Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sukhjit Starch & Chemicals Ltd (BOM:524542, Financial) reported a 13% increase in revenue from operations for Q2 FY25 compared to the previous year, indicating strong market performance.
- The company announced a stock split to enhance liquidity and create value for shareholders.
- There is a substantial year-on-year growth of 17% in revenue for the first half of FY25, showcasing robust financial health.
- The company has managed to sustain its margins despite rising raw material prices and limited availability.
- Sukhjit Starch & Chemicals Ltd is strategically positioned for future growth with expansion plans on track, including partial commissioning expected to begin in Q3.
Negative Points
- The company faces pricing pressures and limited availability of raw materials, which could impact future profitability.
- Despite increased sales, the company has not been able to significantly improve its profit margins over the last few quarters.
- There is a lag of 3 to 4 months in passing on increased raw material costs to customers, affecting short-term financial performance.
- The company is experiencing increased short-term borrowings due to higher inventory levels, which could affect liquidity.
- There is uncertainty regarding the timeline and specifics of the planned 1,000,000 tons per day capacity expansion.
Q & A Highlights
Q: Can you explain how Sukhjit Starch & Chemicals plans to bridge the margin gap with the industry leader through capacity expansion?
A: The company is focusing on capacity expansion, including potential greenfield projects that would be energy efficient and benefit from economies of scale. This approach aims to lower overall costs and improve margins to industry benchmarks. (Respondent: Unidentified_4)
Q: How much inventory does the company carry, and can we expect margin improvements due to inventory gains in H2?
A: The company maintains 2 to 3 months of inventory, potentially extending to 4 months. Margin improvements are expected with additional capacity and de-bottlenecking efforts nearing completion. (Respondent: Unidentified_4)
Q: What is the company's strategy regarding the FMCG and Pharma sectors, and what percentage of revenue comes from these segments?
A: While specific data is confidential, the company is leveraging its locations to address gaps in the FMCG and Pharma sectors, which are significant contributors to market expansion. (Respondent: Unidentified_4)
Q: How does Sukhjit Starch & Chemicals plan to handle the increased maize prices and ensure raw material security?
A: The company is adapting its inventory management to stabilize pricing and is exploring sustainable avenues for raw material security, including potential imports and government-supported maize cultivation. (Respondent: Unidentified_4)
Q: What are the company's plans for further capacity expansion, and how does it align with market conditions?
A: The company is evaluating both greenfield and brownfield expansions, considering market conditions and internal evaluations to ensure sustainable volume growth and competitive positioning. (Respondent: Unidentified_4)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
