Hatsun Agro Product Limited
Q2 FY26
Call date · September 8, 2025
1 · Management Commentary
Key Positives
- GST rate cuts for the dairy sector, especially for premium products like paneer and ice cream, are expected to significantly benefit both consumers and farmers.
- The company plans to pass on approximately half the GST benefit to farmers and half to consumers, stimulating demand and increasing rural spending capacity.
- Ice cream GST reduced from 18% to 5%, and paneer GST removed (though input tax credit not available), leading to lower consumer prices and anticipated demand surge.
- Management expects a 20% topline growth next year, up from the historical 12–13% CAGR, driven by GST reforms and improved affordability.
- Recent capex in new markets (Maharashtra, Telangana) is complete, positioning the company for growth as these markets mature.
Key Negatives
- For paneer, removal of input tax credit may cause a marginal price increase despite GST removal.
- Milk and curd segments see little direct benefit from GST changes, as milk is already tax-free and curd remains at 5%.
- No specific price reduction figures yet for some products; management is still evaluating the exact impact.
Forward Guidance
- Capex is largely complete; focus now on ramping up capacity utilization in new markets.
- No new product launches or segments announced; emphasis remains on existing branded portfolio.
- Expected 20% revenue growth in FY26, driven by GST-led demand boost and improved market penetration.
- Strategic focus on brand strength and direct-to-consumer sales, especially in value-added categories like ice cream and paneer.
- Farmer price admissions to be announced in the next 3–4 days, sharing GST benefits.
2 · Q&A Highlights
Q 1 (Composite): How will the GST rate cuts impact demand, pricing, and margins across dairy products, especially premium/value-added segments?
A (Management):
• GST cuts will stimulate demand, especially for ice cream and paneer; prices may drop by 8–9% for some products.
• Half the benefit will go to farmers, half to consumers; margins may improve due to higher volumes.
• Paneer loses input tax credit, so marginal price increase possible, but overall consumer price will be lower.
Q 2 (Composite): What is the expected impact on topline growth and volume outlook post-GST reform?
A (Management):
• Management expects 20% topline growth in FY26, up from 12–13% CAGR, due to increased affordability and demand.
• Growth will come from both existing and new markets.
Q 3 (Composite): What is the status of recent capex and capacity utilization, especially in new geographies?
A (Management):
• Major capex is complete, particularly in Maharashtra and Telangana.
• These markets are now set for growth as the groundwork is done; higher capacity utilization expected as demand rises.
Q 4 (Composite): How does management view the role of value-added products and brand strength in driving growth?
A (Management):
• Brand strength, not just value addition, is key to premium pricing and consumer loyalty.
• All four company brands are market leaders in their segments.
Q 5 (Composite): Will recent milk price hikes by dairy cooperatives lead to price increases for Hatsun, or will GST benefits offset this?
A (Management):
• Dairy cooperative price increases are not uniform across the country; GST benefits may reduce the need for price hikes.
3 · Other Key Numbers
- GST on ice cream reduced from 18% to 5%.
- Paneer GST removed; input tax credit not available.
- GST on curd remains at 5%; milk remains tax-free.
- For butter and SMP, GST outflow per 25L of milk drops from over ₹100 to ₹30.
- Expected consumer price reduction for some products: 8–9%.
- Historical revenue CAGR: 12–13%.
- Expected revenue growth for next year: 20%.
- Farmer price admissions to be announced in 3–4 days.
- Number of company brands: 4 (all market leaders in their categories).