|Mithun Chittilappilly, Managing Director addressed the call.
The company has comprehensive portfolio catering to the mass consumption market
Electronics- Stabilizers, UPS and Digital UPS
Electricals -Pumps, House Wiring and Industrial Cables, Electric Water Heaters, Fans
Other product include Solar Water Heaters, Induction cooktops, Switchgears
Sales grew 43% to Rs 348.11 crore driven by broad-based growth across Electronics and Electricals product categories. Non-south expansion continues at a faster rate (up 47%) contributing to 23% of the total turnover, while it consolidates stronghold in the South market (up 40%).
PAT grew 23% to Rs 15.35 crore.
Electronic segment grew 47% and electrical segment grew 40%.
UPS, electric water heater and wires grew 57%.
Voltage stabilizer grew 22%.
LT cable segment grew by 32%, Pump by 36%, Electric fan by 29% to Rs 13.9 crore, Solar water heater by only 10% due to supply constrains.
Expansion of warehousing facilities/sales offices and accelerated investments in new product development led to profit margins dipping to 7.8% from 9.5% in Q3 FY12.
Profit margins of stabilizer fell from 16.6% to 11.7% largely due to durable sales not picking up at all in the entire quarter. Volume was up mainly due to doling out of excessive discounts.
Consumer durable sales are down due to very weak sentiments, high interest rates and high inflation. The company does not see sentiments improving unless interest rates and inflation fall. The company is depending on summer product sales to drive growth in the coming period.
Expects stabilizers to recover next quarter onwards except for places like Tamil Nadu and Andhra Pradesh.
Wire has grown by 39% to around Rs 100 crore. The company is setting up a new plant which will increase the capacity by 60-70%. Now wire segment is operating at 100% capacity.
In line with its commitment at the beginning of the year, it has continued to make significant investments in market visibility and brand building resulting in increased advertisement expenditure. This quarter, in order to reap the benefit of festive demand, it stepped up the momentum of advertising spend.
Induction cooktops was launched in the Karnataka market this quarter.
It is gross margins of 35-40% in Induction Cooker and Switchgears & DBs.The management is expecting revenues of Rs. 15 crore in each of these segments in FY2013.
Products will be extended into other Southern markets in a phased manner.
The company increased ad expenditure this quarter at 4.5% of revenues (Rs 16 crore) versus 4.1% in Q3 FY12 to capture festive demand.
The total ad expenditure for the year will be at 3.5-4% of the total revenues.
Switchgears and induction cooktops which were launched recently have received a good response and the company will be launching them in other markets in a phased manner. The company also intends to launch Mixer Grinders during the first quarter of the next fiscal year.
Given the strong performance reported thus far the management is confident of achieving topline expectations of over 35% growth for FY2013 at stable margins of 9.5-10%.
The outlook going forward is extremely robust as it derives the benefit of the continuing power deficit in South India as well as the boom in the residential market there. Further, it will obtain operating leverage from investments made in the non-South branches as they gain scale.
The company expects that the household consumption market will continue to grow at a significant pace over the next five years.
The company has invested in a strong distribution network and currently has 28 branches nationwide and over 230 distributors, 2500 channel partners and 13,000 retailers.
It is expanding towards a pan India presence. It has significant investments committed towards aggressive expansion in non-South markets.
The company has invested significantly towards establishing strong dealer network in non-South markets over the last 3 years. Average revenue per branch in non-South markets is substantially lower than that in South markets and this provides significant scope for expansion of business on existing investments.
The company has increased market share across all product lines. It has leadership position in its flagship product, voltage stabilizers, with 20% market share. It is rapidly expanding market share in the non-South markets.
Revenues and PAT have grown at a CAGR of 38% and 37% between FY08-FY12.
It has witnessed significant expansion in return ratios over the last four years; ROE at 24% and ROCE at 21% for FY2012.
The company is seeing strong demand outlook.
Strong demand outlook. It expects the household consumption to grow at a significant pace over the next five years. Continuing power deficit in South India will augment sales of Stabilizers, UPS and Inverters. The company hopes to capitalize on the boom in residential real estate markets in South India.
The management hopes to lower the cash conversion cycle through vendor financing, resulting in significant improvement in working capital. It target is to reduce it by 20 days each year over the next couple of years.
Expects EBIDTA margins to be at 9-9.5% going forward