From MD speech it’s clear that SKM has no competitors in India. If these products are successful it ll change the fortunes of this company… A pan India presence can be the ultimate game changer. Hoping for the best turnout over the next couple of years
On the face of it, Q4 results look disappointing. However, when we get into the depth of each figure, it looks like the company is making a deliberate attempt to make its number look disappointing by re-grouping & stating numbers without providing any explanation in the notes. More credibility is for Standalone numbers as the Consolidated numbers basically include numbers for subsidiaries in Japan, Europe & Russia. They have margins to manage their expenses and some surplus. The numbers of that will make more sense in Annual Report. Purchase of Stock-in Trade is a mystery. If we look at FY 16-17 Annual Report on page 65 and note 12 on page 72, the figure is just 3.91 Crores and it only mentions Customs clearance & logistics expenses. I fail to understand the logic in showing Customs Clearance & Forwarding Charges of Russia Branch as Purchase of Stock in trade. However, if we look at this Q4 results, the Purchase of Stock in trade for last Financial year (FY 16-17) is shown as 15.51 Crores. The notes fail to mention anything about how are the numbers regrouped to change the Annual Report figure from 3.91 crores to 15.51 crores. The figure for current year is 62 Crores. Is it that the company is getting the B2C goods manufactured from private entities for sale in Indian Market? There is no break-up for Other Income. So we do not know how much of MEIS & State Subsidies have been accounted for and how much is held back for bringing on book in the next year. Even after this, the company has reported highest ever Annual revenue of 299 Crores. The earliest best was 287 crores in 2014-15. Working Capital Cycle has improved drastically. Inventory has come down from 80 Days last year to 50 days. Receivables remain steady as 21 days and payables has come down from 22 days to 20 days. So Net working capital cycle has come down from 86 Days last year to 51 Days now. A reduction of 35 days. This is reflected in low Interest outgo for the quarter. Tax payment as percentage of PBT stands at 77%, if we include differed tax. If we look at only current year tax, it stands at 42%. Contingent Liability has come down from 4.51 Crores to 3.30 Crores. This is the lowest since FY 2012-13. So the company is cleaning up its Balance Sheet. All in all, we could reiterate, the company is making a deliberate attempt to make numbers appear weaker than they actually are.
May be the management wants proxies to accumulate at lower levels? How do we get the management to answer the profit sharing ratio for the value added products in domestic market?
Some quick thoughts from the FY18 annual report:
- MD&CEO hiking compensation to Rs 13.5 L/ month - seems excessive in a down cycle
- I couldn’t find a mention of the B2C business or the brand “Best” at all in the AR.
- Interesting to see Madhu Kela’s Singularity Ventures has picked a 0.5% stake in the Company
- The big jumps in sales (stand alone) have come from India (~3x from 30 cr to 88 cr), Russia (~1.5x from 32 to 44 cr) & Europe (~3x from 7 cr to 21 cr). Japan was flat - MD&A says reentering Korean market now as well as in Africa
- Related party transactions continue to be difficult to understand (for me at least)
- Subsidies (classified as other income) upto Rs 9.4 cr from 9 cr. Not sure who the subsidy is from and for what.
Good snapshot on the company. B2C is where the company will be focusing. Company is betting on Egg White Cubes to be a game changer. Doing business in Japan, Russia and Europe is tough, competitive and unpredictable.
When you mean company is it skm egg or best egg ?
Why egg white is not listed as a product on the skmegg company page ?
I mean the company SKM Egg
Egg White is a recently added product, it could be listed on the SKM Egg website in the coming days.
Patience is key if you are invested in SKM. For decent gains one must be willing to wait 2-3 years for the next leg of the company’s growth.
Disclosure: Invested. Offloaded half the investment at 100+ levels and holding on the rest.
SKM Universal Marketing owns the Best brand and distribution is the understanding in this thread. This entity is related-party, promoter owned company and stands to benefit from the FMCG foray and not SKM Egg products, the listed entity which appears to be more of a contract manufacturer for SKM Universal Marketing.
SKM Egg products own less than 20% of SKM Universal Marketing. I would love to get hold of SKM Universal Marketing business as it definitely would command some sweet margin!
Also, is this why Venky’s ROCE (from screener.in) is more than that of SKM?