Call was add by Mr Mithun Chittilappilly MD.Key Highlights by Capital Mkt
As per the management, shorter summer, weak housing demand and uncertainty in commodity prices, all affected the overall demand of the company’s products and consumer sentiments in Q2 FY’16.Short summer resulted in lower AC sales, which affected the demand for stabilizers. Uncertain copper prices affected the wiring segment of the company. The Digital UPS demand also got affected as there were hardly any power cuts during the quarter.Gross Margins and Ebidta margins improved to around 28.7% and 8.8% respectively due to lower raw material costs.
Company continues to invest aggressively particularly in Non South Market. Advertisements and Promotions account for about 3.7% of total sales. The company continues to increase its presence in Non-South market.South market which constitute around 67% of total sales, grew by about 3% YoY to Rs 300 crore while Non South market de grew by about 4.7%.
The company was able to reduce its debt by about Rs 91 crore during the quarter. Debt Equity ratio stood at around 0.09 as on Sep’15.
The Electronics segment, which constitutes stabilizers and UPS, which contribute about 27.7% of total sales in Q2 FY’16, de-grew by 1.2% YoY. The de-growth was mainly on account of a 10% fall in sales in UPS to around Rs 48 crore YoY. Electrical which includes pumps, house wiring cable, electric water heater, fans and others, and contribute about 67% of total sales, grew by about 1%, while the new products Swithgears, Kitchen Appliances etc grew by about 4% on a lower base YoY to around Rs 21 crore.The company has launched Water heaters for markets in South and Western India
As per the management some part of the rural economy got affected in Q2, particularly the rural side which is completely dependent on Agriculture. Going forward, rural economy is expected to remain subdued as consumers are postponing their demand. However, festive season, should see some good cheer in H2 FY’16, given a low base of H2 FY’15.
Overall, management revised its net sales growth downward from earlier 15% to around 12% for FY’16. Management expects margins to be around 8-8.5%. As per the management, the festive season, the demand should be good and sentiment has already started in a positive manner.Management does not expect to spend more than Rs 20 crore on capex as most of the capex is done and now only maintenance and warehousing capex is required.
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