Q3 FY24 Quick Notes:
Revenue and Volume Growth Potential:
Company has achieved 33% volume growth in the Q3 FY 24 and achieved 26% volume growth in 9M FY24. So, volume wise company has shown good growth and company is confident of achieving the midpoint of the Volume guidance ie 90-100 million metres given in Q2 FY24. For the 9M FY 24 company has done volume of 68.2 million metres. So if company achieves around 95 million metres approximately they will do a volume of around 26-27 million metres which is a very good number. Company is confident of achieving because there are two big seasons for the company in USA, ie Fall winter(Q2) and Spring Summer(Q4).
Even though company has shown good volume growth revenue has grown only by 10% in Q3 FY 24 as realisations dropped by 18%. Company said decrease in prices of the cotton has contributed to it and company is of view that cotton prices will remain stable and makes them competitive in the international market. Realisations will also improve in Q4 due to product mix .
Company plans to double the revenue in next 3-4 years.
Indian players have only 5-10% market share in UK and Europe. Pakistan and Bangladesh enjoy 35% market share in these areas. FTAs with UK and Europe will help in improving market share in this geography.
Capital Allocation:
No major capex in the near term, since all the capex has already been done.
Company is currently focussing on Digital Transformation in partnership with Accenture.
Company is also focussing on Sustainability by developing solar power Plant.
Company plans to become debt free in next 3-4 years.
Margin Improvement:
Company earlier addressable market size has tripled by entering into Fashion, Utility and Institutional bedding in the last 3-4 years. In FY23 19% of the sales was contributed by these segments. Company plans to increase it to 30%. All these are value added segments and will definitely improve the margin. Currently China has 50% market share in this segment. China+1 and our recent Capacity addition in Fashion Bedding Segment will help in growing market Share here.
Red Sea issue impact:
Issue is only on cost side and not on Container availability.
Shipment time increased by 12-15 days.
Company has less sales from Europe hence will be less impacted.
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