Som Distilleries & Breweries Earnings Call for Q1FY25
Summary
TLDRDuring 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.
Outlines
📈 Company Performance and Growth Strategy
The speaker discusses the company's performance in the first quarter and the current quarter of the year, highlighting that the company has outperformed the industry's growth rate. They express optimism about sustaining this momentum for the rest of the year. The company has made significant progress in markets like Rajasthan, Delhi, and Bangalore. Capacity utilization is at 100% for MP and R, while for the W plant, it's at 70% due to recent expansion. The speaker also mentions the company's market share growth and provides financial targets for the year, including a top line of 1,500 to 1,600 crore and a net sale target of 12 to 13%. The conversation also touches on the company's strategy for growth across segments and geographies.
🌐 Expansion Plans and Market Share Insights
The speaker addresses the company's expansion plans, including a capacity expansion for their Visa plant expected by the first quarter of the next year. They clarify that there are no plans for a buyback or dividend at the moment. The discussion shifts to raw material costs, with a focus on the potential for improved margins due to falling raw material prices. The speaker provides insights into the company's operations across multiple states and the varying percentages of bottle returns. They also touch on the company's premiumization strategy, indicating upcoming premium product launches within the financial year and the importance of this strategy for brand perception.
🏗️ Capital Expenditure and Capacity Utilization
The speaker details the company's capital expenditure plans, including a significant expansion in Orissa starting December of the current year, with an estimated completion by April of the following year. They mention the company's eye on acquisition opportunities and potential greenfield projects for the next year. The conversation revolves around growth projections, with the company aiming for a 25 to 30% year-on-year growth for the next 2 to 3 years, and maintaining sustainable margins between 12 to 13%. The speaker also discusses capacity utilization across different plants, with a particular focus on the beer season's impact and future expectations.
🍺 Premiumization and Market Strategy
The speaker elaborates on the company's strategy for premiumization, explaining that while the premium segment is a smaller part of the industry, it is crucial for brand perception and image. They discuss the company's approach to scaling up in the premium segment, with a focus on consumer demand and market trends. The conversation includes a comparison of glass bottles and aluminum cans, with the speaker noting consumer preference for glass bottles in India. The speaker also addresses the company's capacity expansion plans, investment amounts, and the potential for increased utilization rates in the coming years.
📊 Industry Growth and Future Projections
The speaker provides an overview of the company's growth rate, which is significantly higher than the industry average, and discusses the factors contributing to this growth. They share the company's sustainable growth rate projection of 20 to 25% for the next three years. The speaker also addresses the industry growth rate, which is estimated to be between 8 to 9%. The conversation concludes with the speaker's confidence in the company's ability to maintain its growth trajectory and market position.
Mindmap
Keywords
💡Industry Growth
💡Market Share
💡Capacity Utilization
💡Capacity Expansion
💡Quarter
💡Margins
💡Macroeconomic Factors
💡Premiumization
💡Stock Decline
💡Cost Management
💡Dividend Policy
Highlights
The industry and key markets have grown more than the industry rate of growth.
The company aims to sustain growth momentum for the rest of the year.
Market share has been consolidated, and growth has been achieved in key markets.
Significant progress in markets like Rajasthan, Delhi, and Bangalore.
Capacity utilization at 100% for MP and R, and 70% for W due to recent expansion.
Revenue outlook for the year is between 1,500 to 1,600 crores.
Net sales target for the year is in the range of 12 to 13%.
Market perception issues or external factors contributing to stock decline cannot be commented on.
Margins are slightly better than the competition, and cost pressures have stabilized.
Macroeconomic factors or industry-specific trends affecting stock price cannot be commented on.
The company is in a growth phase with a capacity expansion planned for the Visa plant.
No plans for buyback or dividend as of now.
Raw material prices have corrected, and the harvest season is expected to be good.
The main raw materials are sugar, barley, and rice flakes.
The company operates in multiple states, with varying percentages of blast furnace returns.
The cost component of glass bottles in the entire production cost is significant.
Premiumization is a focus area, with plans for product launches in the financial year.
The company is working on premium products, which are expected to be priced similarly to Kingfisher Ultra.
Capacity expansion is planned with an investment of 35 to 40 crores.
