Business Analysis: Jyoti Resins and Adhesives
Summary
TLDRIn this video, the host analyzes Jyoti Resins and Additives, a company that manufactures adhesives for wood under the brand Euro 7000. The company has a loyalty program for carpenters, a diversified product portfolio, and operates in 13 states with 10,000 active dealers. The video discusses the company's growth trajectory, competitive edge, and financial performance, with a focus on volume growth and capacity expansion. The host also highlights potential risks and the company's management history.
Takeaways
- 🏭 Jyoti Resins and Additives is a company that manufactures adhesives, specifically for wood applications.
- 🏷 Their product is sold under the brand name 'Euro 7000', which is a white adhesive liquid used by carpenters.
- 🐛 The company offers an anti-termite application, a type of adhesive that prevents insects from damaging wood.
- 📈 Jyoti Resins and Additives has a diversified product portfolio and sells in a variety of quantities, from 500 grams to 70 kgs.
- 🔑 The company's USP is a loyalty program that rewards carpenters with points for purchases, which can be redeemed for future discounts.
- 📊 They have a widespread network with 10,000 active dealers, 50 distributors, and over 3,00,000 carpenters.
- 📈 The company has seen robust volume growth, with an 8% increase in Q4 of FY23 despite seasonality factors.
- 💹 They project a volume growth of 25% over the next three years (FY23 to FY26) while maintaining a margin of 20-25%.
- 🚀 Growth plans include increasing production capacity and expanding into new states, with a focus on distribution and active dealers.
- 💼 There are concerns about the management's past, with instances of SEBI cases for market manipulation in the late 90s and early 2000s.
Q & A
What is the main product of Jyoti Resins and Additives?
-The main product of Jyoti Resins and Additives is adhesives, specifically glue used in wood applications.
Under what brand name does Jyoti Resins and Additives sell their adhesives?
-Jyoti Resins and Additives sell their adhesives under the brand name 'Euro'.
What is the USP or competitive edge of Jyoti Resins and Additives over other companies?
-The USP of Jyoti Resins and Additives is their loyalty or reward program for carpenters, which encourages repeat business and loyalty.
How does the loyalty program of Jyoti Resins and Additives work?
-The loyalty program works by crediting points to carpenters' accounts based on their purchases. These points can be redeemed to offset the cost of future purchases, effectively providing a discount.
What is the volume growth projection for Jyoti Resins and Additives for the next three years?
-Jyoti Resins and Additives projects a volume growth of around 25% for the next three years.
What is the current capacity of Jyoti Resins and Additives' manufacturing plant?
-The current capacity of Jyoti Resins and Additives' manufacturing plant is 2400 tons per month.
What is the potential future expansion plan for Jyoti Resins and Additives?
-The potential future expansion plan includes increasing the capacity utilization to 80% and then investing in another plant, possibly in Bangalore, after 1.5 years.
How does seasonality affect the revenue of Jyoti Resins and Additives?
-Seasonality affects the revenue as Q3 usually sees the highest revenue due to the festival season, while Q4 is comparatively slower. This is because people tend to repair and paint their houses before festivals.
What is the reason behind the flat revenue on a quarter-on-quarter basis despite an 8% volume growth?
-The flat revenue on a quarter-on-quarter basis despite an 8% volume growth is due to the reward program where points accumulated by carpenters are treated as expenses until redeemed, which affects the revenue recognition.
What are the risks or red flags associated with Jyoti Resins and Additives as per the script?
-The risks or red flags include the possibility of competitors replicating their loyalty program, volatility in raw material prices, and past management issues related to market manipulation.
What is the financial performance of Jyoti Resins and Additives like according to the script?
-The financial performance of Jyoti Resins and Additives is positive, with an increase in revenue, profit before tax, and cash flow from operations, despite some concerns about trade receivables and inventory levels.
