Gopal Snacks Limited (GOPAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Gopal Snacks Q1 FY '27 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Sanjay Manyal from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. We would like to thank the management of Gopal Snacks for providing DAM Capital with the opportunity to host Q1 FY '27 conference call. We have with us today Mr. Naveen Gupta, Chief Business Officer; and Mr. Rigan Raithatha, Chief Financial Officer. I'll hand over the call to the management for opening remarks. Over to you, sir.

Thank you, Sanjay. Good afternoon, and thank you for joining us for the earnings call. We hope you all had a chance to go to our investor presentation uploaded on the stock exchange. We'll share our key operating and financial highlights for the quarter ended June 30, 2026. Q1 mark bears an important quarter for Gopal Snacks as we continue to strengthen our manufacturing network and build on recovery achieved over the past year. The successful recommencement of operations at our Rakon facility, whether with continued contributions from our [indiscernible] has further enhanced our manufacturing capabilities, improved supply chain efficiencies and stage our ability to meet growing consumer demand across our key markets. We delivered our highest ever quarterly revenue from the operation of INR 422.3 crores during the quarter, reflecting a growth of 31.1% year-on-year and 3.1% sequentially. The quarter was supported by disciplined execution across operations, improved product availability and sustained demand across our product portfolio. Demand remains encouraging across our key product categories during the quarter. Our core categories continue to perform well, while the contribution from newer markets also increased, reflecting the gradual expansion of our geographical footprint with [indiscernible] now operational, we are now better positioned to improve service levels, enhance product availability and support future growth across both existing and emerging markets. The recommencement of the [indiscernible] facility also marked the completion of an important case in our operational recovery with production now consolidated from [indiscernible], we expect further improvement in manufacturing efficacy through lower logistics power and operating costs. Together with our [indiscernible] now better rallied to support long-term growth while ensuring greater flexibility across our operations. Our focus on strengthening the distribution network also continued during the quarter we expanded our distributor base to over 1,000 distributors while continuing to deepen our presence across over end focus markets, resulting to deliver sequential revenue growth for 5 [indiscernible] quarters now. At the same time, our distribution management system continues to improve inventory plans, order fulfillment and supply chain visibility helping us respond more efficiently to market demand. Alongside distribution expansion, we continue to invest in building our brand through a mix of digital and on-ground initiatives. Campaigns across OTT platforms, outdoor advertising, vehicle branding and retail visibility programs have helped tendon consumer engagement and improve and results across our key markets. Looking at our priorities remain unseen. We'll continue to focus on improving manufacturing efficiency, expanding distribution reasons strengthening our brand wise, maintaining disciplined acquisition across our business. With our manufacturing network now fully operational and a stronger distribution platform in place, we believe we are well positioned to build on current momentum, increase our guidance across existing and new markets and deliver sustainable long-term growth. I would now like to invite our Chief Financial Officer, Mr. Rigan Raithatha to share his perspective on financial performance during the quarter. Thank you.

Thank you, Naveen. Good afternoon, everyone. Let me now take you through the key financial highlights for the quarter and late 30th June 2026. As we reflect on the first quarter of FY '27 to share that the company has delivered a strong start to the year supported by improved manufacturing capability, disciplined cost management and continued operational execution. During the quarter, we recorded highest ever quarterly revenue from operation of INR 422 crores, representing 31% year-on-year and 3% sequentially. Gross profit increased to INR [indiscernible] crores with a gross margin remaining healthy at 27%. Despite a challenging quarter in terms of significant increase in raw material prices, we were able to maintain a healthy margin to [indiscernible], better product mix, increase in the prices and improved manufacturing efficiency. EBITDA for the quarter stood at INR 31.5 crores, more than doubling over the corresponding quarter of the previous year with EBITDA margin improving to 7.4% as compared to 4.7% in Q1 FY '26. The improvement in operating profitability was primarily driven by higher sales volume, better capacity utilization followed by the recommencement of the [indiscernible] facility, to remain focused on controlling operating costs. Profit before tax increased to INR 18.6 crores compared to INR 5.3 crores in the corresponding quarter of the last year, reflecting the improvement in the operating performance. As there is no exceptional items during the quarter, the PAT after tax stood at INR 12.8 crores. The previous quarter included an exceptional gain related to insurance gain and therefore, sequentially, it is not directly [indiscernible] From the operational standpoint, the recommencement of [indiscernible] being manufacturing facility and the consolidation of production from the [indiscernible] expected to improve manufacturing efficiencies to lower power and fuel transportation and operating costs. These benefits will reflect as the utilization improve over the coming quarters. Looking ahead, we remain focused on improving operational efficiencies, optimizing manufacturing costs and strengthening profitability will continue to invest in distribution expansion, technology and brand building [indiscernible] at now operational and all our manufacturing network fully stabilized, we believed company is well positioned to build on the current momentum and deliver sustainable and profitable growth in the coming quarters. Over to you, Sanjay.