The company tracks capacity utilization, with current utilization rates varying across plants.
The industry growth rate is expected to be between 8 to 9%.
The company aims to maintain a growth rate of 20-25% for the next three years.
Consumer preference for glass bottles over aluminum cans is noted.
The company's confidence in maintaining its growth rate and market position is expressed.
Transcripts
explain you know on the overall industry
situation right now um how is had how
how has it been uh in quarter one uh and
uh this last month of quarter 2 already
and how does it look uh ahead to the
rest of the year and then you could uh
also cover some points what S is doing
on ski Strat areas for growth across all
the segments and in all the geographies
you are present
it's pretty a long question uh the
industry has
been uh they have been GR in in the
industry as well as in the key markets
where they are present
but they have grown more than the
industry rate of growth and we hope that
we should be able to sustain the
momentum for the remaining part of the
Year also uh the growth we have been
able to consolidate our market shares
and grow in our key Market as well as we
have made substantial progress in the
markets like Rajasthan Delhi and
ban uh in the quarter one
uh as for the I would also like to dwell
upon the capacity Equalization of theam
so for this qu we
have operated an that's utilization of
100% for both MP and R while for the W
because it was
a we have just completed the capacity
expansion in April itself uh so we about
70% of capacity utilization for the that
is the kataa plant
So based on
this sorry to interrupt Mr Ry your voice
is very low hello yes please go ahead
yeah so so based on all all you said
that market share and you you hope to
sustain the growth momentum so any
outlook for f595 revenue and Aida
margins I think uh we should be able to
um be able to achieve a top line of
between 1,500 to 1600 cror net Sal for
this year uh while Target for the visit
should be in the range of about 12 to
13% 12 13% okay I'll will get back into
you thank
you thank
you next question is from the line of
Rohit deshmuk from Vish Investments
please go ahead
hello yes sir uh can you provide
insights into any Market perception
issues or or external factors that might
be contributing to the stocks decline
despite strong q1
results how that can you provide
insights into any Market perception
issues or external factors that might be
contributing to the stocks stocks
decline despite strong q1
results I cannot comment on the stock
performance I mean uh but I think our
results have been better than what the
industry has reported so
far
okay can you discuss any margin
pressures or cost management issues that
might be
effec affecting investor
sentiment if you look at the what the PS
have reported in terms of margins I
think our margins are slightly better
than the
competition and the cost pressures also
have
stabilized uh as compared to I as
compared to the last one year
uh are there any macroeconomic factors
or industry specific Trend trends that
might be weighing on the stock despite
the strong quarterly
performance I I cannot comment on the
stock price sir okay okay uh what is the
comp's current St on stock byy by and
divent policy and could be influ
influencing could be
influencing invest I we are on a growth
phase currently we have also announced
in the past that we will be doing a
capacity expansion for our Visa plant uh
which should happen by early next year
uh and in early next year I mean is by
quarter one of next year so as of now we
do not have any PL of buy back or like
you said dividend or yeah
back okay okay thank you I will head
back to you thank you thank
you before we move to the next question
a reminder to the participants to ask a
question you may press star and
one next question is from the line of
yes dadia from D equ please go
ahead hello am I
audible yes sir yes you are yeah just
wanted to understand on the raw material
front uh we've seen prices correct uh
this quarter right and this SE is
expected to be um good in terms of
harvest right and your main raw
materials I'm assuming is sugar barley
and rice plakes uh right so my question
is don't you see your ABA margins
improving further uh 12 13% you've
guided but don't you think it's going to
do you're going to do better than uh uh
that in terms of ABA margins because
your raw material pricing is falling
so I think uh I think the main uh price
component or the cost is of
sles uh right and uh the prices of glass
SP are been
stable as I compared to June 23 and June
24 so they are slightly different in
price and uh but our usage of glass SP
is more than what we just that as the
old BS so that is the reason that and
now we have started operating in
multiple States so we don't have
operations in a single state or two
states uh and there are certain states
where the percentage of blast B comes
back as lower as compared to what we do
in mp or kataka or
Ina that is why I have given a broad
range of the margin of 12 to 13% for
this year will you be able to share what