Outlines
🔍 Introduction to Jyoti Resins and Additives
The speaker begins by welcoming the audience to a business analysis video focusing on Jyoti Resins and Additives, a company known for its adhesives used primarily in woodworking. The adhesive is colloquially referred to as 'glue' and is sold under the brand name Euro 7000. The product portfolio is diverse, including anti-termite applications to prevent wood damage. The company's USP is a loyalty program for carpenters, its end-users, which offers points on purchases that can be redeemed for future discounts. This strategy has helped build a loyal customer base.
📈 Business Growth and Expansion
The presenter discusses the company's growth strategy, highlighting its expansion from a local Gujarat-based business to a nationwide presence with operations in 13 states. They emphasize the importance of volume growth over price increases in the adhesive market and detail the company's distribution network, which includes 10,000 active dealers and 50 distributors. The company's plans for the future include a projected 25% volume growth over the next three years, supported by increased production capacity and the introduction of new products.
🚀 Expansion and Market Penetration
The speaker outlines the company's history of expansion, from its initial production capacity of 250 tons per month to the current plans to increase capacity to 2400 tons per month. They discuss the company's entry into new markets and the deepening of its presence in existing ones. The strategy includes venturing into two additional states and increasing the number of active dealers to drive volume growth. The company's volume growth is evident in its financial performance, with an 8% increase in volume despite seasonal slowdowns.
💹 Financial Performance and Seasonality
The financial discussion covers the company's revenue growth, which has been flat quarter-on-quarter despite an 8% volume increase. This discrepancy is attributed to the company's reward program, where points earned by customers are recorded as expenses until redeemed. The presenter also notes the company's strong asset turnover and profit margins, driven by effective cost management and the use of raw materials. However, they caution about the impact of seasonality on the business, particularly the migration of carpenters during certain months, which affects revenue recognition.
📊 Analyzing Balance Sheet and Cash Flow
The presenter delves into the company's balance sheet, noting the increase in current assets and liabilities. They discuss the implications of the company's accounting practices on net cash flow, highlighting a decrease due to changes in how certain financial instruments are classified. Despite this, they point out that the company's cash flow from operations has improved when accounting adjustments are disregarded. The presenter also raises concerns about the increase in trade receivables and the potential impact on cash flow.
🔎 Risks and Future Outlook
The final paragraph addresses potential risks and the company's future prospects. The speaker identifies the company's promotional schemes as a potential vulnerability, as competitors could replicate these strategies. They also highlight the risks associated with raw material price fluctuations and the importance of the company's management history. Despite these concerns, the presenter remains optimistic about the company's ability to achieve its growth targets, suggesting that with aggressive expansion and effective capital investment, the company is well-positioned for future success.
Mindmap
Keywords
💡Adhesives
💡Additives
💡Brand Name
💡Loyalty Program
💡Volume Growth
💡Capacity Utilization
💡Distributors
💡Market Penetration
💡Seasonality
💡Reward Points
💡CAPEX
Highlights
Jyoti Resins and Additives is a company specializing in adhesives, specifically for wood.
Their adhesive is sold under the brand name Euro 7000.
The company offers a diversified product portfolio, including anti-termite applications.
Jyoti Resins and Additives operates a loyalty program for carpenters, their end customers.
The company has a widespread network of 10,000 active dealers and 50 distributors.
Jyoti Resins and Additives plans a volume growth of 25% in the coming years.
The company started with a production capacity of 250 tons per month, which has increased to 2000 tons per month.
They have a robust volume growth of 27.5% for the entire year of FY23.
The company's financials show an increase in revenue, profit, and net profit.
Jyoti Resins and Additives has a high Return on Equity (ROE) of around 55%.
The company has a significant amount of cash and cash equivalents on hand.
They are planning to expand into two new states, potentially Uttar Pradesh, Delhi, Chennai, or Kerala.
The company's management has a history of legal issues related to market manipulation.
Despite having a high market cap, the company is still considered small and has room for aggressive growth.
Jyoti Resins and Additives aims to penetrate deeper into existing markets before expanding further.
