I managed to attend conf call and below are my notes. My objective is to learn more about the business model. Disc: I hold a tracking position (2% of my PF).
Added result update presentation Q2 FY16 link
http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/F38F8553_E867_4CF1_ABCB_D94584393C80_200608.pdf
Ethos: H1
41 stores: 8 summit stores, 3 duty free stores, 27 Ethos format stores, rest 3 could not capture ?
2 new stores in Mumbai:
- Mumbai international airport domestic terminal
- Taj GVK hotel
Store at Ambience mall gurgaon – very good performance.
Same store sales growth 18%.
56% increase in online leads generation.
Expenses reduced from 13.5% to 12.6%.
Advertisement / Branding initiatives: half page ads in few newspapers
Trust campaign: increase consumer awareness, receiving positive feedback.
Brand recall of Ethos is strong now as compared to last 2 years.
Inventory carrying
H1 FY16: 8.6 months
H1 FY15: 9.3 months
New initiative:
Special section in shoppers stop for premium watches. Trial basis in Mumbai and Hyderabad. This is in line with global trend of premium watch location in departmental stores
Parent business:
1. How things are shaping up next 12-18 months ?
⦁ Expect to grow 10-12% per year
⦁ Hit a bit of speed breaker due to global soft conditions
⦁ Now an indicator of strength
⦁ Domestic demand turning up
⦁ Revival expected from Q4
⦁ 10-12% growth on watch components side
Precision business:
a. Electronics & Electricals
b. Aerospace & Defense – expect to improve
c. Auto
Expect growth from 25crs to 100 crs over next 3-4 years. Average growth 30% with earnings lumpiness.
Growth much better. Aggressive plans Precision stamp -> Precision moulding.
Capital raise 30 crs – funds for expansion. Capital expenditure – engineering side.
Land in aerospace development park in Bengalore. Some capex has already started.
Ethos business:
25% growth. Offline and online combination – depends on effective logistics
Next trigger: GST
Expand portfolio of brands and products
320 employee strength in Ethos.
Trend more on digital media.
Absolute spend -> advertisement / marketing 2.2% of Ethos sales.
Same store sales growth 1Q 16%, 2Q 19% 1H 18%.
Margin contraction: overall market business has been soft.
Overall 1H better than previous year.
EBITDA margins 5% last year to 8-10% next 3-4 years
Ethos Market Analysis:
Market growth single digit, we are growing 25%. Some competitors are bleeding and we are gaining market share. Online business share set to improve.
Number of leads are increasing.
High focus on leads conversion improvement.
Capex plan 25 crs next year. KDDL will invest more in Ethos. Will strengthen equity holding in Ethos.
Pressure point on the margins – due to higher discounts offered. Increase in discount 1% lead to drop in EBITDA margin by 1.2%. Higher than budgeted consumer discounts. 1% higher than what was budgeted.
Number of watch specialists 25
Implementing a program of watch specialists: deputing then to physical stores.
Visits to website: 17 lakhs as compared to 14 lakhs last year
Leads 33000, little bit lower than last year. Focusing on quality of leads.
Conversion rate 8.1% this year as compared to 4.5 % last year. Q3 seeing a big peak.
Club Ethos membership 99800
Service & Repair watch vertical (important vertical)
Online and integrate. Looking for robust platform.
Over next 4-5 years span, premium & luxury watches 30crs a year. Plan to capture 1/3rd of this.
Packaging business – assessing whether to continue or not
ROE estimates:
a. Ethos (KDDL retail business) next 3-4 years > 20%
b. KDDL manufacturing business – already > 20%
Do customers research before buying a watch ?
– Yes if it is expensive. Active dialogue with our information centre (> 30 people)
Rationalizing brands, how do we add a new brand ?
– Check high leads. People are enquiring. Global trend.
Luxury value – making brands rare – corporate strategy. Reduce point of sales.
Top 50% online sales (10-12 brands)
Visit website: watch articles and blog
Pushing brand knowledge
Brands are embracing more online presence
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