Repro india limited

If you read the transcript the management has talked about setting up capacity in the South multiple times (not Chennai) and later I think they mentioned Bangalore. Previously they were talking about Chennai so looks like there has been a change in their plans possibly causing delays.

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Pramod khera :- Ingram tieup contribute to 1/3 of total BOD business!!

How to interpret this?

India Provides Good Future For Books Than Other Parts Of World

https://www.newsgram.com/india-provides-good-future-for-books/

I am posting the link of the bloomberg interview where Mr Pramod Khera mentioned about Ingram contributing 25% to 1/3rd of the BOD business and rest is from domestic books.

He mentioned in the same video that as and when they keep increasing the promotional activity for Ingram books the sales are slowly increasing. But somehow, contrary to expectations, the rapid sales growth due to Ingram did not happen as we investors expected. It is very gradual and slowly picking up. But, the sales growth is happening from tie up with domestic publishers. The sales growth is primarily again coming from front titles (rather than mid and back titles as earlier expected; primarily from Ingram) where margins are low and it seems the e-com discount war is further eroding those margins too.

It seems management is being very conservative here in not going for quick expansion in other parts of the country and probably waiting for e-com war to subside too.

Disc: invested @450 rs levels

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If i am not wrong …somewhere 700cr worth of books being imported in india at least 10% of this diverted to repro-ingram .
Then the picture wil be diffrent…what happens with that case? @kunal28parikh @suru27

I definitely agree , we should lower our projections with regards to sales and hence lowering the pat and projected growth.

Can anyone throw light on the reputation of the management ? People in the print business might know.

I thought they were making some margins in the BOD biz but Mr Khera says they are not making any great margins yet. What is the steady state margins in this BoD biz. Has he said something in this regard?

It would not have broken even yet from what I can understand . That’s why the management is not talking of margins.

I believe, as the time goes on repro will become more stronger and stronger as time passes by.
The crucial point for repro is to get the box space for as many titles as possible in Amazon and other ecom websites. For that to happen we know few factors that influence who wins the box space (may not be in exact priority order):

  1. cost of the book including shipping price: repro needs to get the strategy right first, whether to go for market share(thus revenue) growth or conservative revenue & profit growth; with the strategy in place, they will need to get the pricing algorithm right. The pricing algorithm will keep improving as repro does trial and error and finds the optimum algorithm. From video, we know that management is going for revenue growth, which will delay the breakeven time for the BOD business. This I guess is good strategy since, repro must be lowest cost operator due to the choice of having multiple types of printing capacities, especially the digital capacities.
  2. user ratings: from what we can see in Amazon, repro seems to be having very good ratings of over 98-99. Hope they keep it up as they scale up.
  3. customer location: this must be one of the important factors as it reduces shipping costs. This is where I believe repro is going too conservative for it’s own bad. By end of FY20, we will have capacities in all necessary locations like Mumbai, Delhi, bangalore, Hyderabad, Kolkata as management indicated. Then repro will gain real momentum.
  4. duration of relationship with Amazon: the older players are enjoying this advantage for right reasons, if they have good user ratings. If I am right (my wild guess), after abt 3yrs of relationship, this factor would not differentiate between older and newer sellers. So, by end f FY20, this factor too ceases to be a hurdle.

Other factors outside ecom:
A) financial position: with not so great balance sheet, repro can’t put their might behind any one major strategic decision like going for capacity expansion at multiple places, going for profit less market share growth, going for big promotional activities etc. Couple of years down, with better balance sheet, management Will be more aggressive with these initiatives.
B) like Amazon and Flipkart, repro too will go offline retail one day in limited way. This again depends on strong balance sheet.
C) with GST in, the competition intensity with unorganized should reduce as time goes on. With better terms, management can go for expansion of traditional print business in future, with exports too picking up.
D) the new focus of finding publishers pain points and suggesting solutions is very good thing. Like management says it increases customer stickyness and also more predictable business for better planning.
E) Ingram’s mid and back titles will be primary thing apart from traditional print, which will contribute to profitability and improve balance sheet strength.

Risks would be, we would be understanding strength of organized competitors and managements execution of their strategies. So far, the execution is bit slow as management’s expectations not coming very right but to give them credit they have been very flexible and adopting new strategies by finding new opportunities.

Disc: I don’t have any idea about publishing industry nor I read any books on it. These are my novice thoughts, which could be entirely wrong. Invested at 450rs.

