Som Distilleries & Breweries Limited (SDBL) Earnings Call Transcript
July 22, 2022
Earnings Call Speaker Segments
Ladies and gentlemen, good day and welcome to Som Distilleries & Breweries Limited Q1 FY 2023 Earnings Conference Call. [Operator Instructions] Joining us today on this call is Mr. Nakul Sethi, Director of Finance and Strategy. Before we begin, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risk and uncertainties. For a list of such considerations, please refer to the earnings presentation. I would now like to hand over the call to Mr. Sethi for initial comments and then we will start with an interactive question-and-answer session. Thank you and over to you, sir.
Thank you so much. Good afternoon, everyone. I would like to welcome you all on behalf of our company for our quarter one FY 2023 earnings call. Hope you are all keeping safe and healthy. Our performance during the quarter recorded many great -- ever achievement in the history of our company. We recorded best-ever quarterly volumes, revenue, EBITDA and PAT to name a few. Since the completion of our CapEx plan, this was the first season quarter that we were able to operate without any restrictions. We recorded beer volumes of 47.3 lakh cases during the quarter, resulting in total income of INR 256 crores. All our mainline brands recorded a stellar performance and it was set ever volume sales for Hunter and Power Cool brands. Our recently launched Woodpecker brand sold around 60,000 cases in Q1, which is close to about 50% of the last year's full year sales. And altogether, Hunter recorded a volume of 20 lakh cases, Black Fort and Power Pool recorded 7.2 and 19.4 lakh cases respectively during the quarter. Beer realization for the quarter was INR 506 per case compared to INR 462 in FY '22, primarily driven by higher mix of Hunter in the total volumes and the price hike which we have taken across brands. IMFL Volumes during the quarter was 1.9 lakh cases, an increase of over 160% compared to the same period last year. While the IMFL realization for the quarter was INR 791 compared to INR 775 in FY '22. The strong performance across our brands is a testament to the quality of our products. We had been successfully capturing new market share across all our markets, which indicates strong presence for our products by the consumers. The performance and market share gains are also a testament to our team's execution capability. During the quarter, we recorded an EBITDA of INR 35.9 crores with a margin of 14%, which is in line with our historic growth averages. This margin was achieved despite the prevailing inflationary conditions. During the quarter, we took price hikes across all of the markets. In addition, our focus on operational efficiency supported by peak utilization of our plants was the primary driver for the margin enhancement. Our Karnataka plant operated at peak capacity level during the quarter on an annualized basis. Both Bhopal and Orissa plants operated at unlike capacity utilization of around 70%. Our PAT for the quarter was INR 25.7 crores with a margin of 10%. The overall improvement in operating performance was the primary driver for this improvement. Our gross debt as on 30th June 2022 stood at INR 180.3 crores compared to INR 197.3 crores as on 31st March 2022. Compared to March 2022, our net debt improved by around INR 16 crores as on 30th June 22. As a result of reduction in our debt, our total debt-to-equity ratio at the end of June quarter was 0.6x compared to 0.7x in March '22. Our net debt to LTM EBITDA ratio improved significantly to 2.9x in June '22 compared to over 10x as on March '22. This improvement is a clear indicator of the balance sheet strength and robust capabilities. In addition to the favorable demand scenario, the change in excise policy and increase in the sale points particularly in MP benefited our overall performance. A case that point in MP has increased by over 3x due to sales of IMFL through IMFL stores. It will be too early to predict the exact impact from the sales that it has been just a quarter. We continue to track the development and patent closely and will update once we have better clarity in terms of benefit from the increase in the such funds. Going ahead, we expect to continue the growth momentum. In the last one year, we had been successful in enhancing our market share in all key markets and we continue to gain further to drive our volume growth. Furthermore, we also intend to increase our presence in the states of Uttar Pradesh and Delhi, which are high-growth and profitable markets. We remain focused on enhancing our utilization levels to ensure better returns on assets and strong cash flow generation. With this, we would now like to open the floor for Q&A. Thank you so much for your patience.
Thank you very much. [Operator Instructions] The first question is from the line of Pritesh Chheda from Lucky Investment Managers.
Hello, sir. Congratulations for a first clear season and good numbers. Sir, just I was trying to compare the number versus a quarter which was more clearer pre-COVID, which was the June '19 quarter for comparison purpose. Just wanted to understand on the Beer side, would we be plus some 7%, 8% in volume versus June '19? Is that reference proper? And how would have the industry been versus the June '19 base quarter? And my second question is, we are still trailing in terms of gross margin versus the June '19 quarter based on whatever cost increases that would have happened. If you could just help us understand what is the -- to what extent are we still trailing in terms of the cost increase and on the pricing increase that we have got?
See, first answering your question on the gross margin, gross margins continue to be under pressure because -- for example, we have seen that since March, there has been considerable increase in the price of Barley, as well as glass bottle and so PC boxes. So unless we have...
Quantify the price increase, Barley is I think about 30%?
See, just to give you a figure in terms of where the prices are. Yes, you can say it has risen from December, it was 13-odd to about 39.
So 30% is barley increase and glass price?
