Som Distilleries & Breweries Earnings Call for Q1FY25

Summary

During the Q2 earnings call, the company discussed its strong performance, outpacing industry growth with a focus on market share consolidation in key regions like Rajasthan and Delhi. They highlighted a 100% capacity utilization in MP and R, and 70% in the newly expanded W plant. The CEO projected a revenue of 1,500 to 1,600 crores for the year with a net sales target of 12-13%. Despite a stock decline, the company attributed its success to better-than-industry results and stable cost pressures. Future growth strategies include capacity expansion and premium product launches, aiming for a 20-25% growth rate over the next three years, significantly above the industry's 8-9%.

Takeaways

• 📈 The company has experienced growth exceeding the industry rate and aims to sustain this momentum for the rest of the year.
• 🎯 They have successfully increased their market share in key markets such as Rajasthan, Delhi, and Bangalore.
• 🏭 The company operated at 100% capacity utilization for MP and R, while the W plant, having completed capacity expansion in April, operated at 70%.
• 💹 They project a top-line revenue between 1,500 to 1,600 crores for the year, with a net sales target of 12-13%.
• 📉 Despite strong Q1 results, the company cannot comment on stock performance but notes their results are better than industry reports.
• 🛠️ Margin pressures have stabilized, and the company's margins are slightly better than the competition.
• 🌐 They are in a growth phase with plans for capacity expansion in their Visa plant by early next year.
• 🍺 The company is considering premium product launches and has seen a positive consumer response towards their products.
• 📊 The industry growth rate is projected to be between 8 to 9%, while the company aims for a growth rate of 25 to 30% year on year for the next 2 to 3 years.
• 💼 The company's CAPEX plan includes a significant investment of 35 to 40 crores for capacity expansion.

Q & A

How has the industry performed in the first quarter and the current month of the second quarter?

The industry has been growing, and the company has outperformed the industry's growth rate. They have been able to consolidate market shares and grow in key markets.

What is the company's outlook for the rest of the year in terms of growth?

The company hopes to sustain the growth momentum for the rest of the year, with a target of achieving a top line of between 1,500 to 1,600 crore for the year.

What is the company's strategy for capacity utilization and expansion?

The company has operated at 100% capacity utilization for MP and R, and about 70% for the W plant due to recent capacity expansion. They plan to increase capacity utilization to 85-90% by the next season.

What is the company's stance on stock buyback or dividend policy at the moment?

The company is currently in a growth phase and does not have any plans for a stock buyback or dividend distribution. They are focusing on capacity expansion.

How does the company perceive the impact of raw material prices on their margins?

The company expects ABA margins to improve as raw material prices have corrected. They have given a broad margin range of 12 to 13% for the year, considering the variations in raw material costs.

What is the company's plan for premiumization and new product launches?

The company is working on premiumization and plans to launch premium products in the financial year. They expect to see some premium products being launched in the upcoming quarters.

What is the company's CAPEX plan for the next couple of years?

The company has a CAPEX plan of about 35 to 40 crore for capacity expansion in their Visa plant, which is expected to be completed by April of the next year.

How does the company plan to finance the upcoming expansion?

The company will use a mix of equity and debt for financing the expansion. The equity portion involves the exercise of warrants by the promoter, not a fresh dilution.

What is the company's view on the use of aluminium cans versus glass bottles?

The company believes that consumer preference is crucial, and they cannot force a switch from glass bottles to cans. The choice between the two depends on consumer demand and market conditions.

What is the company's growth projection for the next 2 to 3 years?

The company is targeting a growth rate of 25 to 30% year on year for the next 2 to 3 years, with sustainable margins in the range of 12 to 13%.

How does the company plan to maintain growth momentum in the upcoming quarters?

The company expects to maintain the current growth momentum, despite the seasonal variations in beer consumption. They are confident in their product's reception and market presence.