Release Date: November 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sirca Paints India Ltd (NSE:SIRCA, Financial) reported a significant top-line growth with revenue from operations reaching INR105.5 crores, marking a 26.2% increase year-over-year.
- The company has successfully implemented a strategic price increase across its product portfolio, which is positively impacting EBITDA.
- Sirca Paints India Ltd (NSE:SIRCA) is expanding its distribution network, currently having 2,476 nodes, and is investing in marketing to strengthen brand visibility.
- The recent acquisition of Brand Welcome products has strengthened the company's product portfolio and expanded its customer base.
- The company is making strides in technology with the enhanced Sirca app, improving customer engagement and streamlining the royalty program.
Negative Points
- Heightened competition in the general polyurethane products segment is putting downward pressure on pricing, affecting profitability.
- Fluctuating raw material costs have impacted the company's profitability and margins.
- The EBITDA margin for Q2 FY '25 is 17.97%, below the guided range of 20%, due to increased dealer schemes and muted demand.
- The company faced challenges with prolonged rainy seasons affecting demand, particularly in August and September.
- Export contributions remain negligible, with only minor exports to Sri Lanka and trial shipments to Russia, indicating limited international market penetration.
Q & A Highlights
Q: Can you provide details on the revenue contribution from the new acquisition and core business for the current quarter? Also, what are your expectations for margins in the long term given the current competition?
A: The revenue contribution from the new acquisition, Welcome, was about INR11 crores, while INR96 crores came from our core PU business. Regarding margins, Q2 was challenging due to prolonged rains and muted demand, impacting margins by about 2.5% to 3%. However, with corrective measures like price increases, we expect to return to our original margin levels in the second half.
Q: What is the current marketing and branding expenditure as a percentage of revenue, and are there plans to increase this?
A: Currently, marketing and branding expenditures are between 4% to 5% of our revenue, similar to last year. We plan to increase this spend, focusing on high-end products, especially in the South and West regions, while maintaining a strong presence in the North.
Q: Could you explain the financial asset line item in the cash flow statement showing INR31 crores?
A: This is a combination of non-core interest rates and other financial assets. We had investments of approximately INR40 crores in March 2024, which reduced to INR6 crores due to the acquisition of the Welcome brand.
Q: What is your market share in the Delhi NCR region, and how does it compare to Asian Paints?
A: In Delhi NCR, we hold a market share of about 28%, while Asian Paints has around 42%. Our strategy focuses on secondary sales through contractors and architects, rather than primary sales and dumping at the retail level.
Q: Are there any updates on potential acquisitions in South India?
A: We are still in the non-binding stage for an acquisition in South India. We hope to finalize and announce this acquisition within the current financial year.
Q: What is the expected revenue from the Welcome brand for this year, given the current performance?
A: Last year, Welcome achieved sales of INR48 crores. This year, we are targeting around INR60 crores, despite challenges from extended monsoons affecting demand.
Q: Can you provide an update on your export strategy and expected revenue from international markets?
A: Currently, exports are minimal, but we have started exporting to Sri Lanka and Russia on a trial basis. We expect exports to increase significantly over the next year, with potential revenue of EUR20 million from markets like Russia, UAE, and Estonia.
Q: What are the plans for capacity expansion and associated CapEx?
A: Our current facility operates at 60% capacity, expected to reach 75% by year-end. We plan to set up a new facility in Gujarat with a CapEx of INR20-25 crores, which will add 16,000 tonnes per year capacity, supporting revenue growth up to INR400 crores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
