SOM Distilleries and Breweries Ltd
NSE:SDBL
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SOM Distilleries and Breweries Ltd
Earnings Call Analysis
Summary
Q1-2025
Despite a challenging macroeconomic environment, Som Distilleries & Breweries achieved a significant growth of 33% in total income, reaching INR 5,137 million. Beer volumes rose by 32%, and IMFL volumes by 14%, with flagship brands showing strong performance. The company reported an EBITDA of INR 648 million, with a margin of 12.6%, and a net profit of INR 376 million. The company reduced its net debt, strengthening its balance sheet. Furthermore, Som Distilleries projects an annual net sales target of INR 1,500 to INR 1,600 crores and aims for an EBITDA margin of 12% to 13% for FY '25. They plan to maintain a growth rate of 22% to 25% over the next three years.
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Ladies and gentlemen, good day, and welcome to Som Distilleries and Breweries Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Nakul Sethi, Director of Finance and Strategy of Som Distilleries and Breweries Limited. Thank you, and over to you, Mr. Sethi.
Thank you so much. Good afternoon, everyone. On behalf of the company, I extend a warm welcome to all of you for the quarter 1 FY '25 earnings call. Despite the challenging macroeconomic environment, we have commenced this fiscal year with a strong financial performance.
During the quarter, we achieved Beer volumes of 86.8 lakh cases, and 2.5 lakh cases of IMFL, resulting in a total income of INR 5,137 million, reflecting a growth of 33% over quarter 1 FY '24. Our flagship brand, Hunter, recorded a volume of 26.6 lakh cases while Black Fort and Power Cool reported volumes of 8.2 lakh and 41 lakh case respectively. Beer volumes increased by close to 32% over quarter 1 FY '24, while IMFL volume increased by 14% compared to the same period last year.
Our beer realization for the quarter was INR 550 per case compared to INR 559 in quarter 1 FY '24, influenced by higher sales of Power Cool in Madhya Pradesh and Karnataka.
IMFL realization for the quarter was INR 974 per case up from INR 760 quarter 1 FY '24. We achieved an EBITDA of INR 648 million, with a margin of 12.6%, reflecting a growth of 13% over the same period last year. Our profit before tax rose by 31% year-on-year to INR 560 million. Our net profit for the quarter was INR 376 million with a margin of 7.3% compared to a net profit of INR 337 million over the same period last year.
Beer made significant improvement in our net debt position with gross debt reducing to INR 1,560 million and net debt improving to INR 1,400 million as on 30th June 2024. This reduction has strengthened our balance sheet and underscore our strong cash [indiscernible]. We are pleased to share that we have seen outstanding market growth in various markets where we are present, further establishing us as a leader in the beer sector.
Power Cool secured its position as the second most popular and highest-selling beer in Karnataka, while Hunter emerged as the single largest brand in the neutral market of Delhi for quarter 1 FY '25. Our focus on staying ahead of industry trends and adapting to evolving customer demand has not only strengthened our position, but also we pave a way for continued expansion, and we are hopeful to sustain the growth momentum.
Our focus remains on enhancing market share in our key markets and increasing our presence in high growth markets like Rajasthan [indiscernible]. Additionally, we need to optimize utilization and generates strong cash flow.
With that, I would now like to open the call for Q&A. Thank you so much.
[Operator Instructions] First question is from the line of Rahil Shah from Crown Capital.
Good evening. So firstly, if you could explain on the overall industry situation right now? How has it been in quarter 1 and this last month of quarter 2 already. And how does it look ahead to the rest of the year? And then you could also cover some points what Som Distilleries is doing on key strategic areas for growth across all the segments and in all the geographies you are present.
So it's a pretty long question. So the industrial team, there has been growth in the industry as well as in the key markets where we are present. But we have grown more than the industry rate of growth. And we hope that we should be able to sustain the momentum for the remaining part of the year also. The growth, we have been able to consolidate our market sales and grow in our key markets as well as we have made substantial progress in the markets like Rajasthan, Delhi and Jharkhand in the quarter 1.
As for the -- I would also like to dwell upon the capacity utilization of the plant. So for this quarter we have operated as an annualized capacity utilization of 100% for both MP and Odisha. While for the Woodpecker, because it was -- we had just completed the capacity expansion in April this year. So we have about 70% of capacity utilization for the Woodpecker that you see in Karnataka plant.
[indiscernible].
Sorry to interrupt, Mr. Rahil, your voice is very low.
Hello?
Yes, please, go ahead.
Yes. So based on all you said that you have gained market share and you hope to sustain the growth momentum. So any outlook for FY '25 revenue and EBITDA margins?
So I think we should be able to be able to achieve a top line of between INR 1,500 crores to INR 1,600 crores, net sales for this year, while our target for the EBITDA should be in the range of about 12% to 13%.
