Some updates straight from the horse’s mouth (Virat’s management) post Q2 results as updated by a friend who spoke with management:
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The reason behind sales de-growth is due to 2 months inauspicious period between July mid to September mid which comes once in 12-19 years and with no festivals/marriages etc Ghee off take was low… So sales were lower by 30-35% in Q2. This is both in AP and Orissa which was a double whammy.
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Pent up demand will be seen in Q3/Q4.
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Orissa production plant is in progress to start production by Q1 2017. The land is already procured and there is little CAPEX needed. So the incremental RoCE will be very high.
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Karnataka foray is on track through the already established Crane Betal network and the response is good.
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Management has started concentrating on Durga brand to make it a well established regional player. All the efforts will pay huge pay offs if story goes as per thesis.
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The return ratios are improving and are best in the diary sector.
In my opinion, due to better financial metrics and pristine balance sheet, sticky nature of the FMCG product, brand power, high dividend payment the company deserves better valuations.
Disclosure: I hold Virat as indicated earlier. The details are already available publicly in internet.
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