[Operator Instructions] The first question is from the line of [indiscernible] from HDFC Securities.

So I want to check if you hold on to your delta INR 330 crores to INR 350 crores revenue guidance for FY '27, which you have provided in Q4. Also like how should we see the monthly run rate improving in the coming fiscal period?

Our current run rate is INR 150 crores plus. So there was a small hiccup in the month of April or [indiscernible] facility or a base, and we listed our [indiscernible]. Both these events took place in the month of April. April was a little lower. Otherwise, conceptive our run rate is INR 150 crores plus as of now. So we strongly stand by our earlier guidance given of minimum 20% growth in the financial year over last year.

Sure, sir. This is INR 150 crores is definitely encouraging. My second question is important to how are we navigating the inflationary setting like help us with the cost optimization measures and price hikes affected so far? Also, like will there be any more price hike or we look to maintain pricing in the festive period?

[indiscernible] we hope to come in Q1. I mean we have [indiscernible] that we continue to also [indiscernible] currency. We are quite confident enough that because of the strong brand [indiscernible]

Your audio is not clear.

Let me repeat. In Q1, we have taken the damage correction as well as price increase and similar things, we'll continue to do it in Q2 as well in line with whatever price of raw materials will continue to increase and to protect our profitability, we'll continue to take the necessary steps.

Nitin, let me add [indiscernible] is we have been continuously -- are continuously improving our product basket, and we will continue to do that. So in out of 7 NTIs, which are in pipeline, 5 NPIs are non-palm oil base with healthier margins and which have synergies with our existing product category, number one. So that will help us to keep our EBITDA margin improved number one. Number two is, as of now, unlike history, whereas [indiscernible] needs to gain more [indiscernible] to the consumer versus competition. As of now, we are either at par or we are giving lesser [indiscernible] versus competition. But still, we are able to maintain our revenue momentum because distribution automation is helping us a lot. Whereas the other brand are depending upon the gramic sector because they do not have any alternate. So these 2 points will keep helping us in terms of maintaining our market as well.

Sure. And how should we see the overall margin for the year, EBITDA margin?

EBITDA margin, as we guided earlier, we continue to stand with that. As we see, our EBITDA margin for the full financial year would be between 8% to 9%.

Sure. And my last question pertains to your INR 5 rescue like we have seen this [indiscernible] coming down from 80% in '21, '22 to around 60% last year. So I wanted to have a thought around like, is it a deliberate effort or like [indiscernible] because of the finance event or something else to it? Like, how should we build the INR 5 SQ for us going forward?

[indiscernible] as far as I hate continue to give us revenue as well as reasonable profitability, we continue to [indiscernible] industry takes a because of inflation going beyond [indiscernible], then we are actually seeking it spot. Our revenue is just double because number of pages will remain constant. The value will double. So it does not bother us much. INR 5-point gives us [indiscernible] have done twice in Q1.

And is there any shift in the industry [indiscernible]

Not at all visible as such [indiscernible]

Sure. So this is the shift for us only.

The next question is from the line of [indiscernible] from Antique Stockbroking.

A couple of questions from my end. So in the core market, would you -- would there be any updates that you could share about how the biweekly servicing initiative is progressing? and how is the Western portfolio performed in the core market?

So [indiscernible], when we speak, 38% of outlets are getting double service synergies. And if we come to this Western snacks category in core markets. So just give me a moment. Y-o-Y is 15% in core markets.

Just to follow up on the double coverage reached for 38% of outlets. I think it's been nearly 1.5 years since we started this initiative. So how would sort of the run rate be improving for the distributor with double coverage?

So [indiscernible] typically what happened. We started this initiative in May, June but then we had to read the call button by August because of supply chain disturbances when you create double service synergies, you have to give full basket of the product. When you create a monster, then you have to give them good as well. We took a pause and we restarted this initiative in the month of January, February this year. So the progress is very well and it varies from distributor to distributor wherever distributor is capital in terms of investment and infra, who run rate has gone up almost by 20%, 25%, whereas in a few other cases, it has gone up by [indiscernible].

