Stove Kraft Ltd

Quarterly Result - Q2FY22

Stove Kraft Ltd

Consumer Durables - Domestic Appliances

Current

CMP
Rs. 1050.00
Rating:
Hold
November 02, 2021

Previous

Rating:
Buy

Stock Info

BSE
543260
NSE
STOVEKRAFT
Bloomberg
STOVEKRA:IN
Reuters
Sector
Consumer Durables - Domestic Appliances
Face Value (Rs)
10
Equity Capital (Rs cr)
33
Mkt Cap (Rs cr)
3380.22
52w H/L (Rs)
1133.70 - 406.10
Avg Daily Vol (BSE+NSE)
106,174

Shareholding Pattern

(as on 30-Sep)
%
Promoter
54.29
FIIs
9.09
DIIs
7.35
Public & Others
29.27
Source: Ace equity, StockAxis Research

Price performance

Return (%)
1m
3m
12m
Absolute
-0.92
33.55
-
Sensex
1.23
13.37
50.99
Source: Ace equity, StockAxis Research

Indexed Stock Performance

Stove Kraft Ltd Sensex
Stove Kraft Ltd
Source: Ace equity, StockAxis Research

Financial Highlights:

Particulars (Rs. in Crores) Q2FY22 Q2FY21 YoY Q1FY22 QoQ
Net Revenue from Operations 362.80 236.80 53.21% 214.20 69.37%
EBIT 35.80 31.80 12.58% 16.10 122.36%
EBIT Margin 9.87% 13.43% 7.52%
PAT 22.90 26.90 -14.87% 13.50 69.63%
PAT Margin 6.31% 11.36% 6.30%
EPS 6.93 10.87 -36.25% 4.09 69.44%

Source: Company Filings; StockAxis Research

Quarterly Result Update
Stove Kraft Limited (SKL) reported strong Q2FY22 numbers whereby revenue increased by 53% YoY to Rs 362 crores driven by growth across all channels – general trade, modern retail and e-commerce. Ebitda was up ~15% YoY however margins were down by ~360 bps 11.2% due to higher raw material costs. PAT was down by ~15% YoY to Rs 23 crores as the company has started providing for income tax after setting off accumulated losses brought forward from previous years. During the quarter, the Company introduced Distributor Management System across 100% of its outlets. This tool helps improve operations and provide effective sales & inventory management related only to Pigeon products. The Company has also focused on backward integration of the facilities which will help in reducing costs and improving efficiencies. SKL added 8,247 retail outlets in the quarter gone by. In Q2FY22, Pressure Cooker volume grew by 53% YoY, Gas Cooktop by 31% YoY, Induction Cooktop by 53% YoY, Non-stick Cookware by 14% YoY, LED by 70% YoY and Small Appliances/Mixer/Others grew by 34% YoY.

Stove Kraft

Strong distribution network and spending on advertising & marketing to aid revenue growth
SKL added 8,247 retail outlets in Q2FY22 taking the total number to 63,428 outlets as of September 2021. The company is focused on increasing distribution network across the country and bringing more customers onboard through increasing the number of retail outlets. During the quarter, the company increased spending on branding & marketing through focused and consistent initiatives to develop brand awareness. We believe these initiatives will help the company to deliver consistent growth going forward.

Key Con-call highlights:

  • Witnessing good growth across all channels. Business is moving from unorganized to organized market. Growing at a pace much higher than the industry growth rate.
  • SKL hiked prices by ~5% across the product portfolio at the beginning of Q3FY22. Did not take any price hike in Q2FY22.
  • More price increases will be taken to stabilize margins as input costs have gone up. Management stated that price gap has increased in appliances as competition has taken more price hikes than SKL.
  • Management believes that the volume growth in Q2FY22 is not sustainable. 20-25% volume growth can be achieved going forward. SKL is confident of achieving EBITDA margin guidance of 13-14% as they are focusing more on backward integration.
  • The rate of tax for FY22 will be 14%. From FY23 onwards, the normal tax rate of ~25% will be applicable.
  • The company has planned Rs 50-60 crore of capex in FY22. They are also investing Rs 30 crore on solar power project in order to meet 70-75% of its total energy requirement.
  • In H1FY22, Electric Kettle recorded revenue of Rs 40 crore while Mixer Grinder clocked revenue of Rs 32 crore (+168% YoY). Chopper revenue stood at Rs 26 crore (+65% YoY) and has surprised the management given its high growth.
  • The company plans to spend 3-4% of revenue on branding & marketing going forward. Ad spends stood at Rs 15 crore in H1FY22.
  • In H1FY22, the company has added over 11,400 retail outlets, which is equal to addition of ~20% of the outlets at the end of FY21. In Pigeon, it has added 7,000 retail outlets (40% in West and 15% in South). In Pigeon LED, it has added 4,400 retail outlets (50% in South, rest in Western region, WB and UP).
  • In Q3FY22, SKL is planning to launch Plastic Storage Containers. Also, it will have a full range of LEDs (0.5watt to 50watt) from Q3FY22.

