Release Date: June 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sky Gold Ltd (BOM:541967, Financial) reported a significant year-on-year revenue growth of 90.2% for Q4 FY24, reaching INR 513.4 crores.
- The company has a clear vision to become India's leading jewelry manufacturer, with plans to expand both domestically and internationally.
- Sky Gold Ltd has made strategic acquisitions, including Starmangalsutra Private Limited and Sparkling Chains Private Limited, which are expected to contribute significantly to revenue growth.
- The company is investing in advanced manufacturing technologies and ERP systems to optimize production and improve inventory management.
- Sky Gold Ltd is focusing on increasing its export revenue share, aiming to grow it from low double digits to 30% by FY27.
Negative Points
- The company faces challenges in maintaining consistent gross margins due to product mix changes, with Q4 FY24 gross margin at 7.2%.
- Sky Gold Ltd's inventory days increased due to corporate orders received late in the quarter, indicating potential inefficiencies in inventory management.
- The company is heavily reliant on a few large corporate customers, which could pose a risk if these customers reduce their orders.
- There is significant competition in the jewelry manufacturing industry, which could impact Sky Gold Ltd's margins and market share.
- The transition to gold metal loans (GML) is still in progress, with only 7% of debt converted so far, which means the company is still incurring higher interest costs on working capital loans.
Q & A Highlights
Q: Can you elaborate on the product portfolio of the acquired entities and their margins?
A: Sky Gold manufactures casting jewelry, while Starmangalsutra focuses on mangalsutras, and Sparkling Chains produces machine-made chains. These acquisitions cover 80% of store sales, enhancing our revenue and profit potential. We aim to increase their PAT margins from 1.75% to 2.5%-3% by reducing interest costs and implementing ERP systems.
Q: What is the current capacity utilization, and what are the targets for FY25?
A: Sky Gold has a capacity of 750 kg per month, currently utilizing 350-400 kg. The acquired entities have a combined capacity of 200 kg per month. We aim to increase Sky Gold's utilization to 750 kg and the acquired entities to 300 kg per month.
Q: How will increasing competition and gold price volatility impact margins?
A: Large corporate clients prioritize unique and high-quality products over bargaining for lower margins. We plan to increase margins by offering exclusive and differentiated products, including diamond-studded jewelry, which will help us maintain profitability despite competition.
Q: What are your plans for expanding into the global market?
A: We currently supply to Dubai, Singapore, and Malaysia and are developing products for the US and European markets. We have hired an operations head with 25 years of experience in these markets and plan to launch suitable products within two quarters.
Q: What steps are being taken to reduce dependency on top customers?
A: We are diversifying our customer base by targeting mid-sized and small corporates, in addition to large ones. This strategy ensures we are not overly reliant on any single customer segment.
Q: What is the company's strategy for achieving the INR6,300 crore revenue target by FY27?
A: The growth strategy includes market share gains, new product introductions, and expanding exports. The shift from unorganized to organized markets and favorable government policies also support our growth projections.
Q: Will the company need to raise additional capital to achieve its revenue targets?
A: Currently, there is no need for external capital. We plan to utilize working capital loans and internal accruals to support our growth. Any future capital raising will be considered at an appropriate time.
Q: What is the company's approach to managing gold price volatility and its impact on turnover?
A: Our revenue targets account for an average annual gold price increase of 8%-9%. This blended target ensures we are prepared for price fluctuations.
Q: What are the company's plans for its investments and borrowings?
A: We plan to replace our equity investments with fixed deposits to secure better returns and reduce borrowing costs. This strategy will help optimize our financial structure.
Q: What is the company's focus regarding B2C and B2B segments?
A: We are focused on the B2B segment and have no plans to enter the B2C market. Our goal is to become India's largest jewelry manufacturer by leveraging our strengths in the B2B space.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