Glass price from say about INR 13 a bottle in March, it has risen to about 14.53 in June.
11%.
And I think in about December or January, it was about close to about 12.5%.
Okay.
And really, if you look at sugar also, sugar has risen from about 35.14 per kg K to about 37.7.
Okay.
So the inflationary trend in the prices of the raw materials and packing materials continues.
Okay. So what is the price hike that you have got? And what is the blended increase in the -- so can I assume that there is 12% to 15% increase in the cost, if I take Barley, glass, sugar, whatever you have mentioned. And correspondingly, what is the increase in pricing?
Pricing, it can be said, I mean for the full year, we were at INR 445 or so FY '22. And right now, quarter 1 is about INR 505.
INR 505 divided by INR 445.
You can say that a 10% blended increase. Obviously, it will also depend upon the sales mix going forward. But I mean assuming that we sell more of Hunter, you can say 10% is the...
So then why is the gross margin still trailing?
Because the costs have given -- are obviously higher than the price increase also.
And how much is the trail left? How much more pricing...
Remaining 15%, 20% cost price, 10% is the increase in prices, given 8% to 10% is still there.
Okay. And what is the performance in beer volumes on the June '19 base, if you could give that?
See, we had recorded -- just a minute?
Is it a flat volume?
I think that -- I think we had not done better than this ever in our history. So it's not a flat volume at all.
Can you give the volume growth number, sir?
Just a minute.
And correspondingly, have you gained any market I think in June '19, you wouldn't be there in Orissa, right? Or you were there in Orissa?
We were there in Orissa, we were there in Orissa, as well as in Karnataka, both these states we were there.
Okay. So versus June '19...
So we had done about 37.8 lakh cases then.
So 47 divided by 38, so you have about plus 20%? And industry would have been what?
Clearly industry per se is growing and the point is we are not concerned about weightage about the industry. The thing is that we have gained market share. So if you look at '19, '20, we were about close to about 3.5% in Karnataka for whole '19, '20. And currently, we are at about for -- I think we are at close to about 11.5% or I mean, we ended the year '21, '22 at 6.9%. And for quarter one, we ended the quarter at 11.7%.
Okay, okay.
Clearly, if you look at Orissa, '19, '20, we were at full year 8.1% of the industry. Currently, I mean '21, '22, we were at 10.9%, quarter one, we are at 12.7%.
So 13 versus 8?
Yes.
Okay. Okay. Understood, sir. And lastly, sir, this price increase, when should you get it to offset the residual impact of the RM?
See I mean the price increase we just got in April.
This 10%?
Yes.
So you need some more, right? So that will now come next year straight?
Normally, it comes in next year only.
Okay. So once a year basically before the season starts?
Yes, yes.
[Operator Instructions] The next question is from the line of Keshav Garg from CCIPL.
Sir, I wanted to understand that, sir, have we got the liquor retailing license for the whole of MP?
No.
Sir, so basically we are not in retailing, we are only in manufacturing?
Yes, yes.
Okay, sir. And sir, going ahead, sir, you think that on a quarterly basis, we can sustain the same number because your presentation says that there is some seasonality and I also understand that maybe in some beer sales war?
No, I mean in terms of -- see the quarter one is supposed to be the best quarter for beer as a industry. So obviously, we kind of -- margin or volumes can't be sustained for the rest of the year.
Sir, so any idea you would like to give us that, I mean, like going forward from second quarter onwards, what kind of top line we should expect, like say, around INR 200 crores per quarter? Is that a reasonable expectation?
We would not like to give any guidance about what -- how we are going to end the year or what the quarter growth is going to be. But we are very much confident of a good performance in the remaining 9 months of the current financial year.
Sir, and also what are your CapEx plan going forward?
Right now, we do not have any CapEx plans, but we will review the same maybe by January of next year.
[Operator Instructions]. The next question is from the line of Deepak Poddar from Sapphire Capital.
Sir, I just wanted to understand, do we have any kind of a vision for 3 years in terms of growth and margin? How do we see that over the next 3 years?
Yes, our expectation would be that we should be closer to our historical margin in the next 3 years or so. In terms of top line, we'd like to get this question apart.
Okay. And in terms of margin, you mentioned historical margin that means 17%, right?
I think I'll be more comfortable within the range of 14% to 15%.
14% to 15% historic? And that is on the annual basis your are talking about, right?
Yes, yes.
Okay. Fair enough. And sir, can you throw some light on what sort of product or any new product offering we are looking at that will drive growth maybe in FY '24 or anything on our expansion side? So any kind of color that you can provide in these lines would be...
I think our 3 brands which we sell are Millionaire brand and they are very well recognized in the market and are doing very well and are available at the various price point. So we don't think that there is a need for a new brand to be introduced any time soon.
Okay. But are we looking to expand their reach as we maybe next one to 2 years?
I had mentioned in my statement earlier, as we're looking at markets like UP, Delhi and Kerala and canteen stores could drive our growth -- to drive further growth in the next 2 to 3 years.
The next question is from the line of Kalpesh Parekh from JSN Advisors.