Outlook & Valuation:

We believe the company has taken the right steps towards delivering sustainable growth. It is well placed to reap the benefits of having a strong presence in Tier-2 and Tier-3 cities and is working to establish its presence in Tier-1 cities too. Focus on expanding distribution network will be the key growth driver. Based on our estimates, the stock is currently trading at ~24x FY23 EPS and we maintain Hold rating for the company.

Quarterly Financials

Particulars (Rs. in Crores) Q2FY22 Q2FY21 YoY Q1FY22 QoQ
Revenue from Operations 362.80 236.80 53.21% 214.20 69.37%
COGS 246.00 153.40 140.80
Gross Profit 116.80 83.40 40.05% 73.40 59.13%
Gross Margin (%) 32.19% 35.22% 34.27%
Employee Benefit Expenses 30.30 20.30 23.80
Other Expenses 45.90 27.90 29.40
EBITDA 40.60 35.20 15.34% 20.20 100.99%
EBITDA Margin (%) 11.19% 14.86% 9.43%
Depreciation 4.80 3.40 4.10
EBIT 35.80 31.80 12.58% 16.10 122.36%
EBIT Margin (%) 9.87% 13.43% 7.52%
Finance Cost 3.90 5.40 3.00
Oher Income 0.10 0.50 0.40
Profit Before Exceptional Items & Tax 32.00 26.90 13.50
Exceptional Items - - -
Profit Before Tax 32.00 26.90 18.96% 13.50 137.04%
Tax 9.10 - -
Effective Tax Rate (%) 28.44% 0.00% 0.00%
Profit After Tax 22.90 26.90 -14.87% 13.50 69.63%
PAT Margin (%) 6.31% 11.36% 6.30%
Other Comprehensive Income -0.30 1.30 -0.20
Total Comprehensive Income 22.60 28.20 13.30
Earnings Per Share (Rs.) 6.93 10.87 -36.25% 4.09 69.44%

Source: Company Filings; StockAxis Research

Consolidated Financial statements

Profit & Loss statement

Yr End March (Rs Cr) 2019 2020 2021 2022E 2023E
Net Sales 640.90 669.90 859.00 1154.00 1419.40
Growth % 22.40% 4.50% 28.20% 34.30% 23.00%
Expenditure
Material Cost 438.70 441.90 558.20 763.90 922.60
Employee Cost 68.60 82.00 80.60 108.50 134.80
Other Expenses 103.80 112.20 106.60 152.30 181.70
EBITDA 29.80 33.80 113.50 129.20 180.30
Growth % 199.10% 13.30% 235.70% 13.90% 39.50%
EBITDA Margin 4.70% 5.00% 13.20% 11.20% 12.70%
Depreciation & Amortization 12.40 12.40 14.30 17.30 20.70
EBIT 17.40 21.40 99.20 112.00 159.60
EBIT Margin % 2.70% 3.20% 11.50% 9.70% 11.20%
Other Income 1.70 3.10 1.50 5.00 10.00
Interest & Finance Charges 17.90 20.90 19.20 2.50 1.70
Profit Before Tax - Before Exceptional 1.10 3.50 81.50 114.50 167.90
Profit Before Tax 1.10 3.50 81.50 114.50 167.90
Tax Expense 0.50 0.40 - 16.00 42.00
Effective Tax rate 43.50% 10.30% 0.00% 14.00% 25.00%
Exceptional Items - - - - -
Net Profit 0.60 3.20 81.50 98.50 125.90
Growth % -105.00% 399.40% 2468.80% 20.90% 27.90%
Net Profit Margin 0.10% 0.50% 9.50% 8.50% 8.90%
Consolidated Net Profit 0.60 3.20 81.50 98.50 125.90
Growth % -105.00% 397.80% 2476.90% 20.90% 27.90%
Net Profit Margin after MI 0.10% 0.50% 9.50% 8.50% 8.90%

