Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quarterly total income increased by 1.7% year-on-year to INR334 crores.
- Net profit for the quarter grew by 5.3% year-on-year to INR15 crores.
- E-commerce revenue surged by 161% year-on-year, now accounting for 5.5% of total revenue.
- Export revenue grew by 17.5% year-on-year, contributing 3.9% to overall revenue.
- Project Lakshya's contribution to domestic sales increased from 26% in FY24 to 31% in Q1 FY25.
Negative Points
- Volume degrowth of 5% in Q1 FY25.
- Sales were temporarily impacted due to the transition to the new SAP HANA S/4 ERP system.
- Other expenses increased slightly, attributed to subcontracting and advertisement expenses.
- Cash conversion cycle increased significantly, with a target to reduce it by 10-15 days by FY25.
- The addition of new distributors under Project Lakshya was slower than expected in Q1 FY25.
Q & A Highlights
Q: Can you provide insights on the growth in states where Project Lakshya is being implemented?
A: In Q1, Lakshya distributors saw a 14% year-on-year growth in value terms and 7% in volume terms. There is no significant margin difference between Lakshya and non-Lakshya distributors, but the organized way of working under Lakshya helps us operate more efficiently.
Q: Do you still maintain your annual revenue guidance of 12% to 13% growth for the year?
A: Yes, we are confident of achieving 12% to 13% growth this fiscal year. The demand is strong, and deeper penetration through Project Lakshya will drive growth in the upcoming quarters.
Q: What is the expected addition of distributors under Project Lakshya for this year and next year?
A: We aim to add around 70 to 80 distributors this fiscal year. By FY26, we expect Project Lakshya distributors to contribute 60% to 65% of our revenue.
Q: How are you seeing demand trends in Q2 compared to Q1?
A: Demand has been strong in Q2, with good traction in both urban and rural markets. We are seeing increased demand for economy range products in Tier 2 and Tier 3 cities.
Q: How has the competitive intensity been recently, and what differentiates Dollar Industries from its peers?
A: The competitive intensity remains high. We differentiate ourselves through brand rearchitecture, implementation of TOC programs, auto-replenishment systems, distributor management systems, and SAP S/4 HANA with production modules. These initiatives help us excel faster than our competitors.
Q: What benefits do you expect from the SAP HANA implementation?
A: SAP HANA will enhance production planning, reduce inventory levels, and improve reporting and efficiency. It integrates data from Project Lakshya, enabling precise production planning and inventory management.
Q: How are primary and secondary sales performing?
A: In areas where Project Lakshya is implemented, secondary sales are closely matched with primary sales. Auto orders are generated based on secondary sales, ensuring efficient inventory management.
Q: Are you facing any pricing pressure due to competition?
A: No, we are not experiencing significant pricing pressure. Our focus on quality and efficient inventory management helps us maintain our pricing strategy.
Q: How do you distinguish between mass product, niche economy segment, semi-premium, and premium in pricing terms?
A: Economy products have an ASP of around INR48-49, mid-premium around INR80-90, and premium (Force NXT) around INR220. The premium segment includes a blend of innerwear and athleisure products.
Q: How do you plan to sustain the high gross profit margins seen this quarter?
A: We aim to maintain gross profit margins in the range of 35% to 36% for the year. Our focus on efficient production planning and inventory management will support this target.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