cost component uh is the glass bottle
for you in terms of the entire cost of
production for a
bottle okay uh can you also uh give uh
some guidance in terms of premiumization
you said last con call that you working
on it actively has there been any
movement in that front or is are you
expecting to make any laun
we have certain announcements to make um
on this regard for confidentality reason
I cannot disclose the product launches
which we plan to do uh in this quarter
or the next quarter but I think
definitely you will see some premium
products being launched from quarter
yeah quarter is fine but you're saying
that we'll see a premium uh product
launch this year this financial year
yeah yes yes this financial year and
when you say pre what do you
mean IM means that maybe something which
is more expensive than
Hunter uh can you give me a price range
like one what price range uh would would
you
categorize I think uh uh maybe in the
range
of maybe something in the range of ultra
or
something uh sorry in the range of I
couldn't hear you I'm sorry
okay okay I'll come back in the queue I
have more questions I'll come back in
the que thank
you thank
you next question is from the line of
vinit Agarwal from adya banii please go
ahead yeah hi thank you for giving an
opportunity good evening sir
congratulation on good numbers so I have
a couple of questions uh so one is uh
what is our our kex plan going forward
for the next couple of years and what
are the growth projections uh we are
building in Beyond fi25 and what what
kind of sustainable margins we will be
able to maintain and another is uh if
you can talk on the about the market
share in new markets and how are how we
are seeing tractions
there so
um your first part of the question was
related to uh the CeX plan so we have
got one capex plan uh like I was
discussing with the previous caller
uh uh in
Ora uh which we should start by December
of this year and hopefully we should be
able to complete it by April of next
year any amount if you can uh like what
kind of the range of I think about5 to
40 okay and uh we are also
eying certain acquisition opportunities
in state where we want to
enter uh or we might even look at the
Green Field uh but uh maybe that it for
next
year and what are the growth uh any if
you can um like talk on the growth
projections Beyond
fi25 we are looking at the growth of in
the range of about 25 to 30% year on
year for the next 2 to three years
that's I think our internal
Target and the margins will be
sustainable at this uh current in that
range which I indicated earlier or
between 12 to
13% yeah thank you that's thank you
thank
you participants to ask a question you
may press star and
one next question is from the line of VI
Gupta from noa's Capital please go
ahead uh thank you sir for the question
uh I just had one query do you track uh
capacity utilization and how much uh is
the current
utilization across the
plans like I mentioned if I just analy
the capacity whatever has been the
production in this quarter one uh so we
are had about 100% in urisa and MP and
at the kataka plant we are at
70% but allly because this is our main
season
the uh capacity utilization would
slightly come down for the remaining
part of the year
with the seity in
beer yeah I'm talking beer only yeah so
for kataa uh by the next season would
the utilization reach
100% I think we should be about 85 to
90% by next season and uh after maybe uh
in the second year it'll be
100 yes yes and if
things uh I mean prove to be then we
could reach about 90
95% uh by by by next
year that's about it sir thank you thank
you thank
you we have a next followup question
from the line of yes dadia from D Equity
please go ahead yeah hi um my next
question is regarding your recent uh uh
uh expansion uh disclosure that you made
you said that you'll be using a mix of
equity and debt uh can we know more
about it in terms of size and why are
you diluting uh if you're going to be
diluting Equity more why are you doing
so because you don't have a lot of debt
in your books anyways right
so I I didn't understand the equity
portion uh and the size of the kex could
you some could you uh drop some light on
that you're talking about which
disclosure sir you recently made a
disclosure that will be expanding
capacity
right keep that was I think in context
ofisa yeah correct
right yeah so I mean equity in that
would be that there's certain warrants
which need to be exercised by the
promoter okay but not fresh right not
fresh dilution you're not talking about
fresh
dilution no no not
fres and uh Your Capacity utilization in
this particular plant is around 50% %
right theisha PL yeah yeah yeah where
you're expanding Your Capacity Aisha so
it was for I mean last year and same
time last year also we had reached about
65% and this year we have uh crossed
100% so so in Aisha you've crossed 100%
capacity utilization
yes okay uh and also
don't also why don't you do aluminium
cans instead of bottles like a followup
question from your last answer is the
cost of an aluminium can more than a
