Release Date: May 30, 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) achieved a branded sales percentage of 41% during FY24, up from 36% in FY23, driven by rising demand in India, Middle East, and Southeast Asia.
- The company resolved supply chain issues for its garment unit, leading to higher turnover and productivity in Q4 FY24.
- Mallcom (India) Ltd (BOM:539400) commenced the second phase of expansion at Chandipur, West Bengal, setting up a new unit for manufacturing industrial safety shoes with a CapEx of INR20 crores.
- The company maintained a long-term rating of A with a stable outlook and retained its status as a three-star export house.
- Mallcom (India) Ltd (BOM:539400) reported its highest consecutive quarterly turnover of INR122 crores in Q4, resulting in a growth of almost 9% year-on-year.
Negative Points
- The company's operating revenue for FY24 showed flattish growth of almost 3% year-on-year.
- EBITDA for FY24 declined marginally by 1%, with an EBITDA margin of 13.72%.
- Net profit for FY24 was reported at INR36 crores, with an EBIT margin down to 8.63%.
- The company faces significant competition from unorganized players, which constitute 50% to 60% of the Indian market.
- Operating cash flow was lower due to increased working capital requirements, with higher inventory and debtors.
Q & A Highlights
Highlights of Mallcom (India) Ltd (BOM:539400) Q4 and FY24 Earnings Call
Q: Sir, congratulations on a decent set of numbers in a kind of a muted international environment. As I see, India has performed pretty well compared to your international operations. Sir, I would like to understand the growth. What kind of growth rate you are looking for and also your mix between India and international and also Mallcom brand and your white label thing, sir. And also a bit of margin profile with your new production facility coming up? Thank you, sir.
A: So thank you for the question. We are expecting around 15% growth for the next year. The percentage split between India and international, as well as branded versus white label, is expected to remain similar to this year, with a slight increase in white label. The margin profile is expected to be similar to this year as new products will be launched in the later half of the year.
Q: And, Rohit, did you, are you noticing a better compliance from the Indian industry in terms of their standards going forward or I think the government is tweaking labor rules and stuff like that, maybe at least in terms of safety?
A: Definitely, labor regulations are getting stricter. Both the government and larger corporations in India are pushing for higher safety standards, which is beneficial for our business.
Q: What levels of debt would you be happy with during the year and next year, sir?
A: We are not borrowing for long-term capital requirements, only for working capital. Our debt levels remain almost debt-equity neutral, and we are generating cash, so we expect similar levels going forward.
Q: On the CapEx front, you said, broadly INR38 crores we have spent and including both the units, Sanand and Ghatakpukur will be spending on the INR60 crores, right? in next year. When can we see the full benefits of all this coming in and what kind of asset turns can we do on this CapEx?
A: We have targeted INR1,000 crores by FY28. The CapEx is aimed at preparing infrastructure for future demand and consolidating our facilities. We expect a minimum 15% growth next year and aim to achieve the INR1,000 crores target by FY28.
Q: The number you stated by FY28 that will require at least 20% revenue CAGR growth. So FY26, '27 will cover for it, since you're targeting next year, 15% growth. So, is it like that?
A: Yes, the target remains. We are not changing this. We will definitely try to meet that. The growth will be back-end loaded towards the targets, with larger growth expected in FY26 and FY27.
Q: I wanted to know whether the garment supply chain issue is 100% sorted now and is that the reason for healthy revenue in Q4?
A: Yes, the supply chain issue has been completely resolved, contributing to higher turnover and productivity during Q4 FY24.
Q: What was the capacity utilization level in Q4 and the full financial year?
A: Capacity utilization varies by product category. For example, leather gloves are at 90%, garments at 20%, synthetic gloves at 20%, and safety shoes at around 80%. It remains flexible and similar across quarters.
Q: If I look at our operating cash flows over the last two years, they seem to be lower. Is this a one-off, and when do you think this will get normalized?
A: The lower operating cash flow is due to increased working capital requirements. We are investing in growth, so the cash generated is being reinvested into CapEx and working capital. This should normalize as we achieve higher turnover and growth.
Q: How is the Q1 looking for us and what's the trajectory that we're expecting from our exports going forward this year and the year ahead?
A: Q1 is looking much brighter compared to last year and last quarter. The export market is bullish, with positive developments in Europe, North America, and South America. We expect a better Q1 as compared to last year and last quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
