Thanks for the notes, Spiderman! Few questions -
1. By Tax Clarity, you mean the below issue got addressed due to GST?
Mgmt interview from 2016 mentions local sale of egg products as a challenge due to additional tax.
http://www.skmegg.com/?page=press_report
Q: Do you sell any significant volumes in India, like 3-to-5%? As yours is a 100% EOU, do you incur any additional duties while selling in India? Despite being available in India for decades, why are Indian consumers timid about these products? Do you see a breakthrough on this front?
A: Yes, we do sell in India, but not even 3% (of the overall revenue). Since we are 100% EOU we have the problem of 9% + 2 % + 1% duty issue (even though basically egg is a non-excisable product) , which makes the product expensive for the domestic consumers. If government supports us on this duty front, there will be very big demand for the liquid egg products in domestic market.
2. What were egg powder prices during last year (as you said it rose to 6 usd, so earlier it must be lower), when SKM struggled? By average you mean average for last year?
3. What sort of margin uptick can we see because of this?
4. Is this guidance? Or they mean for last 5 years? Probably is guidance!
5. This means they are targeting 500 cr topline in 5 years. Assuming existing plant would be used for domestic supply as well? They said no capex as capacity utilization is 72%. So they are positive on egg cycle to turn around in order to meet their 500 cr guidance?
6. Did they spell out any planned expenditure for B2C?
7. Text in bold below isnât clear. Can you please clarify this? By the way, being suppliers to SKM public company, the private company is making good money on behalf of the public company. Now, this private company doing publicity for the public company can be another point of contention in long run.
8. I donât consider this as negative as they have been primarily B2B. Now, they need to first test their B2C business with the help of current market presence before advertising big. I like this caution.
9. By new business you mean B2C venture? Or you mean the capex that was planned earlier to double the topline? What are the requirements that need to be fulfilled to get approved under this central government scheme? Also, what will be the maintenance and up-gradation capex? I suppose this is for the current plant? Some de-bottlenecking?
10. Anybody living in or around Erode, please try SKMâs Egg cubes and post feedback to the forum.
Thanks Spiderman for your time and effort in attending and sharing. Itâs not easy and appreciate your spirit.
- Revenue decreased by 20% during the year and I find it odd there wasnât any explanation about that either in the AR or on the AGM. Is Management thinking itâs business as usual and doesnât merit explanation?
- Raw materials account for 90% of revenue. Wafer thin margins & the leverage the company has got is very minimal. Co consistently talk about new geographical markets, that costs substantially to set foot on. However there is no reporting by country. And every year we find new geographies getting mentioned.
- Too many group companies in similar line of business. Especially procurement and marketing via SKM Universal is tangled and murky due to lack of information. Interacted with one or two employees in the past. The work culture is such that they do not differentiate between the 2 companies. When SKM Universal comes on both ends (procurement & marketing) and margins of SKM Universal are not disclosed, canât avoid the suspicions. No efforts are taken to assuage the fact.
- Procurement was solely through SKM Universal earlier. Now going by RTP report, procurement costs given to SKM Universal has come down drastically. Itâs a material event and there is no explanation.
- Given the procurement market is unorganized (with certain funding by the company for feeds and other input costs to livestock farmers), would expect more clarity on the procurement value chain. No clarity again.
- Company talks about high margin business - read if it clicks, SKM Universal will take away the lionâs share.
Management is savvy. Choice exercised by management in disclosing certain pieces of information and not others. leads to further suspicions.
PS: No positions. Had business interactions in the past, but not now.
- Yes, now companies can claim Input Tax Credit which are using Liquid Egg as Input.
- High was 13 Dollars Avg 8 to 10 Dollars Low might be 3.5 to 4 Dollars.
- Feed is coming near to plant, transportation cost might be reduced.
- This is how business has grown in the past.
- No Capex for this year.They will think about it when demand picks up.
- Till now they spent 1 Crore on B2C, they will do it as when required.( They have FDâs )
- The procurement cost of egg is similar to NECC prices. Now B2C is small or negligible in long run SKM universal marketing company is a contention.
- They are testing waters before getting down but too much caution is a sign of worry. They are testing the product in Erode Town. this itself shows how their aggressiveness.
- Existing Equipments which are more than 15 to 20 Years old, when they install new ones surely that might increase the capacity but not too much. ( Surely it will increase by few Tons )
- I tasted it , it is similar to white egg. ( Only White eggs)
Management is listening to voice of investors, so they can change your attitude towards investors of listed entity over a period of time.
After a surge in August prices are again coming down. Until this stabilize would be difficult to protect margins.
Latest Company presentation http://www.bseindia.com/xml-data/corpfiling/AttachHis/07c352a4-77bc-49cb-b873-3aff3273eb65.pdf
Supply to domestic FMCG can bring huge opportunities.
for latest egg prices see this link
Bird flu spreads in Italy
and deals further blow to Netherlands
as Egg prices firm up in US
hi friends,
tracking from 2014, bought it at 200 levels, averaged at 55-60 level, current average is 115, think in India processed food industry is yet to take off, the next generation belongs to it. Average indians are not aware of egg powder. Egg market in India is well established and i feel braking it is tough, Creating awareness and providing value to customer is the key for company.