The company's reward program for carpenters might be replicated by competitors, which could affect its unique selling proposition.
Transcripts
hi guys welcome back uh today's another
beautiful day and we'll be analyzing
another business model so today I'll be
doing Jyoti resins and additives I think
most of y'all would have heard about
this company right and it had and this
company has performed really well for
the last one year right so let us see
like let us see in today's video like
will the growth trajectory continue or
you know what is the what is the future
of the company looks like right so uh
I'll just start directly with the
presentation early I'm sharing my screen
thank you
yeah so the company we are doing is
Jyoti residents and additives first let
us understand the product portfolio Okay
what is it more than the product
portfolio let us understand the business
model first what is the what does the
company do simple the company does
adhesives what does that mean in a
simple language additive is nothing but
glue you would have seen heavy call
right when you were a kid what what
would you use that fevicolor you know
the white color gum you would use it to
what to stick two things or you would
have seen it in that art and craft right
but there you were using for art and
crafts but here the adhesive or the glue
that you're using it is specifically for
wood right you would have seen right
when a carpenter comes and let's say if
something in your house is broken maybe
a leg is broken or something you would
have seen right those people would use
this white color egg liquid so that is
what it is it is nothing but uh these
people nothing they they manufacture
nothing but glue or adhesive as you call
it specifically that is used in wood or
that is used in wood now of course when
you go out you're not going to see this
this name called Jyoti resins and
adhesives right if you go to any if you
ask a carpenter you know like oh do you
use Jyoti resin and Addison he might not
know it so what they have is Jyoti
residence is a company but their brand
name or they sell it they sell the
adhesive under the brand name called
Euro Euro 7000 then you see here on
under all the bucket in all the bucket
it is written Euro Euro Euro so they
have this brand called Euro they sell it
under this brand right so that's that
can you see here they were very
Diversified product portfolio so there
were a lot of things going on when I
talk about glue when you talk about blue
for or the adjective that goes into goes
input can you see your anti-termite
application uh termite is basically an
insect or a worm so what happens is this
termite feed or they ate the wood or you
know the dead plant right as a result
what happens as they eat this wood uh
the uh the strength of the wood becomes
less and of course if that if that
material is used in any structural
corporate let's say if you're building a
wooden staircase and this termite ends
up being there and they start eating
this wood right over over a period of
time what will happen the stairs because
the the structural Integrity of your
what is that structural Integrity of the
stairs will get loosened and of course
right it will it will cause structural
damage it will break
so anti-termite is is a kind of a wood a
wooden glue or a wood adhesive that
prevents the formation of of this
insects like termite like I'm not going
to go into detail now like you
understand it there are many many
Diversified product portfolio and not
only that you know the product like the
the way they sell in terms of quantity
also it goes from 500 grams to 70 kgs
you know that kind of big big buckets
also they do sell so that's about the
product right now once you're clear
about the product let us try and
understand what is the USP or as you
would call it the mode or the
Competitive Edge that this company has
right over the others because when I
talk about Globe when I talk about
additive I think the first thing that
goes into your head is like oh pretty
light and light is such a great company
it has been here for for the last 65
years right so you know what is their
mode how are they able to crack this and
you know gain market share when this
giant like Pedialyte has been there for
so many years so Jyoti residency if they
run a program called the Loyalty program
or an award or a reward program for for
this Carpenters right because anyways
this vodka glue that is there the End
customer is nobody but Carpenter you and
I will not take a bucket of uh you know
Euro 7000 and just keep it in the house
right the Carpenters use it because of
course they deal with a lot of this wood
wooden thing right so what happens here
is let's say if I'm a carpenter and if I
go to buy a product of Jyoti resistance
sorry Euro 7000 if I go to buy that
product what happens let's say I spend
100 rupees of money there right then
what happens maybe a certain percentage
for every purchase what I do what I get
is I get the points that will be
credited to my account over a period of
times you know when this point is
sufficient it will get Auto debited in
the sense like let's say I I go again
