Premco, poor results continues in the series for the company. Dividend declared for quarter also declined to Rs 2 per share during Q3FY24 as against Rs 6 per share declared in Q3FY23. The decline in dividend declared is major concern for me.

During the quarter. while consolidated profit declined by 53% yoy, standalone profit declined by more than 61%. So, India business continue to adversely affected. Even depreciation charge for quarter is almost same last year in standalone business, hence assume that company has not commericalised new plant. When the new capacity would be operational, the company performance is expected to remain lower than normal level of profitability due negative operating leverage.

Overall, no positive take away from the results in my view. Proftiablity in Vietnam and India under pressure, No update on capex commencement, Major drop in Dividend, No attempt from management for NSE listing. Critically evaluating my investment in company.

Disclosure: My view may be biased due to my investment in the company. I may increase/decrease/exit my holding in the company without informing forum. I am not SEBI registered advisor. I am not recommening any investment action in the company. Reader shall do his/her own due diligence/consult financial advisor before making any investment decision.

People interested to know – I got around 50% of money invested using loan against security (in my case mutual funds) at 9%. FYI.

I listened to Sharda Motors q3 fy 24 concall. As usual it’s very difficult to expect easy to understand and forthcoming answers from management. Management is very conservative in answering questions in concalls. But whatever I gathered and deduced from concall is as follows…

Since past 2 quarters company has been benefitting from change in RDE emission norms for Passenger vehicles. The TREM emission norms have been pushed to fy 2027.

On being asked about the growth in company per quarter, management says a rough estimate can be made by looking at Gross profit gorwth. On calculating the gross profit, for which I used sales minus raw material numbers, I get figures of 139 , 131, 144, 137, 175, 172 ( all figures in crores) for last six quarters. It is a clear indication of benefits since past two quarters. On being asked how long this benefit can last, management was largely evasive.

The above issue came into play because the newer products sold do not account for Catalyst ( a part within the emission product chain) as it is not used in design of products for latest emission norms. And earlier too, Catalyst was only a pass through part for the company, not accounting for any margin. So minus the Catalyst, the sales amount shows decline but this calculation does not reflect the true picture.

e.g An emission product which earlier used to cost say Rs 120, ( with cost of catalyst being rs 20) will now cost 100 rs. If profit on each product remains same at rs 12, then earlier profit margin used to be 10% (12 % 120 multiplied by 100) but with the newer product (minus catalyst) margin is 12% ( 12 % 100 multipled by 100)

Near term growth tailwind is the new RDE norms based products. As the product matures its contribution to sales and margins improve. How long this lasts is anybody’s guess. Management is very reticent about this question.

The other growth driver is exports. China plus one factor is playing out better than expectations of the management. From the management answers, it appears that this could play out atleast partially in FY 25.

On use of net cash on balance sheet, management says primary focus is to go for a well thought out acquisition which could aid growth. Dividend distribution policy is spelled out which stipulates payment of anything from 10 to 30% of profits as dividend according to judgement of management. A couple of times mention was made as to provide shareholder returns and that something was being thought about it. ? Buybacks besides dividends. ? ( no clarity here)

On the information about land parcel in NCR region which everyone knows has appreciated a lot in recent times, there was no information about approximate value of the land being talked about.

All in all a concall which is reminiscent of most past concalls wherein while listening you try to grasp whatever you can and after listening when you think about take home message, it remains same as before. Nothing new.

If anyone has better understanding of this company and concall, please put pen to paper and share details. I have put up whatever I have understood from a difficult to grasp concall.

Decent numbers:

PAT would have look better if exceptional loss was not there due to floods in TN.