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Stove Kraft Ltd
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Ladies and gentlemen, good day, and welcome to the Stove Kraft Limited Q1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] To note, this conference is being recorded. I would now like to hand the conference over to Mr. Rajendra Gandhi, Managing Director. Thank you, and over to you, sir.
Thank you. With this, I would like to take this opportunity to introduce to you our new CFO, Mr. Ramakrishna Pendyala. He holds a bachelor's degree in commerce and is a chartered accountant with 18 years of experience in corporate finance, controlling, auditing, petition, corporate governance, and compliance fields. Previously he was associated with Hical Technologies, Gokaldas Images, Mann+Hummel, Areva P&D, and PWC in various positions. He was also associated with Stove Kraft for more than 7 years in the finance and accounts department. His vast experience will help the company to achieve its long-term goals, increased value for its stakeholders. We also have Korean capitalists with us on this call who are our Investor Relations advisers. We have uploaded our investor desk and the earnings press release on the stock exchanges on the company's website. I hope everybody had an opportunity to go through our Q1 results, investor presentation at the press release. We have uploaded on the stock exchanges and from the company's website. [Indiscernible] Q1 FY '24, we have witnessed a growth of 8.2% and 21.4% in our top line and gross profit respectively. Despite Q1 being a muted quarter across the industry. This shows the strong market position of our brands because of superior quality of products and just the consumers in having us, which we have built over the years with our consumers. Our being a seasonal business and the first in the last quarter being smaller than the second and the third quarters, we are very excited about the upcoming quarters and would like to continue with expanding our business across different categories and geographies. Moreover, the rise of the middle class and the increase in disposable income are evident in the growing demand for consumer drives, automobiles and lifestyle products with the Indian consumer sector showing great promise. There are still some challenges to address during this period. Inflationary pressures resulting because of heavy and unpredictable reinforced in the few pockets of the country may affect the consumers' demands and lead to cautious spending budgets among other certain segments of the population. Additionally, businesses never made [indiscernible] consumer demands, which have been our priority, and we will continue the same. Last year in Q1, we had announced the opening of our first company-owned and company-operated [indiscernible] store for the Pigeon brand and has given a guidance of opening around 40 stores in 18 months. We are pleased to announce that during the current quarter, we continued our expansion and have successfully added 25 additional company-owned and company-operated retail stores for the Pigeon brand in South India, taking the total count to 77 stores as of 30th June 2023. That is roughly double the count in a span of 12 months, which we had announced in the corresponding quarter a year ago. Also, 90% of the stores have achieved operational breakeven in an average time of 3 months post opening. We also improved our offering by bringing indigenously manufactured products like stainless steel bottles, the electrical kettle, and electric rice cooker, along with our non-established [indiscernible] from our Bangalore unit, which will lead us to the next leg of growth and create long-term value for all our stakeholders. Our continued focus on various modes of tray and launching of new high-quality products has helped us achieve significant growth in small appliances, on both Y-o-Y and Q-on-Q basis. This was because of good traction across different modes of trades than single tail e-commerce, retail and modern retail on experiencing growth. The company has formed a formal team leadership team of [indiscernible] who come with vast experience across different areas of capabilities and are fully committed to the sustainable growth of our company. Looking forward, we are confident about our growth in FY '24 to continue with the upcoming festive seasons augmenting well for us. Now I'll discuss the Q1 FY '24 financial performance. The [indiscernible] revenue stood at INR 297.7 crores versus INR 275.1 crore in Q1 FY '23, registering a growth of 6.2% on the year-to-year basis. Gross profit or the profit for the quarter improved significantly from the previous quarter and year-on-year basis as well as quarter-to-quarter basis. Gross profit margin for the current quarter stood at 36.9%, that is an increase of 400 basis points year-on-year and 40 basis points quarter-on-quarter. EBITDA for Q1 FY '24 stood at INR 84 crores versus INR 21.6 crores in FY '23. The EBITDA margin was 8%, which was in line with the corresponding quarter last year and an improvement of [indiscernible] basis points from the previous quarter. Profit of the tax for the quarter stood at INR 8.2 crores versus INR 8.1 crores in the corresponding quarter last year. PAT margins for Q1 FY '24 stood at 2.8% as compared to 2.9% in Q1 FY '23. Now I would request the moderator to open the floor for question--and-answers. Thank you.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] The first question is from the line of Natasha Jain from [indiscernible].
Hi sir, my first question is on the gross margin. So there has been a very sharp increase there. I want to know, is it purely a raw material cost softening? Or have you taken price hike? And if you have taken price hike, could you just tell us which segments and by how much?
