StoveKraft – Kitchen Appliances Company

Stove Kraft Limited (SKL) Q2 FY25 Earnings Call Summary

Key Financials

• Q2 FY25 Consolidated Revenue: INR 418 crores, a 10% YoY growth from INR 379 crores in Q2 FY24.
• Q2 FY25 EBITDA: INR 49 crores, with margins improving by 120 basis points to 10.5% compared to Q2 FY24.
• Q2 FY25 Profit After Tax: INR 16.7 crores, slightly lower than Q2 FY24 due to the notional impact of indirect lease accounting.
• H1 FY25 Consolidated Revenue: INR 732.8 crores, an 8.2% YoY growth from INR 677.5 crores in H1 FY24.
• H1 FY25 EBITDA: INR 80.7 crores, with margins at 11% compared to 9.4% in H1 FY24.
• H1 FY25 Profit After Tax: INR 24.9 crores, with margins at 3.4%.

Key Pointers

• Own Manufacturing Strategy: SKL’s strategy to establish its own manufacturing facilities has started to yield positive results, leading to enhanced operational efficiencies and improved gross margins and operating profits.
• Stable Raw Material Costs: The company benefited from stable raw material costs in Q2 FY25, contributing to margin improvement.
• Retail Expansion: SKL continues to expand its retail footprint, adding 22 new stores in Q2 FY25, reaching a total of 213 stores across 13 states and 54 cities.
• Channel Mix: The company reported double-digit growth across all major channels in Q2 FY25, indicating robust demand. The channel mix was:
  • General trade: 28%
  • E-commerce: 40%
  • Modern trade: 13%
  • Corporate Sales: 5%
  • Own Retail: 4%
• Exports: Exports constituted 10% of the company’s revenue in Q2 FY25.

Future Outlook

• Positive Demand Outlook: The company is optimistic about maintaining a strong market position, driven by the festive season, favorable economic conditions, and government policies.
• Volume and Realization Growth: The company reported growth in both volumes and realization in Q2 FY25 and expects this trend to continue.
• Quality Control Order (QCO) Advantage: The introduction of QCO for various small appliances is expected to further boost SKL’s revenue and margins as the company has already established the required manufacturing infrastructure.
• Retail Expansion: SKL plans to continue aggressively expanding its retail store network, aiming to add around 50 more stores by the end of FY25.
• EBITDA Margin Target: The company aims to achieve EBITDA margins in the range of 11% to 14% over the medium term (3-5 years) through operating leverage and improved gross margins.
• Exports Growth: SKL is working on developing new products for the export market and expects to achieve a 16-17% revenue contribution from exports with the addition of new global retail partners.

Challenges

• Working Capital Management: While working on reducing inventory and receivable days, the company saw an increase in working capital loans in H1 FY25 due to the festive season.
• Subdued Volume Growth in Certain Categories: Some product categories, such as induction cooktops and gas cooktops, experienced subdued volume growth in Q2 FY25.
• Competition: SKL faces competition from other established players in the kitchen and home appliances segment, particularly as new manufacturers emerge in response to the BIS standards and QCOs.
• Depreciation and Interest Costs: Depreciation and interest costs are expected to increase as the company continues to expand its retail store network.
• MFI Channel Slowdown: The rural MFI channel remains subdued due to pre and post-election restrictions.