Whole Egg Powder prices are on rise. Egg Contamination issue is similar to Avian Flu. World Over countries have banned Netherlands egg powder due to contamination issue. Netherlands is one of the top exporter of Egg powder. If skm utilize this opportunity it can benefit a lot.
December results should be a block buster one. Due to Christmas season year end price will increase further. And we have B2C launch in all 4 southern states.
Expecting 120 soon.
Prices for dried egg products are higher for yolk and albumen, steady to slightly higher for whole, steady for blend. The undertone is steady to higher.
Offerings are mostly light. Demand remains good for yolk, moderate to fairly good on the balance. Supplies are light to very light for yolk, light to instances
moderate for other dried products. Market activity is moderate to active.
Egg powder prices have almost doubled compared to last months⌠SKM can rally any timeâŚ
Lot of accumulation gng onâŚ
if we recall in agm⌠MD shree kumar said average rates for Egg powder is around 8 to 10 dollars⌠so we should be there for good times ahead.
8-10 dollar ? per kg/ pound? how many eggs make one kg/ pound?
hatcheries business,which they sold to a pvt company owned by the promoters themselvesâŚ
they started selling branded eggs in India Again under SKM but after using all the resources for initial startup⌠the branded egg:Best egg was transferred out,These are redflags,i think.
I took an exposure to SKM some time back. Some details from a short write up I made while reading up on the company are as follows.
SKM EGG PRODUCTS
.
COMPANY INTRODUCTION
One of the largest egg processing company in Asia.
It accounts for more than 50% of total egg products exports out of India.
It has a good market share in Japan, Southeast Asia, and Far East countries.
Newer markets include Nigeria, Taiwan, Thailand, Indonesia, Russia, Malayasia.
Globally approved supplier of Heinz, Mondelez, CSM etc.
It produces all powders from eggs namely from eggwhite, yolk and full egg. It has also started production of egg liquid and egg paneer which is egg white cubes.
FINANCIALS
CMP 74 MARKET CAP 194 crores.
ST borrowings 43 crores. LT 11 lacs. Cash and equivalents 17 crores.
Promoter holding 55% , No pledging.
Brief financials
FY 16 sales 303 crores, Net profit 24.53 crores
FY 17 sales 232 crores, Net profit 2.34 crores.
Q1 fy 17 sales 41 crores, net profit 0.78 crores
Q1 fy 18 sales 78 crores, net profit 1.37 crores.
INVESTMENT THESIS
Company is a big player in egg products and is mainly into exports. It has started scratching the market in India in terms of newly launched products.
Opportunity size versus market cap (194 crores ) remains attractive.
Success of launches in Indian markets of a B2C nature remains an optionality.
Q1 FY 18 results has shown good growth in topline though margins remain under pressure. If margins were to improve then this company can provide decent returns.
Currently stock price reflects a lot of negatives and any kind of positive surprise can provide decent returns.
PS. I did not have too much idea about how the picture is going to pan out as a lot is dependent on the egg powder prices prevalent in the target markets. But the technical picture with very good consolidation between 70-80 and a subsequent breakout and consolidation above this zone helped my conviction and I added up to my position.
This is not a recommendation and anyone contemplating a position should do their own due diligence. I am not a SEBI registered or otherwise investment advisor.
In my opinion, the company has a strong moat as new entrant entering into this industry is very difficult. A new entrant has to obtain numerous stringent statutory approvals in the exporting countries.
Also, the company has strong egg sourcing from the villagesâŚwhich is a tremendous job by the company.
With such a huge market, necessary approvals and good sourcing of eggs, I expected great numbers when I first looked into. However disappointed.
Is there any chance of under reporting?
Shell egg demand is on the rise as the holiday baking demand season is underway. Wholesale price levels are posting daily increases on light to moderate offerings. Supplies are sufficient for needs while trading is moderate to active. Breaking stock prices are steady for light to moderate offerings and supplies, trading is moderate. The preliminary sample of featuring by retail outlets indicates a decline in activity as retailers focus on specialty types in their ads. The average ad price is unchanged. Shell egg ads are breaking in store circulars across the country but retailers are focusing more of their features on specialty shell eggs rather than conventional. This should change into the next week as the holiday period approaches
From the both data we can assume from mid of nov to dec the egg prices will USA will go up minimum 50 percent since the inventory is low, there will be acute shortage during festival season.
December qtr results will be a bumper one expecting 150 soon
I am from the same location of the company. I am holding the stock from 15 and havenât sold even at 220 due to the trust on their business. It is a positive move on the introduction of their products (Egg cube and Egg Paneer) in domestic sales.
Currently their products is know to the shareholders and few other. So the company should take the next step to make it reach to all the people. Soon expecting it to be as like VenkysâŚ
Q2 result for 2017 is about to be released on 13th November and hope their numbers should be good and make the investors cheer with upward price movementâŚ
Suzuki and ISE Japan to enter Indian Egg and Egg Processing market.