We [indiscernible] to increase I mean, better gross margin. Of course, there were some price corrections, but it was not limited to that. The gross margins have improved on multiple contributions coming from, of course, soft input costs. There is a small correction in the price. And this basically a products that we are selling, there are [indiscernible] that we are importing and selling and then going to that stage where we manufacture these products and [indiscernible] contribution has given us also improved margins. So all the 3 along with our competition is coming from our retail stores [indiscernible] higher margins compared to our company [indiscernible] because we are able to [indiscernible] the end question. So all these 4 are actually [indiscernible] to improve gross margins. Even otherwise, the business is designed to deliver a [indiscernible] previous quarters, we have made corrections in our pricing structure now to achieve and include 35% as margin.
All right. So sir, then during some of the previous con calls, you mentioned that FY '24 guidance for gross margin would be 33.5% now that we've already closed around 37%, could you tell us what could be a sustainable gross margin going ahead? Is there a scope of further improvement from here?
Yes, whenever [indiscernible] margin, the business was defined, by delivery of 35% but we were having some surprises in both input costs or I mean, sometimes some lower realization income margins in some of the categories. We aspire to not to go below the 33 and 35, this is the margin rate that we [indiscernible] of course, this has been one of those orders we won better on the growth to be realistic in the range of 35%, I would say that would be the right margin aspiration.
All right, Sir, my last question is your staff cost as a percentage of revenue has increased sharply to 13.1% compared to 11% in FY '23. And so has the OpEx cost. So can you tell us what led to the sharp increase? And again, here, what could be a sustainable run rate?
Yes, this is the current rate if we continue to be here. We have increased overall people count. There's a lot of backward integration and new plants that have been set up in the last few quarters, and there is an addition in people count. So this is the new number. This will be at this number, the percentage looks high only because it compared with this quarter. The first quarter and the last quarter are relatively low contributing quarters in revenue. Both put together they only contribute 40%. But as the cost overall, even on an absolute number is more or less at the same number. So in terms of percentage, there will not be such an increase, we believe it should be in the range of 11.5% to 11.7%. And when you correspond only look at this quarter, it will look high.
Thank you, the next question is from the line of Khush Gosrani from InCred Asset Management, please go ahead.
. Hi, sir. A, I wanted to understand what was the volume growth in this quarter overall. B, If you could highlight the CapEx that we have done for the 25 stores [indiscernible]?
So the overall investment on each store is in the range of INR 17 to 19 lakh per store.
Okay 90% are [indiscernible]. And so volume growth in this quarter, sir?
So in different categories, I mean, performed differently. On the pricing front, I can say, we were at par just a little higher than the last quarter. Induction cooker, we have grown about 15%. On the nonstick cookware, it is actually more of our nonstick cookware goes to exports. And there is a movement from the first quarter to second quarter because last year was a higher base. We had some inventories that were not shipped in the last quarter of the previous year and so we have a little lower volume growth also in the nonstick cookware. But the small appliances have contributed significantly in different categories, some ranges from 20% to some categories like [indiscernible] growing at a very, very high percentage.
And sir, if I look at the EBITDA margins, we are back to 8%, but where is the other costs have increased because gross margins are at quite at higher levels than our guidance, but EBITDA margins are flat. So I understand how the flow-through between the gross and EBITDA margins. I understand [indiscernible] cost is higher because of the ECHO hiring does well. But where is the expense we having higher costs, which tended to be absorbed?
In each of those costs, people costs, there is a little increase because we have a number of counters that's gone up, which is again proposed that our outward rate cost is in proportion, is in the same percentage as normal, but because of the revenue growth. We, of course, have an additional cost so we have some reconciliation items with our online platforms. And so we have provided additionally for the ECL to the extent of INR 3 crores. That's why you see a little higher on the other cost. Otherwise, in terms of percentage, more or less, but for the people cost, as I mentioned, will be in the range of 11.5% to 11.7%. All other costs are in the same percentage on annual basis.
Sure, sir. And one last question from my side, sir, last quarter, we were having the e-com platform in terms of growth. So have they decided in this quarter? What is the situation on the e-com side?
We have grown on the e-commerce platforms. We are growing at about 25% on the e-commerce.
Okay. And is there cost that you have provided, how much needs to be provided for the year?
So normally, it is not at this level. We prefer to provide a little higher in the quarter, considering that there are some [indiscernible] spending for the previous period. So as and when the [indiscernible] concerned, get a better view of this, but it will not be as high as what currently we have proved in this quarter. These are INR 3 crores for this quarter.
