Attended the kitex AGM yesterday.
It was good to see kitex add a second level of management for the first time
Mr.Suryanarayan is elected as the Vice President of Corporate Strategy. He will be looking after the investor relations , can be a good pint of contact for all the shareholders.
Mr. Harkrish Singh Sodhi is elected as the Vice President of Business Operations. He had earlier worked with Kitex in 2013 -14 as head of business operations. He has been appointed as Mr. Sabu Jacob would like to focus more of his time on future growth strategies – investments and expansion.
The AGM started with a normal corporate presentation by Mr. Suryanarayan. The presentation incorporated financial performance of the company till now , future growth plans and projections. The ppt has been attached here.
Revenue guidance for the year FY20 has been given as 730 cr, however Mr Sabu in his speech later added that he is confident of crossing 810 cr(his projection last year) . The order book for this year is very strong.
After the presentation there was a Q & A session. The following things were discussed –
Our present capacity is 4.5 lac pieces per day. our capacity has increased by 3.5 lac pieces a day. This has mainly been due to better operational efficiencies. They explained that earlier we used to have 8 hours of inventory in the assembly line, that has been replaced by having 32- 40 hours of inventory in each assembly line. This eliminates the bottlenecks in the system and has been beneficial for improving their capacities. Each line is 30-32 machines. . Right throughout the process we need to keep higher inventory to achieve higher outputs through this method We have also added additional people at the bottlenecks in each line. So without capital investment we increased productivity.
Our competitors have similar inventory levels with lower margins.
We will be also outsourcing some production to achieve the 810 cr revenue target.
Our payments made to sister concern ( KCL) for processing work is much lower than other companies.
After Jockey and TRU issue we are selective about selecting customers.
Our receivable position going up is not an abnormality. The nature of industry has changed as such. As far as Toys R Us is concerned, we have only 1.4 million dollars remaining. The claims of 9.7 million dollar should not be viewed as receivable. Basically out of 165 cr only around 10 cr is from Toys R Us pending. Anything received above that will be extra. Kitex USA and Gerber our biggest debtors. Logic for selling through Kitex USA is value addition to customers, instead of FOB we are giving LDP.
We also do this as we get a percentage of profit in Kitex USA, as we are trying to build our brand over there.
With little star and Lamaze we are doing well . We might be able to get into Walmart stores by next year. We have entered into Walmart , Amazon and Target websites. Getting into Walmart stores will be a huge step forward.
Chinese players are our major competitors. US China trade war is benefiting us. But they also said they operate in a specialized segment. They are many safety regulations in this segment. So they see themselves insinuated from global conditions. For us only issue is capacity. Never faced demand problems.
Last 27 years we are taking every efforts to grow the company. last 2 years losing the jockey business along with Toys R Us has affected growth. Otherwise we are on the right track. We have lots of orders to execute before March 31st. Demand side there is no problem. But we are struggling with production (capacity)issues. We have reached no.2 position in infant wear industry.
Although our buyers appreciate our product quality, our infrastructure we do not get any credit for it. They pay the same price as they pay Chinese players. Only advantage is that if we come up with more capacity it will be consumed quickly by our buyers.
50 cr land purchased last year. Difficult to get big plots in Kerala. Got 4 – 5 plots for this money.
100 cr roughly stuck with government authorities .
11 cr is stuck with textile ministry for 3-4 years. expect this to come within next few months.
44 cr is stuck with GST & VAT department . Accumluating since 4 years.
33 cr is stuck in MEIS. Claims have been submitted, part received of it has been received.
Buyback – management does not plan for any buyback as they feel they will need funds for aggressive investment planned ahead.
Will be planning investor meetings regularly.
Will be planning to make around 60 mother units as a part of expansion plans. Will be employing 300 people per ahead in these mother units . Have one of this mother units starting this December.
Plan to invest 910 cr in a span of 5-6 years.
Walmart, Target , Gerber, Mother Care- our top customers.
Disc - Invested