for the next time when I purchase and
and whoever is there you know from
wherever I go they'll see in my account
like oh you have so and so points you
can redeem it so maybe the product will
cost 100 rupees but over the over the
years have accumulated so many points as
a result I might have to pay just 60
rupees or 80 rupees you get that right
you're understanding how a reward system
works or a pawn system works I think
most of us have this experience with
like Flipkart or Amazon right we
purchase something I think Flipkart is a
good example we purchase something and
we get Flipkart coins right and then you
know once you know when uh when a
certain amount is there you can you can
redeem that point and you get a you get
to offer in your in your final bit so
the similar kind of thing even they run
with a carpenter uh with the Carpenters
and this has proven to be very loyal uh
this has proven to be you know uh made
the carpet is very loyal to them because
of course right let's say you you are
buying something from Flipkart and you
have accumulated points that you know
now that it's it's a pure psychology
players on one end because you know now
you are you will have to spend 100
rupees Less on this platform compared to
another platform because again and
because of that you tend to go and Shop
only from that platform it's a similar
type of story here going on right so
that is one thing so that is one of the
main USPS or Competitive Edge that they
really take pride on uh then can you see
her of course right now they are in 13
states they have 10 000 active dealers
and 50 Distributors and you know they
have a network of three La Carpenters
now one thing I would like to highlight
is here the volume growth becomes very
crucial right because when you talk
about adhesive Central you can't keep
increasing the price because if you
increase the price there will be
somebody who might not be willing to
increase the price some of the other
competitors and then what there might be
a problem of course right there might be
a shift of your customer so here when
you talk about growth in terms of volume
and value here it primarily comes to
like volume plates right and you can see
here the majority of the revenues coming
from five states that is Gujarat I've
put the percentage of Revenue Gujarat
around 30 to 35 Rajasthan and and other
uh other places like Karnataka and
Maharashtra and madhya Pradesh right so
if we have understood the business mode
we've understood the business model let
us try and understand the Outlook right
what is this what is this company
projecting so the company plans around a
25 volume growth in the coming years
like from F5 fi23 is a base if you take
for the coming three years it is until
fy26 they are they are they have given a
guidance of 25 volume growth while
maintaining a margin around 20 to 20 or
22 to 25 right and of course they're
targeting a CHR of 25 growth now how
will this growth come from let us see
right so first thing is like you know
this company was started long bank but
in the year 2006 they started this brand
code Euro 7000 and they started selling
this white blue okay so of course let
you understand this white glue is your
final product right glue is nothing but
your ad is so this final product to make
it of course you need a lot of raw
materials all these raw materials are
imported from different different
countries and finally they manufacture
the the final product that is a white
blue in their plant called santech in
Ahmed Gujarat that's why can you see
here the majority of the sale comes from
Gujarat around 40 to 35 that's one thing
now we understand why because they
started there and their plant is also
there so when they started they started
with 250 tons per month in earlier
um uh when they started I think in 2006
they started with this and they started
entering the Gujarat Market later what
happened in the year 2016 and 17 they
increased their capacity in that plant
uh to so that the plant can produce 500
tons per month and they moved into they
went they started the distribution to
another state that was called
Maharashtra in 2018 and 2019 what had
happened that increased the capacity to
thousand tons per month and they moved
into 12 States among that among the 12
states where the Karnataka madhya
Pradesh and which was the other one
Karnataka madhya Pradesh at uh Rajasthan
right that those were the states now
what has happened in 2022 they have
again expanded the capacity from uh 1000
tons per month to 2000 tons per month
right it's basically 2X and of course
you're pouring into many other states
um and and that's a process right
further right now even after this whole
2022 after the whole 2000 tons per month
they're increasing it further to 2400
tons per month and here's the thing
they're increasing it to 2400 tons per
month and they're building a warehouse
here so this is the whole plan now in
spite of building the capacity and
increasing the capacity to 2400 tons per
month what has happened is their current
plan that is there at this now it is
still running at hardly fifty to sixty