Next question is from the line of [ Rohit Deshmukh ] from [ Vishwa Investments ].
Can you provide insights into any market perception issues or external factors that might be contributing to the stock decline expressed strong Q1 results.
Sorry?
Can you provide insights into any market perception issues or external factors that might be contributing to the stocks declined expressed -- strong Q1 results.
I cannot comment on the stock performance. I mean, but I think our results have been better than what the industry has reported so far.
Can you discuss any margin pressures or cost management issues that might be effective -- affecting investor sentiment?
If you look at what the peers have reported in terms of margins, I think our margins are slightly better than the competition. And the cost pressures also has stabilized as compared to the last 1 year.
Are there any macroeconomic factors or industry-specific trends that might be weighing on the stock despite the strong quarterly performance?
I mean, I cannot comment on the stock price, sir.
Okay. What is the company's current stance on stock buybacks and dividend policy and could be increasing -- couldn't these be increasing?
In beer growth phase currently. We have also announced in the past that we will be doing capacity expansion for our Odisha plant which should happen by early next year. And in early next year, I mean is, by quarter 1 of next year. So as of now, we do not have any plans of buyback or like you said, dividend or something like that.
[Operator Instructions] Next question is from the line of Yash Dantewadia from Dante Equities.
Yes. Just wanted to understand on the raw material front, we've seen prices correct this quarter, right? And this year is expected to be good in terms of harvest, right? And your main raw materials, I'm assuming is sugar, barley and rice, right? So my question is, don't you see your EBITDA margins improving further, 12%, 13% you've guided, but don't you think it's going to do better than that in terms of EBITDA margins because your raw material pricing is falling.
I think the main price component of the cost [indiscernible]. And the prices of last quarter have been stable as I compare to June '23 and June '24. So there maybe a slightly different in price. But our usage of glass bottles is more than what we give back as the old [indiscernible]. So that is the reason that, and now we have started operating in multiple states, so we don't have operations in a single state or 2 states. And there are certain states where the percentage of glass bottles, which comes back lower as compared to what we do in MP or Karnataka or in Odisha. I've given a broad range of the EBITDA margin of 12% to 13% for this year.
Will you be able to share what cost component is the glass bottle for you in terms of the entire cost of production for the bottle?
[indiscernible].
Okay. Can you also give some guidance in terms of premiumization you said last con call that you are working on it actively. Has there been any movement in that front? Or are you expecting to make this year?
We'll have certain announcements to make on this result for confidentiality reason, I cannot disclose the product launches, which we plan to do in this quarter or the next quarter, but I think definitely you will see some premium product launch this financial year.
Your quarter is fine, but you're saying that we'll see a premium product launch this year, this financial year?
Yes.Yes, this financial year.
And when you say premium, what do you mean?
Premium means that maybe something which is more expensive than Hunter.
Can you give me a price range? Like what price range would you categorize for premium?
But I think maybe in the range of something -- in the range of [ INR 1,000 ] something like [ INR 1,000 ].
Sorry, in the range of? I couldn't hear you. I'm sorry.
In the range of [ INR 1,000 ].
Next question is from the line of Vinit Agarwal from Aditya Birla Money.
So I have a couple of questions. So one is, what is our CapEx plan going forward for the next couple of years? And what are the growth projections we are building in beyond FY '25? And what kind of sustainable margins will be able to maintain? And another is, if you can talk about the market share in your markets? And how are -- how we are seeing traction there?
Your first part of the question was related to CapEx plan. We have got 1 CapEx planned like I was discussing with the previous caller in Odisha, which we should start by December of this year. And hopefully, we should be able to complete it by April of next year.
The amount, if you can like what kind of...
Could be in the range of about INR 30 crores to INR 40 crores. And we are also eyeing certain acquisition opportunities in states where we want to enter or we might even look at a greenfield, but may be guided for next year.
And what are the growth, if you can talk on the growth projections beyond FY '25.
We are looking at a growth of -- in the range of about 25% to 30% year-on-year for the next 2 to 3 years that's I think, our internal target.
And the margins will be sustainable at this current...
Yes, yes. In that range, which I indicated earlier of between 12% to 13%.
[Operator Instructions] Next question is from the line of Vivek Gupta from Novus Capital.
I just had one query. Do you track capacity utilization? And how much is the current utilization of the plants?
Like I mentioned, if I just annualize the capacity, whatever has been the production in this quarter 1. So we have had about 100% in Odisha and [indiscernible] and the Karnataka plant, we are at 70%. But all we see because this is our main reason, the capacity utilization would slightly come down for the remaining part of the year.
With the seasonality in Beer?
I'm talking about Beer only.
Yes. So for Karnataka, by the next season, would the utilization reach 100%?
I think it should be about 85% to 90%.
By next season, and after maybe in the second year, it will be 100%?