Sure. And this is nonrecourse to the company, right?
Generally, all the payments, I mean, receivables we are moving to channel financing and all this channel financing is nonrecourse, but these are from reconsideration items spending, which the team is working on. And once we have a clear better view, then probably, I mean, we will know exactly where we are on.
: Thank you, the next question is from the line of Koushik Mohan from Ashika Institutional Equities. Please go ahead.
Hi sir, congratulations for the great set of numbers. So I have a basic question, and I just wanted to understand how this full year looks like. And what can be the operating margins for the full year sustainable basis?
Our aspired number for the operating EBITDA is 11%.
Okay. How about the top-line quarters?
For as the second and fourth quarters are the larger contributing quarters and this year, the festivities are moved by a month, so between the second and fourth quarter, so we believe the first quarter is going to be larger compared to the second quarter, unlike what it was in the last year. But these are larger contributing process. We believe that we'll continue to grow in double digits.
Sir, my second question is, so in Bangalore unit, you have another space, which is opposite to your unit. So when will that location will be started in work in progress? And also, how about -- you were telling in one of the calls that you are going to get it this as your inventory management system some other, like any guidance over there? When will be that plant will be in live?
Maybe you would have to [indiscernible] some time back, already as per the plan by about 60% to 70% of the activity, the construction activity is completed. We have several units there in the land. And it's currently a large warehouse to put up the WMS in place is being installed, maybe in the next quarter, that is end of this quarter, early next quarter, the warehouse will fully functional.
[Operator Instructions] The next question is from the line of Khush Gosrani from InCred Asset Management.
Yes, sure, sir [indiscernible] channel-wise, revenues mix of this part?
Can you please repeat?
Sir, could you break how much sales came from the DT and from the [indiscernible] channel-wise mix revenues?
Yes, I can share with you. In terms of percentage -- I can give you the numbers, maybe you will have to [indiscernible] about INR 112 crores from general trade, LED was INR 14 crores. Modern [indiscernible] rate was INR 38 crores, institutional sales INR 6 crores, e-commerce 92 crores, exports, there are 2 types of exports. One is the brand exports and the OEM exports. The brand exports contributed INR 2.5 crores and the remaining is all OEM exports.
Got it, sir. And if you could help us understand your ambition on the retail side. We have already opened 25 stores and last month, we were guiding for [indiscernible] stores per month. So by this year and by next year, how many stores you are imaging to open and what could be the revenue contribution?
Yes. The retail stores are performing well, for each of the stores are getting to profitability for the month of operation. And every month, we are seeing an increase in the average revenue from per store. Of course, on the number of stores, I can say that we want to do at least INR 8 to INR 10 crores a month, and we are on that run rate.
Thank you, the next question is from the line of Madhu Rathi from [indiscernible] Cyclical PMS, please go ahead.
I have a few questions. What will be our operating profit margins in different segments, a small appliances nonstick cookware and all? And what is our aim to get in the next 2 to 3 years? Like what portion of our revenue will come from like individual segment or something that we aspire to, is my first question?
[Indiscernible] solution company and all that goes into the kitchen [indiscernible] equally contribute. But the near term looks like all the 3 segments with the cooktop segment that comprises the gas cooked up and the induction cooker or the cookers segment, which is the pressure cooker and the non-stick cookware and all the other appliances that are electrical or non-electrical, I think, in our opinion, all the 3 will more or less in the same range between the 30% to 35% of these categories will contribute. On the margin side, both for the product and channel, we are margin agnostic. I only said that because there were some products in the appliances because introducing these products initially, we trade with them, then we assemble and then get into manufacturing. Many of those products have got into manufacturing and started contributing to the real margin that we aspire, so that's where that correction is. Otherwise for us on the margin side, for the brand vision, it is both channel and product agnostic.
Thank you sir, and the next question would be the CapEx that we have done in the past 2 to 3 years, what kind of revenue or volume do we see from this active capacity utilization? And what would be our current capacity utilization for the same?
So as I mentioned, our business is a little seasonal, and we have built capacities for particularly fields, that is the second and the third quarter. And so currently, if you ask me what is the existing capacity can deliver in terms of revenue, we are ready for a INR 2,000 crore revenue but there is an ongoing improvement that we keep on [indiscernible] could be between the way the lines are there and of course, additions should require. With the current CapEx that is in place, we can get to INR 2,000 crore.
Thank you sir, and for our export segment, is there some kind of slowdown from the recession fuel [indiscernible] in the western economies?