percent capacity utilization that's it
it is not running more than that so what
they're planning to do is once it goes
up to this 80 percent capacity
utilization once this plan goes then
they will go invest in the uh in buying
another plant maybe maybe uh doing a
Greenfield project and they're planning
to do this after 1.5 years if again once
the the current client reaches the 80
utilization they are planning to open
another plant in in probably in the
south of India somewhere in Bangalore so
that's the whole plan the uh how are
they able to penetrate into 25 sorry how
are they able to like go into the whole
25 car growth rate or 25 percent because
for the next three years and having a 25
volume growth on a uh year on year plus
while maintaining this this is the plan
like I told you they've increased the
capacity already and of course uh
they've increased the capacity and the
second thing is like I told you here
when you talk about IDs if it is more of
a volume growth after volume growth the
more you do distribution the more
increase active dealers the more you do
this that's how you get your that's how
we get the uh volume growth right the
best example again to this would be what
Varun beverages did how did they get the
volume growth of course there was a
product mix because of staying the game
changed but also as a you know they they
started pouring into new markets same
thing is happening with Vector also
right you can see Vector is giving a 40
car 40 percent growth how did Vector do
this Vector also increase their
distribution you would have seen that
right because of this the volume growth
comes the more you increase your
distribution the more you have more
active dealers you have or the number of
stores one another prime example with
volume growth is Metro how was Metro
able to do 25 in growth of course
premium the other one is you would have
seen there when uh Nissan Joseph came um
Nissan Joseph started it interacting
right I think in q1 of last year he had
given a guidance of 260 stores in the
next three years right and that's how
the volume growth came the 25 percent
per cage out there anyways we are type
racing but to understand the basic point
that volume growth comes from
distribution right and you can see that
their distribution how are they doing
already they are in this 12 States right
and I showed you the five majority in
five major states where the revenue is
the majority of the revenue is coming
from right now what they're planning to
do is they're trying to venture into two
more States and these two more States
can be either uttar Pradesh or Delhi in
the North or it can be Chennai and
Kerala in the South so of course right
uh one is they're entering into two new
States and they still feel that the
current states are there in like Gujarat
Maharashtra uh MP right and Karnataka
they still feel that they have not
penetrated deep enough you know not to
the time to entitle and they feel that
you know there are much more uh
penetration to be done there so that's
that's how they plan to grow
yeah uh and now let's just see the
oh yeah another thing I would like to
highlight is that uh I keep stressing
about volume growth right and they have
had a robust volume growth for Q4 uh for
the entire year of fi 23 and that is
27.5 and this quarter if you see they've
had a volume growth of eight percent uh
like if you see from Q3 to Q4 in spite
of seasonality why I tell seasonality is
because uh you would you would know
right any kind of consumption business
especially paints businesses is kind of
related to pains business also if you
see this all of these people have the
highest revenue or the highest revenue
in a year coming from Q3 because Q3 May
uh Festival so that people tend to paint
the houses and repair things now before
Diwali I think this culture is very
prevalent in the north of India because
of that what happens the majority of
sales comes from Q3 and Q4 becomes a bit
a bit dull as comparison to Q3 because
of that seasonality factor but in spite
of that can you see her even on a
quadrant quarter they've done a eight
percent volume growth which is really
fantastic right so
now let's just see the financial
statements so the first thing first is
can you see her that the revenue has
increased right Revenue has increased on
a quarter on uh sorry Revenue has
increased 13 year on year but look what
on quarter basis it has been flat right
now I'll explain the reason why it is
flat uh before that can you see other
income has not increased not a major but
uh Pat also uh on a year on year you can
see that increase has been 137 uh I
think it has been it has increased by
137 and um where is it yeah it has been
increased uh 137 and if you see the
other thing is the um employee benefit
expenses even that has increased earlier
on your basis which is good right you
would see here The Pact again of course
um
one second yeah
yeah the reason here for the revenue can
you see her being flat on a on a quarter
on quarter basis although we've told
that the volume growth of eight percent
has been that quarter quarter but why is
it not projected in in terms of Revenue