Heartiest congratulations on good set of numbers.
Thank you, sir.
Sir, I was just going through the presentation and as you mentioned that our focus will be on this 3 product Hunter, Black Fort and Power cool and we are quite strong in only 3 states as on today, Madhya Pradesh, Karnataka, Orissa which you are saying that we will plan -- we plan to expand to UP and other parts, Delhi and other parts. Then don't you think we'll be needing some CapEx for the same?
Yes, as of now, currently where we stand, we have got enough capacity in our Bhopal plant to reach out to UP and to Delhi.
So current utilization will be how much, say 75%, 80%?
Utilization is 70%, it was for quarter one.
Right.
But there's still enough scope for us to produce more.
Okay. So at least we will have to take this call probably a year down the line type of things like one or 2 years...
Like I previously mentioned that maybe we'll record in January of next year because UP per se is a can market, so we want to sell more in UP, we have to maybe think of a increase -- increasing our canning capacity here in Bhopal. But that is something which is not in our radar right now, maybe after about 8, 9 months we'll take a call on that.
Right. But sir, we also have this IMFL facility, so slowly, steadily should we expect more focus only on beer, I mean already it is 95%. So should we expect 100% beer only happening in coming days coming time?
Because normally we have seen that in the summer months, beer sell more, that's why the share of IMFL has gone down. But I think about we should expect in the long-term or the medium-term that we should be selling about 88% to 89% of beer and about 10%, 11% of IMFL.
Right, right. And my last question is on your pref allotment what the management has decided as on today, I mean at INR 72. So this is like -- so any specific investors you identified for them we are giving or it is like we are still evaluating?
No, this -- the money for the pref will be basically used for furthering the working capital requirement of the company because most of the states where we operate or are currently duty-paid states. So the company has to invest in the duties, excise duty before they dispatch or out from the factory So this money basically will be used for that purpose.
Okay. So it is done -- the contribution will be by promoters and from the same circle as on today?
Yes.
Okay. Wish you all the best, sir and let's catch up whenever you are in Bombay next time.
Yes, yes, sure, we'll do. Thanks.
[Operator Instructions] The next question is from the line of Tanay Shah from Dolat Capital.
Just one question from my end. Sir, hopefully, if you could just throw some light on the healthy volume recovery compared to last year. I mean how much of the growth is driven by the core MP market? And how much is from the newer market segments, if you just could bifurcate and give us some light on that, where does the growth come from?
So I mean if you look at -- I just give you an idea about the -- so about 54% of our volume has come from MP.
Okay.
Close to 26% has come from Karnataka and 15% has come from Orissa. So that makes it all together close to about, I think, 95%. 5% would be from the remaining states like Delhi, Kerala, UP and CSG.
[Operator Instructions] The next question is from the line of Mr. Aman Vij from Astute Investment Management.
Sir, my first question is if you can talk about the MP market like you had explained in Orissa and Karnataka how we have increased our market share, sir if you can talk the same for MP market?
The MP market, we are the market leader. We -- for the June quarter, we had a market share of 35% and opening of the outlets where the excise department has increased the point of sales and included the country liquor shops also for distribution has immensely helps -- the growth of the industry per se also.
How would have the industry growing in Q1 in MP?
It's grown quite well.
Any number, sir, did we gain market share or we grow as per the market only?
So I think as the industry per se has grown by about 10% and we have taken a share more than 10% because our market share was slightly less last year.
Sure. If you can briefly talk about the opportunity going forward in UP, Delhi and Kerala market, what is the current market? And in next 3 years, what kind of market share are we target to?
It's very difficult for me to give specific as to what market share we will be targeting or what we want to achieve there. But I mean they are growth markets where we want to be and they are big markets, like for example, UP is about, I think, about INR 4.5 crores to INR 5 crores case Beer market, Delhi is about INR 1.5 crore case market, so these are markets where we want to have a fixed considerable or significant presence going forward.
Sure, sure. So at least for next one, 2 years, among the 3, 4 geographies, where do you think the growth will be faster?
Yes, these 2 markets are very important for the growth of the company.
And what kind of growth are you expecting in, say...
We want to increase our market share in states where we are only doing well like Orissa and Karnataka and MP.
[Operator Instructions] The next question is from the line of Krishna, Individual Investor.
Hello?
Go ahead, sir, you are audible.
Yes, can you share the revenue mix for the last year state wise as you just mentioned for the June quarter.
Sorry?
Can you share the revenue mix for the beer segment state wise, as you just shared for the June?
We normally don't share the revenue mix state wise.
No, like you said that you had 54% volume from MP, so last year how much volume would be from MP?
That's what I said, we normally don't share.
Okay. Okay. No issues and that's it from my side.
Thank you. [Operator Instructions] As there are no further questions, I now hand the conference to the management for closing comments. Nakul sir, would you like to give any closing comments?
Yes, yes, sure. I would -- thank you all for sharing your time and joining this call. We are very confident of the future going forward. And hopefully, we should do very well in the coming short to medium term. Thank you so much.
Thank you very much. On behalf of Som Distilleries & Breweries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.
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