Just one last question. I think you've seen an acceleration in network addition, especially in the other states, specifically [indiscernible]. So is this largely because of our third-party facilities and do you intend to continue expanding with third-party visits.

So number of distributors is across other than focused space, that is largely attributed to a leaner distribution business model, whereas we are not pressing hard for rain selling in with a smaller distributors. We try to give them only hero products, and it has nothing to do with third-party operations. Our party operation is eventually has been up in 2 of our periods, 1 in Western whereas Kashipur is contributing roughly INR 2 crores per month. And Mahindra plant that has helped us in terms of revenue in site. But it has nothing to do with distribute [indiscernible]

The next question is from the line of [indiscernible]

So yes, good to see the momentum on the sales growth coming back. First one, basically, we had increased our trade spend. We used to be at around 3.5%. So have we reduced them? Or are they select to old levels of 3.5% thereabout?

You are referring to the discounts which we are giving?

Right, right.

Yes. So it's -- the current quarter, it is 2.5%.

Okay. Okay. So despite that benefit coming in, which used to be 3.5% to now 2.5%. We see that from a margin standpoint, quarter-on-quarter, we have kind of contracted. So if you can call out like you did say that we've taken some grammage reductions and also price hikes. So if you were to add both of these factors, then what would be the effective price hike that you've taken since say, the last bad months, 5, 6-odd months. And how much more gap is left to kind of cover the branded inflation that we are seeing at a company level?

Recently, if we look at sequentially quarter, there is not much gap as far as trade discount percentage is concerned. Whatever gap is there, probably if you are looking year-on-year basis, that gap is roughly around 6.7%. If we talk about inflation to total inflation, which we [indiscernible] terms of raw material, as out of which 4.2% we have passed on to the consumers and [indiscernible] hit our P&L in the current quarter. But also probably we are taking necessary steps in terms of further damage reduction and the increase in the prices in the coming quarters.

So Q2 has seen further 100 bps addition in terms of inflation, right? That's what you're going to say?

No, it would not be 100 bps, it could be slightly lower than that.

Okay. Okay. Okay. And so of course, with this kind of revenue growth, my sense is we would have started gaining back the market share. So if you can just -- I know maybe there is no syndicated data on this, but if you can just call out like have -- in our opinion, we managed to recoup the lost market share? Or how are we trending there?

First thing, let me tell you, this is the fifth consecutive quarter with sequential growth and we have a clear road map that will continue to grow quarter after quarter from here onwards. Historically, our Q4 has been weaker than Q3 and Q1 has reached versus Q4, but we have reversed that and in last 2 quarters successfully, and we'll continue to do that. So growth drivers in Gujarat are very clear, it will be double service distribution automation, and that gives us lots of confidence now with rolling out new products. And in terms of focus and other states, it will remain footprint expansion and distribution automation. So we'll continue -- the work is behind us. This is what we can say.

Okay. Sir, when you say the distribution automation, you're basically referring to ARS and DMS?

As of now, we have started a pilot in ARS whereas our system is giving suggested PO to the distributor. So majority of automation is towards DMS as of now and DMS tracking, monitoring, followed by corrective [indiscernible] measures has states giving us results.

Okay. And then this fire loss is, I think the claim of around INR 30 crores, INR 40 crores we were expecting in Q2 of the current financial year. So is that on track? Or are we expecting some delays there?

We are expecting those things to all in Q2 [indiscernible] coming from the insurance company from the PSCs, but we are quite confident enough because whatever necessary documents are required already subjected to the insurance company, and the process is doing very strong.

Right. And just the last one. So I know you did give some indication of the guidance for the current financial year. But it looks like just to reconfirm this number, we could add roughly around INR 500 crores to INR 600 crores kind of revenues in this financial year. So we are looking at somewhere around INR 2,000 crore kind of a revenue. And margins, you said is 8% to 9%. So would that be the exit for the current financial year or for the whole financial year, you are saying it would be in the range of 8% to 9%?

So really for the full financial year in terms of top line fees, we would be ending somewhere between INR 1,800 crores to INR 1,900 crores. As far as EBITDA margin is concerned, it's between full year average in 8% to 9% and exit run rate [indiscernible]

The next question is from the line of Soham Samanta from Motilal Oswal Financial Services.

