Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mallcom (India) Ltd (BOM:539400, Financial) reported an 8% year-on-year growth in operating revenue for Q1 FY25, reaching approximately INR102 crore.
- The company has commenced Phase 2 expansion at Chandipur, Ghatakpukur, which includes setting up a new unit for industrial safety shoes, expected to be completed by the end of FY25.
- Mallcom (India) Ltd (BOM:539400) received a conditional financial grant of INR7.17 crore from DPIIT for its new unit project.
- The Sanand-II project in Gujarat for manufacturing Protech workwear is progressing as per schedule, with production likely to commence by September 2024.
- The company is increasing manufacturing capacities and investing significantly in marketing and branding efforts to meet growing demand in both export and domestic markets.
Negative Points
- EBITDA margin declined from 14.92% to 13.96% year-on-year due to higher operating costs.
- Net profit remained flat year-on-year at approximately INR9 crore, indicating no significant improvement in profitability.
- The demand environment in Europe remains slow, which could impact future revenue growth.
- There is a container shortage and Red Sea crisis affecting logistics, which has led to increased costs and potential delays in shipments.
- The company faces challenges in expanding capacity to meet the growing demand, particularly in the context of the China Plus One strategy.
Q & A Highlights
Q: What is the life cycle of our products? And how frequently do we need to replace them across all categories?
A: Depending on the category, the product life cycles are different. For example, cotton gloves are replaceable almost every day, while leather gloves can last between five days to one month. Safety shoes can last from six months to a year, and garments have a similar lifespan. Disposable suits are used only once.
Q: How many distributors do we have in India? Are you planning to add more in domestic markets?
A: We have around 80 distributors in India and some in neighboring countries. Yes, we are planning to add more distributors in the domestic market.
Q: How do you see the demand environment in countries like Europe, South America, and North America?
A: The demand in Europe is still lagging, while America is showing signs of growth. South America has steady demand. Overall, the Western world is growing slowly, but we expect improvement.
Q: What is the pricing strategy in the domestic and global markets?
A: In the domestic market, prices are slightly better due to branding investments. In the international market, it is highly competitive, and we follow a different strategy, often involving private labels.
Q: What are our present capacity utilizations currently?
A: For garments and safety shoes, we are utilizing around 90% of installed capacity. For leather and nitrile gloves, it is around 70%.
Q: What will be the peak revenue potential after the West Bengal and Gujarat expansions?
A: The Gujarat expansion is expected to add around INR100 crore to the top line. The West Bengal expansion is more of a replacement, but additional capacity will be built during the year.
Q: What is the current mix between domestic and exports?
A: For the quarter, domestic sales are around 42%, and exports are 58%. We aim for a 50-50 mix by FY28.
Q: What is the competitive landscape in the international market?
A: The landscape looks bright due to geopolitical issues. The China Plus One policy is benefiting India, and FTAs with various regions are also favorable. However, capacity remains a constraint.
Q: Are your products attracting any PLI benefits?
A: We do have products eligible for PLI benefits, but we are not investing enough in plant and machinery to claim them.
Q: What is the impact of the current container shortage and Red Sea crisis on your margin or export demand?
A: There is a container crisis affecting margins slightly. Most sales are on an FOB basis, so the impact is more on the buyer, but it does affect us indirectly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
