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.

Outlines

00:00

📈 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.

05:01

🌐 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.

10:02

🏗️ 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.

15:09

🍺 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.

20:11

📊 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.

Keywords

💡Industry Growth

Industry growth refers to the expansion of a particular sector over a specific period, often measured by revenue, units sold, or market capitalization. In the script, the company discusses how it has outpaced the industry growth rate, indicating a strong performance relative to its competitors and the sector as a whole.

💡Market Share

Market share is the portion of the total market for a particular product or service that is controlled by a company or group of companies. The script mentions that the company has been able to consolidate its market shares, suggesting that it has increased its portion of the market relative to its competitors.

💡Capacity Utilization

Capacity utilization is the extent to which a company is using its productive capacity, often expressed as a percentage. The script discusses the company's capacity utilization rates for different plants, which is critical for understanding how efficiently they are operating and their potential for growth.

💡Capacity Expansion

Capacity expansion refers to the increase in a company's ability to produce output, often through the addition of new machinery, facilities, or other means. The script mentions a completed capacity expansion and plans for future expansions, indicating the company's growth strategy and commitment to increasing production.

💡Quarter

A quarter, in a business context, typically refers to a three-month period in a company's financial calendar. The script discusses performance in the first quarter and projections for the second quarter, which are crucial for investors to understand the company's financial trajectory.

💡Margins

Margins in business refer to the amount of profit a company makes relative to its sales, often expressed as a percentage. The script discusses EBITDA margins, which is a key financial metric for understanding the profitability of the company's operations.

💡Macroeconomic Factors

Macroeconomic factors are large-scale economic factors that affect the overall economy, such as inflation, interest rates, and GDP growth. The script mentions these factors in relation to how they might influence the company's stock price, even though the company cannot comment directly on stock performance.

💡Premiumization

Premiumization is the strategy of offering higher-priced, premium versions of products to attract consumers willing to pay more for quality or status. The script discusses the company's plans for premium product launches, which is a strategy to improve brand perception and potentially increase margins.

💡Stock Decline

A stock decline refers to a decrease in the market price of a company's shares. The script mentions a decline in the company's stock price despite strong Q1 results, which is a point of concern for investors and a topic for discussion in the call.

💡Cost Management

Cost management involves strategies to control and reduce business costs to improve profitability. The script discusses how cost pressures have stabilized, which is important for maintaining margins and achieving the company's financial goals.

💡Dividend Policy

A dividend policy is a company's approach to distributing profits to shareholders in the form of dividends. The script mentions that the company is in a growth phase and has no plans for a buyback or dividend, indicating that profits are being reinvested in the business.

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