why is that so
um remember I spoke about this reward
program uh their their Mort is this
reward program or right so what happens
is in this reward program is let me try
and explain this in a simple matter
right so let's say now I'm a I'm a
carpenter right and I go and I get a
hundred rupees worth of product right so
of course he has to he will get certain
points credited in his account right
like because he purchase let's assume
the amount of points that is credited in
his account is 10 Rupees so what happens
is this 90 rupees will go as will go
although he has given the complete
hundred Rupees to the company 90 rupees
will get registered as revenue and the
other 10 Rupees will get registered as
expenses now why this 10 gets registered
as expenses is because you know right
tomorrow you will come and they will
redeem the points right because which
means what you have to pay once he
redeems a point actually this will go to
their revenue back to the revenue so you
understand that because of this the
expense part of it or the financial
liability part of this will increase I I
don't if I'm making sense like if I've
explained it properly but yeah I I don't
know but the I just tried to explain
again I don't think I am I'm satisfied
with the explanation but here's the
thing right if I'm the Carpenter and I'm
buying a product of 100 100 bucks right
and let's say I give I I do give hundred
bucks to the company but what happens
well it is getting calculated in in uh
calculated by the company they take it
as this person has paid 90 rupees that
goes into the revenue and the 10 and the
10 Rupees will go as expenses why
because this person will come and redeem
that 10 Rupees again right after he
redeems at 10 Rupees as a point once
this point then only this will get uh go
into the revenue pack so I hope this is
clarified right now how is this
affecting here is in like I told you
remember there is a seasonality aspect
between Q3 and Q4 like I told you one is
Festival season the second thing what
happens is all these Carpenters that you
see they have migrated from different
different places during this season that
is in the January February region
January February and March season what
happens is they tend to go back to their
Villages and what happens if they're
going back to the Villages of course
they're not working right so they don't
they don't redeem the points if they're
not getting if they're not ready
Redeeming the points it it becomes still
as a part of expenses now it doesn't go
to the revenue that is why the revenue
has not increased although there has
been a volume growth of eight percent
water and water and I hope this is
understood now now the how much has been
the amount that has not been redeemed it
has been five crores so if I added five
crores here right 66.8 if I add five
crores here that redeemed points that
their points that are supposed to be
redeemed you would see that the quarter
on quarter Revenue also there will be an
increase can uh the cotton quarter also
will increase I think it will be then
how much 10K 1.8 crores so yeah so on
that basis if you see you will see that
quarter and water Revenue has increased
your own your author's Revenue has
increased other income employee benefit
has increased good thing and of course
net profit of the period if you see
right 137 percent yeah say six it's in
lacks no yeah so 6.92 lakhs to
um sorry 6.92 crores to 16 or 16.4
cruise and of course if you're not
Quantum quarter basis you will see it
has increased from 12 to uh 16 crores
the next thing we will see here is the
uh yeah the the asset liability
mismatched if you see the current asset
right 135 gross and current liability is
103 crores it is greater it's greater
than one uh so that is there uh if you
see the reserve also has increased can
you see the total Equity has increased
right Roe is also has increased because
of course
analysis Dupont analysis
turnover into asset turnover is nothing
but volume then of course your profit
margin which is your value growth and of
course your last is your uh leverage
your financial leverage asset turnover
because this time this this year they
have had an asset turnover of 8 times 8X
right so of course you would see the RO
increasing because of that the next
thing comes is profit margin yeah profit
margin you would have seen that the raw
material price of all this you know to
make all this uh adhesive they use a lot
of bam and other products now uh I think
polyvinyl polyaceted something that's
that's a chemical that they use So what
had happened again the same situation
just like the paint company because of
the coveted Supply demand issue the
price had gone up to 1.5 x and to and to
take care of the to protect your margin
what will these people do they will
increase the price and pass it on to the
uh on to the consumers so because of and
now the raw material prices come down so
because of that there is a margin
expansion that has that has happened
right
and the other one is financial leverage
I don't think this company has a lot of
financial leverage because
a lot of the times you know when you see