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They have two types of digital printing One book print and short-run which is suitable for printing 30-1000 copies at a time. I remember last quarter about 35% of the BOD sales was from the one book printer which roughly coincides with the contribution from Ingram (1/3). The rest is using the digital short-run printer are you inferring/saying these are front titles? If so why are they using short run printers to print front titles won’t it be cheaper for them to use offset printing to do that given the larger scale and certainty of demand

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@Batterinram Very difficult to categorize how much of revenue is coming from what. {Ingram, Domestic} x {Front, Mid, Back}. As per management, most (or almost all) of the Ingram titles are Mid & Back titles, which would be printed on One Book Printers. Personally, I agree with you that the Ingram revenue and exclusive one book revenue would be pretty much equivalent. The exceptions being few mid Ingram titles & few mid & back domestic titles. Since these exceptions contribute very small amount, we can neglect it for now.

Coming to why management would be using digital machines for printing front titles, according my personal opinion, it is purely due to Repro’s “not so” significant market share in those front titles. The Ecom itself is tiny portion of book market (5-10%??) and Repro again is still not a significant player (if we exclude Ingram titles). As more and more offline retail shifts to Online and as Repro keeps growing its market share (by winning Box space from competition), it will be able to print more front titles in offset printing.

If the original printing of those front titles come from Repro itself, then Repro can print the extra books along with the printing done for publisher. This is the reason, I believe, the traditional print is also very important for Repro. But due to my very limited knowledge of publishing industry, I trust the management’s call on the decision of going for only select traditional business clients.

Contrary view are welcome.

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I am very surprised that there was little discussion about Rapples in the Q4 ppt and concall. There has been susbtantial jump in Rapples sales from 30cr to 67cr+ in FY18. What is the kind of margins they make in this biz? Additionally, in one of the older interviews Mr. Khera claimed that they would hit scale in BoD biz in FY18 but he is saying he is not making great margins as yet. Could we work with following EBITDA margin assumptions in the long term -

BoD - 18-25%

Traditional Print - 14-16%

RKCL – margins?? and growth expectation?

With my limited knowledge, my opinion is as below:

  1. rapples is out of focus completely. Seems the education system is not yet ready for rapples solution, probably due to costs involved (like devices etc). When management feels market is ready the will bring rapples back into focus.
  2. traditional print is the only one which will have stable revenues, stable margins and slow growth (from exports to African countries near term as long as oil stays high).
  3. BOD, nothing except decent growth in revenues (in tune of >30% you) can be expected. It will be continuously evolving. The current strategy seems to be market share gain as scale gives a huge advantage in ecom discount war. Being capital efficient, 10% initial ebitda (for 2-3 yrs) would be fine. The revenue growth will be indicator of management execution.
    Disc: invested @450 levels. Biased opinion.

@GSrikan - Do you know how much of their revenues come from Africa? Please let me know. Thanks!

Am seeing a spike in Exports to Africa for “Books, Publications and Printing” category in the recent months driven by Ethiopia and Nigeria mainly. Does Repro export to these countries?

Repro shares has gone up 3 times in last four years.However the profit has halved and sales has decreased .I am not sure whats driving the shares price higher but the margin of safety does not seem there at current price. A publishing business at 50 P/E has very less margin of safety.Its not debt free business either.

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@phreakv6 Repro used to have very good export market especially to Nigeria. Once the oil went down these African countries currencies went down and there was crunch off foriegn currency. Management has been focusing on those receivables since last 5yrs slowly. Recently they written off 17cr (don’t remember the figure) bad debt which were provided for.

Now they are focusing on export orders backed by letter of credit. They are focusing on Western clients who have branches over there in African countries.

The exports were profitable than domestic business. The exports are now, if I am right, are no more than 50cr/yr out of 230 cr FY18. Management has been optimistic recently, not too much. Repro’s primary focus is BOD only. The current traditional print capacity is max 400 cr. Out of that they are using some capacity for ecom too for pre printing front titles.

I don’t think export jump is much beneficial for repro at these valuations. May be repro share price is holding up due anticipated jump in exports.

May be the other exporters are doing risky exports again (pure guess). Assuming, you may not be following repro business keenly earlier, repro is transforming into > 120 day receivable days traditional print business to close negative working capital e com business. Apologies for unsolicited answer here.

Disclosure: invested @450 levels

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With rising crude, they ve an option to do traditional export business but when I asked during concall,they said they wont be doing it n they would like to focus on BOD. So, i think worst case margins should be better than traditional business which they ve said earlier. FY18 AR may give some hint on projections

Rapples wont conyribute to even 15% of valuation i think . From where you got rapples revenue nos?

I am also surprised with …

"I am very surprised that there was little discussion about Rapples in the Q4 ppt and concall. There has been susbtantial jump in Rapples sales from 30cr to 67cr+ in FY18. "

From where this 67cr figure came!!!