No. We have good order book. There is a [indiscernible] the first quarter to second quarter of some of these because last year, we had what you call, built-in inventory, which we could do ship the other volatility in the containers availability in the before the first quarter. So we could keep a lot of it in the first quarter. The order books are quite strong. We see growth in our export business also even for the current year. There's no slowdown.
Thank you sir, if you can give me the number for order book, it would be very great.
We believe for this year, I'll say for the next 2 quarters, we have closed INR 100 crores of pending orders.
Thank you, the next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Yeah, hello sir, so I have a few questions. One, have we [indiscernible] employee and other expense, which I'm seeing in a certain range in the last 4 quarters now. Can we take this as a more stabilized cost and there won't be any major addition on these costs where employees are about INR 36 crores to INR 39 crores and other expense is about INR 48 crores to INR 50 crores number.
Yes. On the employee side, we are fully set both on the number of people and on the leadership. So it is a more stable cost.
And how much is the E&T expense that you will incur for FY '24 versus FY '23?
We will continue to invest between 3% to 3.5% in the range of INR 50 crores for this year.
Okay. Then I could not understand your answer on the gross margin expansion that you have taken product price correction. I just want to check if you have taken any product price hike because the margins have expanded, right? So have you taken any product price hikes in any of the categories?
Yes. So some of the products, it's not only driven by price hike. Of course, across the categories, we did some correction, very difficult to explain on this call, is also competitive competition sensitive. But I can say that we did a correction on all our prices without actually changing the pricing, but there is a change in our realization number one, but [indiscernible] by softness in our input costs. But there are several products which the costs have come down because they have moved to manufacturing of these products. So all these 3, along with our additional margin that we make on our retail is what is reflecting on the gross margin.
So should I interpret that a unit profitability of certain categories have improved despite the RM decreasing, you haven't taken a corresponding price correction, that's what I should understand, we are not able to fully comprehend this.
I will again repeat. It's not that we have not corrected some of our costs. Yes, we have corrected on some of our costs. I mean on some of our realizations. I'm sorry, [indiscernible] there has been an implied improvement in our cost, but there is also a price correction that we have taken across the categories, not limited to one.
Okay, so there is a price correction but that price correction is not corresponding with the RM correction. So your unit profitability has increased, right?
Yes. I think that's the right [indiscernible].
Okay. My last question is, sir, on the CapEx of what kind of CapEx is under growing bond or what is planned for FY ‘24 and '25?
FY '25, we would want to be limited to our cost that we will not want to invest more than 25% of our [indiscernible] depreciation on the CapEx. But this year is already planned. We are differing a little of this from this year. The bigger investments on 3 buckets, one is our layout that is up and coming up very soon. The second is our Bangalore plant and the third is of course the retail.
Sorry. First is, to understand for FY '24, where are you spending?
Could be in the range of around the INR 75 crores.
So where all is getting spent [indiscernible]?
The warehouse, [indiscernible] unit, and the retail business.
Which it, sir?
Retail. We are investing in our retail stores.
No, I understand warehouse and retail. I need to understand the unit what are the manufacturing side [indiscernible].
This is a completely automated plant for making cast iron cookware.
Okay, cast iron cookware. Okay. That's a new product like. This cost with respect to the manufacturing unit also fits in the employee cost and the other expense or when the unit or this will add to your employee and other expenses?
Now you're talking about the new plant that is going to come up?
. Yes. This cast iron cookware.
Yes. This is a relatively highly automated plant on human cost, it is not high. But it will start operating only in the end of the fourth quarter and more of that cost, if at all, will be only from the next quarter. But to the size of the unit, it is very light on the people cost. And most of the [indiscernible] the key people of the plant are already there on our roles.
Okay. And I'll just add one more last question here. What's your sense in terms of the market demand for this year do you see, because last year was a little bit soft across the world for a lot of the companies as well. You see a setup where demand should be relatively better. In any case, now you're running on the GM moving to your P&L? Will we see a much, much better profitability this year considering the fact that you are saying that costs are largely stable and GM expansion has come, some comments would be very helpful, sir.
On the GM side, I can say that we will maintain in the range of 35%. We are very confident of it now. On the growth side, I can say several of those products, which earlier did not have the cost advantage than we were reporting or just assembling, any of those products, which we have moved to manufacturing, we have an edge in the market, both in terms of the product that we are offering, the price that we are offering, it's a better range that we are offering. So that's where we are seeing growth coming from. And we believe that immediately after that is the second quarter onwards, once the activities start picking. I don't think the demand is going to be a big problem.