a company they'll have this 25 per group
rate they tell but what happens is the
Roa is hardly 15 16 so that that growth
you know it's very difficult to get that
growth it's not impossible but in order
to go to achieve that growth you know
the companies might have to take debt or
dilute equities here then that won't be
the problem because your Roe is around
um 55 right Ro is around I think 55
around that percentage so if you're
targeting a 25 growth 55 percent it is
not a I mean it's good right and also
one of the reasons the RO is so high is
because this company has so much cash
you know like they're so cash which
company
um I don't know why they have so much
cash but yeah again they've been very
slow with your progress also right if
you see if the light has expanded over
the last 65 years and if you see the way
these people have expanded right a key
planted like until now since the time of
inception till now if you see um like we
2006 May jump Euro 7000
in that uh Gujarat and you would have
seen right they've just kept increasing
the capacity then Brownfield Square
that's all they have done they haven't
opened another new plan so you can
understand they've been I think very
conservative with the whole uh with the
whole growth approach now let's see here
um
The Profit before tax has has increased
right it has come from 26 to 61 almost
2x okay compared to last year to this
year right that's one thing after adding
all your depreciation changes uh and
other things the working uh the cash
flows before your working capital also
has increased from 24 to 61 crores now
here can you see here the net cash flow
has decreased right now there's an
interesting thing that has happened here
is if I read in the Concord that the
accounting practices have changed that
in day is accounting practices and that
has changed so what because of that what
has happened is there are two two kinds
of uh when you do a fixed deposited
there are two things one is that fixed
deposits where the maturity is after 12
months and the other thing is a fixed
deposit where the maturity is between
three to 12 months right it can mature
anywhere between 3 to 12 months so those
fixed deposits those FD that you do
where the amount will get matured
between 3 to 12 months that should be
that should be considered that's cash
and cash equivalence right uh and and
not just not Current financial assets so
what has happened is because you have
had a lot of money there as a result
because of that the net cash flow uh
from operations it seems less the the
final let cash flow used in operating
activities it seems less but if if I
don't consider that whole in day eska
practice and like if I go back to the
normal accounting practices you would
see that the cash flow has increased in
fact it is 37.7 crore compared to so if
I'd say yeah uh yeah 37.7 crore so it
has increased at 2 to 37.7 so it's a big
increase you would see that the only red
flag I have is the trade receivable has
increased a lot right
uh last time uh last year same time
company 12.24 crore which means what you
are you are selling your product uh your
or your mall to the to the uh to your
dealer or your retailer whoever it is
and that person hasn't been you know
like after selling the product that cash
can question that is there that has to
come to you it it didn't come and here
the delay the time that is there you
know it has uh it has increased uh
although if I have to check the debtor
days has improved I think from 122 to
107 days I'm not sure exactly the number
but again this this is the only red flag
that I have inventory Sky increase is
not a big deal because that guy told you
they're setting up a new plan uh new
building for you know new plan for the
storage of raw materials so increase in
inventory makes sense because of that
other than that if you see there is
nothing as so in this in this uh
what is that in this company as to like
you know uh in in the in the whole cash
flow that is the only one thing uh after
that uh right there is other than that
you will see purchase or sale of fixed
assets nothing uh none of not a big item
the only thing is I could say dividend
because earlier the company was not
giving dividend I think I think over a
year back or something at that time this
was even a smaller company they weren't
doing concall I think uh and the company
and I think all we had was an annual
report as much as I remember this was
very long back and all they had was an
annual report they were a small company
they were really growing well but having
said that the only part of council was
these people were having so much cash
and they weren't giving dividend but you
would see that the salaries of you know
the top management would keep increasing
so that was kind of a thing but having
said that now we would see that they're
giving dividend also right so that's not
about your cash flow I have explained
everything you know the entire balance
sheet so the other thing is the last
thing is after the Q4 fi23 so yeah
that's the management commentary like I
told you how will the volume growth come
from you know volume growth from all the