Just wanted to check, in UC market, how -- I mean, what is the growth of this quarter if you just [indiscernible]

[indiscernible]

Okay. And in the market, what are the products, the higher selling products like [indiscernible] because last time we discussed [indiscernible] is over there, which are almost one of the [indiscernible] if you can spell out for -- I mean which are the growth drivers that we are ramping [indiscernible]

[indiscernible] eroded from 2 FTEs and the numbers in terms of [indiscernible]

And the second thing is [indiscernible]. So we know that [indiscernible] we discussed with [indiscernible] working days and all. So which we are on a very good track right now if we look in calendar we had in 2026. But if you look in Napo, still, our capacity relation is less than 30%. It's been almost more than 2, 3 years. So I just wanted to understand what is the strategy during -- I mean within the [indiscernible] around the 200 kilometers area, how we are gaining the market share? Or how we are doing the distribution in this particular location?

So there is one plus and one minus point to this question on right. When we look at operational efficiencies, so we identify 559 distributors who were mapped to our Nagpur branch out of which roughly 60 distributors, we already mapped to our Morat plant because that will just benefit in terms of logistics costs. So that continues to put pressure on Asco plant in terms of lower utilization, lower capacity utilization. I look at that, when I talk about adding [indiscernible] calendar year, we are on the right track. That is lesser well our expectation in terms of building more number of [indiscernible] of 300, 400 kilometers of Napo though we got good momentum in subscriber part of [indiscernible] as well as [indiscernible] terms of number of distributor improvement. But we really keep focusing on how can we improve our number of distributor count surrounding Nagpur that capacity utilization also improved [indiscernible]

is there anything different like I mean consumer taste are some differentiate between the area or we could tap the particular product on all [indiscernible]

Yes, definitely, there are a lot of regional nuances. For example, we introduced a product called [indiscernible] years back in Maharashtra. So that's a [indiscernible] but we don't manufacture in Gujarat. And [indiscernible] we sell roughly 25,000 patterns of [indiscernible] plan in Gujarat, whereas in rest of India, we hardly tell. I mean we don't sell. It will [indiscernible]. There are a lot of regional crisis like in [indiscernible] every month, whereas in Gujarat, we just sell 4,300 rate of [indiscernible]. There are a lot of [indiscernible]

The next question is from the line of [indiscernible]

I just wanted to know on the part that this year will be doing a margin of 8% to 9%. So what is the max achievable margin we are targeting that on a sustainable basis once the Rajkot facility is fully enforced. And assuming we are fully able to pass on the prices, which the inflation would suggest [indiscernible] sustainable margins we are targeting at?

The sustainable [indiscernible] margins, which we are targeting is somewhere around 1% to 1.5%. That's what is sustainable the EBITDA margins [indiscernible]

And if I talk about it ramp up, till when do we expect it to happen, like FY '28, '29 if you can give a gradual ramp-up of the EBITDA margins?

See, it will ramp up gradually. As we say, this year, our EBITDA margins will be 8% to 9% with an exit run rate close to double digits. Similar to things will happen in the next financial year, where our exit run rate would be close to 11%. On an average out basis, if we talk about, that should come somewhere around, I would say, [indiscernible]

Okay. Makes sense. And what strategy we have in place for our core market to share because if you look at our Q-on-Q figure, we had only a flattish growth in our core market. And the main selling product or [indiscernible] so are we planning to expand the growth idea new products which are in place? Or still we have markets of [indiscernible]?

As I earlier stated on company level, our current run rate for the last 3 months has been INR 150 crores. We understand that over market on sequential basis did not grow. There was a clear reason that in April, when we had disturbance of 5, 6 working days going to that or plus plant shifting from [indiscernible] the entire INR 12 crores, INR 13 crores top line loss in the [indiscernible], the states getting [indiscernible] so now from May onwards, there is 0% disturbance in terms of operations. So that is why May and June were INR 150 crores plus INR 150 crores. And subsequently, also, we have the same run rate that as cost for market is concerned. Now since our operations are stable to micro improving outlet with double service will also double. That field will double that helps me to gain confidence that now I can roll out more number of products. This is the better margin. And this is how I can take leverage of distribution automation as well as increase in head count.

And other question is right now in Gujarat, if you have a number on what is the organized market of [indiscernible] in particular, and how is the transition taking place? Like are people switching from [indiscernible]? So if you can shed some light on it.