
[Foreign Speech]
Dhwanil Desai
[Foreign Speech]
Operator
Mr. Desai, your voice is breaking. Actually it’s a — there is a breakage when you’re talking. So can you use your handset, please?
Dhwanil Desai
Just a minute, please. Is it better?
Operator
Yes, much better. Thank you, sir.
Dhwanil Desai
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Dhwanil Desai
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Dhwanil Desai
Okay. [Foreign Speech]
Vinay Joshi
As of now, capacity utilization it is around 58% [Foreign Speech], but now we have to see what we are expecting is Rabi season is going to be good. So, we have to wait and see how Rabi season is going on and if it is better than the losses may reduce and as initially I told, but in normal scenario the breakeven will be for next year only but now we have to see the Rabi season, how it is going on, accordingly our losses will impact on the overall performance.
Dhwanil Desai
Okay. [Foreign Speech]
Vinay Joshi
Okay. I think your voice is breaking anyway what I understood. So, see, now this year also [Foreign Speech] we have added some two, three new products. And we are also working on to add on some few more products for next year also, which will help us in overall growth of the revenue. Regarding Brazil, it is Board has approved to incorporate a subsidiary for having a market expansion in Latin America as well and it will help us in the faster registration of our product there. So process of — we already applied for registration in Brazil, but for incorporation of company now we have to start the process and which will help us in overall revenue growth for overseas import, export as well.
Dhwanil Desai
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Dhwanil Desai
Okay, sir. [Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech] after one year, next year we can start business in Brazil.
Dhwanil Desai
Okay. That’s it from my side and wish you all the best. Thank you.
Rameshbhai Ravajibhai Talavia
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Smit Shah from JHP Securities. Please go ahead.
Smit Shah
Yeah. Hi, sir. [Foreign Speech]
Vinay Joshi
At Peak utilization, we are targeting around INR450 crore sales in addition to the captive consumption, and that we are targeting around FY ’28 onwards.
Smit Shah
Okay. But margin profile?
Vinay Joshi
So, margin, once it will reach optimal utilization, then we are targeting margin of around 15% to 18%.
Smit Shah
Okay, okay. Understood. [Foreign Speech]
Vinay Joshi
So initial approval we got and we have submitted all the documents. So it is the [Foreign Speech]. We are hoping that by Jan, Feb we will get the final approval of the subsidy, but primary approval we’ve already received from the government.
Smit Shah
Okay. [Foreign Speech]
Vinay Joshi
That is on B2C segment.
Smit Shah
Okay, okay. Okay, got it. Thank you so much, sir.
Vinay Joshi
Thank you.
Operator
Thank you. The next question is from the line of Nirav Jimudia from Anvil Corporation. Please go ahead.
Nirav Jimudia
Yeah. Sir, thanks for the opportunity, Sir, I have two questions. [Foreign Speech]
Vishal Domadia
[Foreign Speech]
Nirav Jimudia
[Foreign Speech]
Vishal Domadia
Yes, yes.
Nirav Jimudia
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Nirav Jimudia
Got it. [Foreign Speech]
Vishal Domadia
[Foreign Speech]
Nirav Jimudia
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Nirav Jimudia
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Nirav Jimudia
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Nirav Jimudia
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Nirav Jimudia
[Foreign Speech]
Rameshbhai Ravajibhai Talavia
[Foreign Speech]
Nirav Jimudia
Thank you so much, sir, and wish you all the best.
Rameshbhai Ravajibhai Talavia
Thank you.
Operator
[Operator Instructions] The next question is from the line of Siddharth Agarwal from Prudent Value. Please go ahead.
Siddharth Agarwal
Hi, good afternoon, sir. Sir, I would like to understand [Foreign Speech]
Vishal Domadia
[Foreign Speech]
Siddharth Agarwal
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Siddharth Agarwal
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Siddharth Agarwal
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Siddharth Agarwal
On the ground inventory [Foreign Speech] Thank you.
Vishal Domadia
Thank you.
Operator
Thank you. We’ll take the next question from the line of Ketan Athavale from RoboCapital. Please go ahead.
Ketan Athavale
Hello, sir. Thank you for the opportunity. [Foreign Speech]
Vinay Joshi
See, this because price realization is reduced so that margin what 1% to 2%, we are expecting for this year, we may not see but of course GP margin we are seeing improvement. In EBITDA margin, we may see going forward that initial margin of 1% to 2%. And once we reach the optimal utilization in next three to four years, then we’ll see almost around 4% margin improvement.
Ketan Athavale
Okay, sir. [Foreign Speech]
Vinay Joshi
H1 level, more or less we will maintain at same level.
Ketan Athavale
Okay. Thank you.
Operator
Thank you. We’ll take the next question from the line of Manthan [Phonetic] from Alpha Wealth. Please go ahead.
Manthan
Hello. Thank you for the opportunity. [Foreign Speech]
Vishal Domadia
B2C is 25%.
Manthan
[Foreign Speech]
Vishal Domadia
Second one, Maharashtra [Foreign Speech]
Manthan
[Foreign Speech] we’ll have a substantial revenue?
Vishal Domadia
Financial year ’27. The next to next year.
Manthan
Okay.
Operator
Sir, do you have any further questions?
Manthan
No, nothing from my side.
Operator
[Operator Instructions] The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Ankit Gupta
Thanks for the opportunity. [Foreign Speech]
Vishal Domadia
Can you repeat the question?
Ankit Gupta
[Foreign Speech]
Vishal Domadia
[Foreign Speech]
Ankit Gupta
Sure. [Foreign Speech]
Vishal Domadia
[Foreign Speech]
Ankit Gupta
Okay. Rajasthan, Maharashtra?
Vishal Domadia
Maharashtra 12% and Rajasthan 9%.
Ankit Gupta
[Foreign Speech]
Vishal Domadia
More than 30%.
Ankit Gupta
[Foreign Speech]
Vishal Domadia
34%.
Ankit Gupta
34%. [Foreign Speech]
Vishal Domadia
[Foreign Speech] sales is only more than just double, triple.
Ankit Gupta
[Foreign Speech] Thank you.
Operator
Thank you. [Operator Instructions]
[Operator Closing Remarks]