Yes, yes. And if think I mean, proved to be very good, then we could reach about 90%, 95% by next year.
We have our next follow-up question from the line of Yash Dantewadia from Dante Equities.
My next question is regarding our recent expansion disclosure that you made. You said that we'll be using a mix of equity and debt. Can we know more about in terms of size and why are you diluting -- if you're going to be diluting equity one. Why are you doing so because you don't have a lot of debt in books anyways, right? So I didn't understand the equity portion and the size of the CapEx. Could you talk some light on that?
We're talking about recent disclosure.
You recently made a disclosure that you'll be expanding capacity?
The backlog, I think, in context of Odisha. Yes. So I mean equity and debt would be that the certain warrants which need to be exercised by the promoters.
Okay, right. Not fresh dilution, you're not talking about fresh dilution.
No, not fresh dilution.
And your capacity utilization in this particular plant is around 50%, right?
The Odisha plant?
Yes, yes, yes, while you're expanding your at Odisha?
So it was for, I mean, last year, and same time last year also, we had reached about 65%. And this year, we have crossed 100% for this particular quarter 1.
So in Odisha, you crossed 100% capacity utilization?
Yes. And that's we need additional capacity in Odisha.
Why don't you do aluminum cans instead of bottles like a follow-up question from your last answer. Is the cost of an aluminum can more than a glass bottle?
It also depends upon the valency of the can in a particular market because the demand of the consumer is very important. I mean I cannot pushed the consumer from a glass bottle to a can.
So is that -- is that a trend that you've noticed till now? That consumers are more drawn towards glass bottles?
Yes. So I mean, in India, about -- I think about -- if you look at the valency about 75% to 80% of the total consumption happens in glass bottles.
And this is a follow-up question on the premiumization part that you said. Since you said it's going to be priced somewhere around the Kingfisher Ultra is what I'm assuming. My question is how do you see this scaling up the premiumization part? What kind of demand are you seeing on ground? What is the strategy? Could you share some point on that, like how you're seeing it play out the premiumization?
If you look at beer, I think about close to about 15% of the industry towards the premium segment. Now growing [indiscernible] bread and butter of all the beer manufacturers come from the 85% mark segment. To grow or to have a better perception or a brand recognition of the company, it makes sense to have a premium brand, but we are not expecting much of volume to come from the premium brand. It is to improve the perception and image of the company.
If you look at -- I mean, I don't know how much information you use is -- on the volume of a strong, but undoubtedly, I believe that about out of its portfolio was 80% to 85% would be coming from Kingfisher, all the strong beer category.
Right. Can you give us the size of the capacity expansion? How much will be investing?
Sorry?
Size of the capacity expansion, how much money will be invested into the capacity expansion part?
About INR 35 crores to INR 40 crores.
[Operator Instructions] Next follow-up question is from the line of [ Rohit Deshmukh ] from [ Vishwa Investments ].
Sir, can you elaborate on the guidance for the upcoming quarters and any potential challenges that might impact future performance?
I think I indicated that for the full year, we are getting guidance of between INR 1,500 crores to INR 1,600 crores, of net sales.
Despite this coming quarters, September and December, where beer consumption is low compared to June and March.
Yes, yes. Because we are -- I mean, seeing good traction of our products all across the year.
So you're telling that you will maintain the current run rate in upcoming quarter also.
I'm not commenting on the run rate. I'm just giving you a guidance that we should be in the range of INR 1,500 crores to INR 1,600 crores for the full financial year, the current one.
[Operator Instructions] Next question is from the line of Chirag Singhal from First Water Fund.
Sir, just wanted to understand more from a growth perspective. So we have been growing at 20%, 25% kind of growth rate. And for this year also, based on our guidance, the growth rate comes to around 20%. So what is the industry growth rate and how we are able to grow at a 20%, 25% growth rate. And going forward, your move towards premiumization and everything considered, what is the sustainable growth rate that we are looking at maybe from a 5- to 6-year perspective?
I think we are a growing company, and we had quite an exciting team on board. We have got good products. We have a solid brand, which are recognized by the consumers. We give a good face of liquid in our bottles. And we have been able to maintain our market shares in the -- in our key markets, where our plants are. And we continue to grow in our new markets. So I think that's how we have been able to grow much faster than the industry.
And on a sustainable level, I think, for the next 3 years and it shows, we'll be able to maintain a growth rate in the range of 22%, 25%.
Okay. And can you also share the industry growth rate like the regions that you're catering to? What is the industry growth rate?
Industry should be growing by the range of 8% to 9%.
Sorry.
8% to 9%.
[Operator Instructions] Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Nakul Sethi for the closing comments.
Thank you all for joining in the call. We are pretty confident that we should be able to maintain our growth rate. That's it for me. Thank you so much.
Thank you. On behalf Som Distilleries & Breweries Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.