distribution and the capex that they're
doing that's one thing uh and you know
how are we can significantly prove from
that so here what is the red flags and
the risks that I see here is one is the
promotional scheme that you're talking
about right
I I wonder I understand that you know
the Carpenters are very loyal to them
and everything but I wonder if this can
be like I know they have been running
this royalty and reward program for a
long time you know since I think 2015 or
2016. but here's the thing like I think
anybody can come and replicate this
right like even Pedialyte today has a
huge network has a huge uh active active
dealers compared to these people and
they can come and replicate this anytime
and this is another company called
nickel additives even they can do that
so I don't necessarily see this as a
mode right because anybody can come and
take this away from you and what if they
end up giving even more discounts so
that is one thing the other thing is of
course your raw material price you know
if that increases again your whole
product can come into since you know it
is very difficult here to take a price
High because if you take a price hike
here what happens is there can be where
people start to downgrade your product
so I see these two risks and the other
one thing I would like to highlight is
because these people are very small
company right I think the market cap is
hardly 15 1500 crores that's it so very
small company and even right now can you
see they're only into 12 States right
hardly into 12 States or 12 States no
only in five states are like heavily
penetrated other than that you know they
have still a lot more work to do they're
only in only in like metros and Taiwan
cities and all so here is a thing like I
I think the company can like still more
you know like penetrate into another
other states rather than just two states
uh uh the other thing is like since they
have a lot of cash right it's their cash
and cash equivalence if you see you know
they have they have a lot of cash and
their Roe is at 55 percentage you know
like so it just shows you that they can
set up another plant and you know like I
think be aggressive with the growth uh
you know just uh two states they're just
penetrating into two states you know
they can do another capex and I don't
know they can be be aggressive and
someone had spoken about this in Concord
also but uh the management was like you
know they are being aggressive because
they're going to penetrate even deeper
in the existing states that they are
there and of course they will go to two
more States because when you see the way
Pedialyte has worked over the years you
know they were quite aggressive when
they when they started their whole
distribution and the active dealers that
they're doing so that is one thing the
last thing I would like to highlight is
a management uh management management
background uh this is this is somewhat a
red flag for me because I think on two
instances in the Year 1997 and 1998 and
somewhere in 2003 and 2004 the
management the sebi had filed a case on
them telling that you know they were
involved in rigging of uh uh instruct
manipulation so I don't know as per as
to like
um I mean I don't want to go into detail
of that of course but you are I mean see
there has been instances where Market
doesn't forgive and there has been
instances where if growth is there
Market doesn't care about anything else
else also I think a classic example is
force Motors every time you know when we
come out of a deep autism Circle and and
the sales number are good or Force
Motors you would have seen it has done
probably Forex like uh so that's the
thing I just wanted to highlight this
this is like one red flag that I found
out regarding the company management you
know the background other than that it's
good to it's good to go you would see
that
um the company is great and I I don't
like if they are entering into two
states increasing the active dealership
I don't see why they can't do a 25
volume growth right it seems a bit easy
for them to do having said that yes it
would be back it would be a bit nice you
know like probably if they can increase
the uh increasing capacity uh and again
penetrate into more States like I think
I think that that's the only thing I
have to tell other than that a great
company absolutely great
um
absolutely great company that I don't
see any flaw other than this so
yeah uh all we can do is track and see
if you know if the companies delivers
the 25 volume growth that they've told
and and hopefully that 25 volume growth
gets converted into the top line also uh
because and and I and this whole reward
program think like what happened in this
quarter I hope it doesn't happen again
in the next quarter next quarter or the
coming quarters and of course let's
track and see you know if this company
does what it say it will do 25 volume
growth while maintaining and a bitter
margin of 22 to 25 yeah so having said
that thank you
thank you and uh yeah I'll see you again
uh next time have a nice day
thank you
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