Here are my thoughts-
On the management-guided volume growth of 60% +, I sense a few systemic concerns –
- Capacity was never utilized at these levels and might involve a lot of new learnings, constraining volume increase to such an extent.
- Availability of the suitable raw material crop – Management stressed this multiple times in the conf call and I infer that they have some concern around the suitable sources of supply.
- Do not see any solid reasons for Ready-to-Cook demand, which is 83% of the current capacity. In the conference call, the management sounded confident about better usage for the ready-to-eat demand (only 17% capacity).
On the cost side, most of the costs are variable and shall increase in line with the volume growth. Going by the conf call commentary “The current freight charges, I think we shall speak at least to the extent of USA. We have signed new service contracts between USD $14,000 to $16,000 from major destinations, compared to the previous quarter or last year’s contracts were between $9,000 to $11,000.”, I anticipate freight cost will be way higher compared to the last year.
If freight cost escalates even by 25% over the FY22’s freight cost, topline growth of up to 25% in FY23 would not change the bottom line. Anything above that might improve PAT but way lower than the sales growth.
It seems that Q1 and Q2 are their major quarters. I will be on the lookout to see how Q1 turns out.
| Subscribe To Our Free Newsletter |