glass bottle no it also depends upon the
saleny of the can in a particular Market
because the demand of the consumer is
very important I me I cannot push the
consumer from a glass bottle to a can so
is that some is that a trend that you've
noticed till now that consumers are more
drawn towards glass bottles yeah yeah so
I mean in India about I think about if
you look at the ceny about 75 to 80% of
total contion happens in
last right and
uh this this a followup question on the
premiumization part uh that you said uh
since you said it's going to be priced
somewhere around the Kingfisher Ultra uh
is what I'm assuming uh my question is
uh what was how do you see the scaling
up the premiumization part uh what kind
of demand are you seeing on ground uh
what is the strategy could you share
some uh uh points on that like how you
seeing it play out uh um the
premiumization if you look at the I
think about close to about 15% of the
industry is towards the premum seg
the bread and butter of all all the B
manufacturers comes from the
85% right to grow or to you know have a
better perception or a brand recognition
of the company it makes sense to have a
premium brand but we are not expecting
much of volume to come from the premium
band does it just to improve the
perception and the image the
company if you look at if you look at I
mean I don't know how much information U
Get on the volume of think so strong but
I am undoubtly I believe that about out
of his portfolio what 80 to 85% would be
coming from K strong or the strong be
category right uh can you give us the
size of the uh capacity expansion uh
how much you'll be
investing sior size size of the capacity
expansion how much money you'll be
investing into the capacity expansion
part about 35 to
40 35 to 40 CR okay okay okay thank you
so much for taking my questions have a
cretive thank
you participants who wishes to ask a
question may press start and
one next followup question is from the
line of Rohit deshmuk from visha
Investments please go
ahead uh sir can you elaborate on the
guidance for the upcoming quarters and
any potential challenges that might
impact future
performance I think like I indicated
that for the full year we are getting
guidance of between, 1500 to 16 cres
1600 cres of net
sales uh despite um this coming quarters
September and December where beer
consumption is low compared to June and
March yeah yeah because we are uh I mean
seeing good reaction of our product
uh uh all across the
year so you're telling that uh you will
maintain uh the current R in upcoming
quarter also
I'm not commenting on the Run rate I'm
just giving you a guidance that you
should be in the range of 15 to, 1600
cres for the uh full Financial the
current one okay okay thank you so
much thank
you ladies and gentlemen to ask a
question you may press star and one
participants who wish to ask a question
may press St and one on their Touchstone
telephone ladies and gentlemen to ask a
question you may press star and find
next question is from the line of chak
singal from first water fund please go
ahead yeah uh thanks for taking my
question uh congrates on a good set of
numbers uh so just wanted to understand
uh more from a growth uh perspective so
we have been growing uh you know 2020 %
kind of growth rate and for this year
also based on our Guidance the growth
rate comes to around 20% so what is the
industry growth rate uh and how we are
able to you know grow at uh 20 25%
growth rates and going forward uh uh you
know your move toward premiumization and
everything considered what is the
sustainable growth rate that you are
looking at maybe from a 5 to six year
perspective I think
uh we are a growing company and uh we
have got an exciting team on
board uh we have got good products uh we
have a brand which are recognized by the
consumers we give a good taste of liquid
in our
bottles um and we are being able to
maintain our Market Shar in the in a key
Market where are plant are and we
continue to grow in our new market so I
think that's how we have been able to uh
you know grow much faster than the
industry and
uh we on a sustainable level I think for
the next three years and PR sure that we
will be able to maintain a growth rate
in the range of 2 to
25% okay and can you also Shar the
industry growth rate like uh uh the
regions that you're gatering to uh like
what is the industry growth rate uh IND
should be growing by the range of 8 to
9%
sorry 8 to
9% okay
okay got it sir uh thanks that would be
it from my
end thank
you participants to ask a question you
may press start and find
ladies and gentlemen as there are no
further questions I would now like to
hand the conference over to Mr nakul
City for the closing
comments uh thank you all for uh joining
in the call uh we are pretty confident
that uh we should be able to maintain
our
rotate
uh that's it for me thank you so
much thank you on behalf of s
distilleries and bries limited that
concludes this conference thank you all
for joining us and you may now
disconnect your lines
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