Balance Sheet

Yr End March (Rs Cr) 2019 2020 2021 2022E 2023E
Share Capital 24.70 24.70 32.60 32.60 32.60
Total Reserves -87.30 -85.80 267.10 365.60 491.60
Shareholders' Funds -62.40 -60.00 301.40 399.90 525.90
Minority Interest 0.20 0.20 - - -
Non Current Liabilities
Long Term Burrowing 210.00 204.80 20.70 0.20 -4.80
Deferred Tax Assets / Liabilities - - - - -
Long Term Provisions 4.60 6.30 7.20 5.00 4.90
Current Liabilities
Short Term Borrowings 99.90 122.10 29.80 29.80 29.80
Trade Payables 134.10 150.90 176.60 198.50 253.80
Other Current Liabilities 29.20 34.30 14.80 10.00 10.00
Short Term Provisions 2.00 2.00 2.20 2.20 2.20
Total Equity & Liabilities 427.10 471.30 569.70 662.80 838.90
Assets
Net Block 180.50 193.20 219.60 266.90 300.20
Non Current Investments - - - - -
Long Term Loans & Advances 6.70 8.60 14.80 16.00 16.00
Current Assets
Currents Investments - - - - -
Inventories 97.40 116.60 156.00 157.20 197.40
Sundry Debtors 89.70 103.00 84.70 110.30 141.00
Cash and Bank 31.50 19.40 37.30 53.40 125.50
Short Term Loans and Advances 7.50 13.90 34.00 34.40 34.30
Total Assets 427.10 471.30 569.70 662.80 838.90

Cash Flow Statement

Yr End March (Rs Cr) 2019 2020 2021 2022E 2023E
Profit After Tax 0.60 3.20 81.50 98.50 125.90
Depreciation 12.40 12.40 14.30 17.30 20.70
Changes in Working Capital -18.00 -27.50 -8.10 -4.80 -15.70
Cash From Operating Activities 13.20 15.60 110.00 110.90 131.00
Purchase of Fixed Assets -7.40 -26.10 -63.40 -64.60 -53.90
Free Cash Flows 5.70 -10.50 46.60 46.40 77.10
Cash Flow from Investing Activities -6.80 -27.30 -66.40 -64.60 -53.90
Increase / (Decrease) in Loan Funds 40.30 16.30 -100.80 -22.40 -5.00
Equity Dividend Paid - - - - -
Cash from Financing Activities 21.80 -1.80 -29.10 -22.40 -5.00
Net Cash Inflow / Outflow 28.10 -13.50 14.40 24.00 72.10
Opening Cash & Cash Equivalents 0.40 28.50 15.00 29.50 53.40
Closing Cash & Cash Equivalent 28.50 15.00 29.50 53.40 125.50

Key Ratios

Yr End March 2019 2020 2021 2022E 2023E
Basic EPS 0.30 1.30 24.90 30.00 38.40
Diluted EPS 0.30 1.30 24.90 30.00 38.40
Cash EPS (Rs) 5.30 6.40 29.20 35.30 44.70
DPS - - - - -
Book value (Rs/share) -25.20 -24.60 92.00 122.00 160.40
ROCE (%) Post Tax 4.70% 8.50% 32.50% 25.70% 25.90%
ROE (%) -1.00% -5.30% 27.00% 24.60% 23.90%
Inventory Days 57.70 58.30 57.90 57.00 56.00
Receivable Days 48.20 52.50 39.90 40.00 40.00
Payable Days 79.50 77.70 69.60 72.00 72.00
PE 1783.70 358.30 18.30 30.40 23.80
P/BV -18.20 -18.60 5.00 7.50 5.70
EV/EBITDA 47.70 42.50 13.40 23.00 16.10
Dividend Yield (%) 0.00% 0.00% 0.00% 0.00% 0.00%
P/Sales 1.80 1.70 1.70 2.60 2.10
Net debt/Equity - - 0.00 - -
Net Debt/ EBITDA 9.70 9.40 0.10 -0.20 -0.60
Sales/Net FA (x) 3.50 3.60 4.20 4.70 5.00