Release Date: January 29, 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 revenue growth of 72% year-on-year for Q3 FY24, reaching INR460 crores.
- The company has successfully added new clientele in both domestic and international markets, contributing to revenue growth.
- Sky Gold Ltd (BOM:541967) aims to achieve a revenue target of INR1,700 crores for FY24 and INR5,000 crores over the next three years.
- The company is focusing on expanding its international business, aiming for a 30% contribution from international markets over the next three years.
- Sky Gold Ltd (BOM:541967) has received fresh capital from preferential allotment, which has strengthened its liquidity position and improved its credit rating.
Negative Points
- EBITDA margin for Q3 FY24 decreased to 3.9% from 4.5% in Q3 FY23, indicating a decline in profitability.
- PAT margin for Q3 FY24 also decreased to 1.9% from 2.4% in Q3 FY23.
- The company is currently utilizing only 250-275 kgs per month of its 750-800 kgs per month capacity, indicating underutilization of resources.
- Sky Gold Ltd (BOM:541967) has a high debt level, which is expected to increase to INR240-250 crores in the next year.
- The company is not focusing on B2C business currently, which could limit its market reach and growth potential.
Q & A Highlights
Q: Could you please go over your annual CapEx over the next two to three years?
A: We have already done the major CapEx this year with the INR15 crores capacity shift to the new facility. In the coming years, we will add INR50 lakhs to INR1 crore in machinery per year, which will not be a major CapEx.
Q: Your Q2 investor presentation states that by the end of FY24, your capacity is 750 kgs a month. What is the current capacity utilization, and what do you see going forward in FY25-26?
A: Currently, we are producing 250-275 kgs per month. We can go up to triple capacity in 2.5 to 3 years. For FY24, we target 400-450 kgs per month, and for FY25-26, we aim to reach maximum utilization of 750 kgs.
Q: What is the channel for export? Do you sell directly to end consumers or via intermediates?
A: We export to corporates with 200-300 stores and to distributors who supply to small retailers in Gulf countries, Malaysia, and Singapore. The mix is approximately 50-50 between corporates and distributors.
Q: What will be the debt level by this year-end and next year-end? What are the plans regarding gold metal loans?
A: Currently, we use INR160 crores of net debt, which will increase to INR240-250 crores next year. We will utilize 70-80% of the GML facility, reducing our interest cost from 9.5% to 4.5%.
Q: Why is there a significant investment in the balance sheet alongside debt? How will the shift to gold metal loans affect return on capital employed?
A: The INR60-70 crores investment in blue-chip shares is collateral with banks. We will replace it with FD, reducing our cost by 0.40-0.50 basis points. This will improve our PAT margins and reduce working capital days.
Q: What is the guidance for Q4 FY24, given that December is typically the best quarter for jewelers?
A: We aim to reach INR450 crores in Q4 FY24. We have added new clients from a January exhibition, which will help drive revenues.
Q: There is a slight reduction in margins this quarter compared to last year. What should we expect going forward?
A: We are in a scaling mode, entering new clients with attractive prices. Margins will gradually improve as we increase product range and control gold loss. We target EBITDA to increase from 3.9% to 4.5-4.6%.
Q: What is the difference in margins between your domestic and international business?
A: There is a slight margin difference, with exports being slightly better than domestic.
Q: Do you see PAT margins moving to 2.5% to 3% in the next two to three years?
A: We target to reach 2.5% in three to four quarters and 3% in 1.5 to 2 years.
Q: What are your strategies to improve EBITDA margins?
A: Implementing ERP systems to track gold loss and inventory management will help. We aim to reach 4.5% EBITDA in two to three quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
