My understandign was that they have always said that material costs are passed on to the customer. Thus this seems a bit odd.
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The CFO says, “Despite a 5.18% decrease in total income to ₹107.22 Crore, our strategic focus on volume growth yielded an 8.58% increase in product volumes, underscoring the resilient demand for our products.”
This is a dumb statement! It’s like saying “I made less money, but on the other hand I am proud I sold more quantity”. Well, as even a fourth grader will tell you, if you reduce prices you will sell more! It is not “…underscoring resilient demand for our products”.
An decrease in Income of 5.18% against a volume growth of 8.58% means a price drop of 12.7% per unit volume, in an inflationary environment.
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Promoters really pumped up expectations with a long term guidance and then did a block deal in Q2FY24 and sold down stake.
A cautionary tale for everyone, “Dont trust the promoters when they spin stories especially when they want to sell their own stake”
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Also puzzling is the fact that they say margin is hit due to increase in raw material costs. In the face of increase in raw material costs they had to reduce finished goods prices.
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COGS has gone up by 7%!
Rather I think this result has to do with the change in product mix. Look at the volume and value for the 2 segments in Q1FY24 and Q1FY25. A drop in volume of 5% (57% to 52%) has resulted in drop in value of 2% (53% to 51%). This indicates bimetals is a higher margin division and change in product mix is affecting the margins. Can this be the right conclusion (Bimetal having higher margin than Shunts)? It would be great if this is corroborated elsewhere.
In any case, looking forward to the concall for management insights beyond this press release commentary.
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The law of lower price => higher volumes has nothing to do with product mix. And if I get paid less while I sold more (whether 1 product or a basket); price / unit (single or blended) was reduced. That cannot happen if demand was “resilient”.
If share of one of the two reduces from 57% to 52%, it does not mean volume has dropped by 5%. Volumes could also have gone up, and the volume for the other went up faster. Similarly drop in share of value is not drop in value.
Revenues / Volumes do indicate nothing about margins. So you cannot conclude the above.
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A quick question here: company in some of the earlier calls had mentioned that Shunts revenue coming from BMS applications is quite small (from Mar-23 call) but since then some of the posts had mentioned that BMS’s contribution within shunts revenue is quite high. any one can please clarify this anamoly?
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After some more reading and speaking to some-people involved in the value chain, the understanding I have is that:
- There is a tech-edge and barriers to entry when it comes to the Auto business (as there is a long approval process and products are also more sophisticated)
- Same true for their bimetal business esp when they are supplying to the likes of Scheider etc
Though, when it comes to enery meters (and smart meters) it seems that there could be some local competition that may emerge. Also companies might still import from China as it works out to be cheaper even after duties.
Would be keen to gather thoughts from others on these.
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One promoter group (Ghumman) have transferred their shares to another promoter group (Sandhu). Is it bad or good news for the company and its shareholders?
it is irrelevant to investors…
So, management commentary indicates the Q1 margins pressure is mainly due to product mix change and lower exports. That partially confirms the above reasoning. This also indicates that the shunts business requires lot more material than bimetals hence the increased COGS. @diffsoft , What is your reading?
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Further, the geography mix is probably important to track. Exports has higher margins than domestic business in bimetals business.
Below is the snippet regarding the pricing and margins question. Evidence that bimetal business is more profitable than shunts due to consistent end consumers and not having to deal with Chinese competition which is there in shunts. On top of that, within shunts segment, there is better margin with automotive customers due to technology (slightly specialty business in shunts) vs smart meter (more like commodity business). So, another metric to track would be growth of shunts in smart meters vs automotive & other segments - this can be slightly difficult.
Overall, track exports v domestic (exports is higher margin) and product mix + growth for shunts with respect to end consumer (automotive is higher margin v smart meters)
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I don’t have any reading. My point was limited to Econ 101. If you lower prices, you will sell more quantity. Also note that my point has nothing to say on margins. It’s just a simple relationship between price and volumes. To repeat, if you lower prices you will sell more quantity.
So you can’t call that an achievement; whatever words may be used to describe it, as the CFO did - “strategic focus” / “resilient demand (really!!)” .
Everything else; like ‘we sold more in domestic’, ‘we sold more shunt / less bimetal’ etc etc are explanations for the outcome. I don’t have much to say except that we should be very careful not to mix up cause and affect / stimulus and response. For instance if my employee comes and tells me that he sold more in domestic and less as exports; then was selling more in domestic which fetches less, a stimulus (i.e. did we purposely do it to make less money? wouldn’t that be dumb) or was it a response (export demand was weak so we responded by selling more domestic to keep utilisation going). He may cloud his reasoning as well as ours by saying - “I sold more domestic because demand was high”, “this is my strategic focus” etc etc; but the real reason is that he could not sell in the export market.
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The latest Annual Report is delightful. The AI and data centre boom is a positive development for the company.
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Please explain what is their contribution to data centres?. Its fashionable to add data centre, AI, ML, hyperscaler etc in your annual report to get a higher valuations.
Looks like with EVs having fizzled out a new game is being played now.
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It’s about their contribution to switchgear, silver contacts etc. Just see the Jun 24 concall.
I’m very sure that an honest management will not fool investors by painting a rosy picture.
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And the latest FAME 3 is on the cards.
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