Okay. And on the Pigeon brand, we saw some litigation reoccurring. You want to comment on that?
It is one of our distributors in Chennai, and we are addressing it legally, sir.
Thank you, the next question is from the line of V.P. Rajesh from Banyan Capital Advisors.
Most of my questions have been answered, but just one is on the [indiscernible].
I can hear you but is very low.
Mr. Rajesh requesting you to please use the handset mobile speaking. If you could please speak a bit louder so that your question is audible.
Okay. How is it now?
Yes, thank you sir, please continue.
So my first question was regarding the channel revenue by channel. What is the revenue you got from your own stores?
For the last quarter, it was INR 7 crores.
And as you are expanding this, obviously, this will continue to increase materially, right? That's the way to understand this in all the sort of similar sizes?
We are seeing growth on the revenue from the retail [indiscernible].
And then my second question was regarding the market share. Could you just give some commentary on that, if you are becoming leaders in the markets you're operating in or you are in top 5 or some color like that in your key products that you talked about earlier?
Several of these categories, we are getting to the top 3, but some of those products that we have recently started, particularly the electric kettle and air fryer we are getting to market leadership. This is what I would have mentioned.
Okay. So you would say overall in the segment of cooktops and cookers et cetera, you would be among top 3 in the country is it?
Yes, definitely in the top 3.
The next question is from the line of Gaurav Agarwal from Arihant Capital Markets.
Sir, in terms of the EBITDA margin outlook, so you have said that your expectation to the 11% EBITDA margin. So just want to understand whether the 11% is kind of an expedition or is it something that you want to achieve in this full financial year basis? Or you want to exit this quarter for Q4 at 11% EBITDA margin?
So for us, the numbers look at those margins should be annualized. Quarter 1 and quarter 4 are smaller quarters. When you combine the revenues for the year is where business is designed to deliver that 11%. I know in the past you have quarter for various reasons, maybe we're not in the control. But overall, when we do our AOP, the business plan and as per that, we believe that we'll be able to deliver this invest.
So 11% is what you are targeting to deliver for FY '24, is that correct understanding?
Yes.
Okay. And is the competition like the other listed company, they do kind of 13% kind of withdrawn margin, and it's not like 1 year margin that I'm talking about. [Indiscernible] last 2, 8, 9 years, so trend if you see it has broadly been in that range, 13%, 13.5%, 12.8% kind of a margin. Sir, can we also get to that kind of margin [indiscernible] this year or maybe next year, but as over a 3-year or a 5-year basis, can we also try to move into that kind of region?
For us, the bigger aspiration today in the near term is to have higher growth and [indiscernible] larger market share. We have also want to stick to our consumer base, which is addressing value segment. And with this, too, we believe that as we grow, there is much growth both stronger and going to get stronger, there's definitely a possibility of higher margins. But in the near term, I think the business plan is to deliver 11%.
Okay. So what I understood from you that you want to focus on revenue and hence get a higher growth rate and in that process, you are okay to sacrifice a couple of margins, right? The growth is what you are aspiring for, not on the 13% margin?
You are right, sir. Currently, our aspiration is to grow faster.
Understood. And sir, just a couple of more questions in terms of growth or any kind of expedition you have for this year [indiscernible]?
Normally, if you will understand that in the last 5 years, we have grown at a CAGR of 19%. We believe that we can grow at the same rate, but it also depends sometimes on the market conditions. In the recent 2 quarters, we have seen a little softness on the demand side. If markets are normal, we believe that we can grow at the same rate that we were growing in the past, but we still believe with the strategies that the company has in the channel expenses that we are doing and also the brand new product introduction, this we can be assured of a double-digit growth.
And the last question is you have taken a lot of initiatives in terms of hiring people at the top. So if you can just elaborate on all you have hired in the last 6 months, 1 year, what all you are planning to further make new hires? And any other initiatives that you are taking so that we become a bigger company, better company going forward?
As I mentioned, all the 7 [indiscernible] on board.
Actually, sir, I joined in the call a bit late. If you have elaborated it in the last half an hour, if you can just briefly also [indiscernible]?
We have the head of manufacturing comes with a large experience on manufacturing being the managing director of a large automobile company, multinationals Vikas Gupta is onboard, he is heading the overall manufacturing operations of the company. We have marketing CMO, who heads both marketing and product, he's been as Head of company's [indiscernible] as Managing Director and the immediate past was Vice President at a large consumer brand company. We also have the head of our sales who has been with the company where we designated a CR, the revenue officer, he comes from Hindustan Petroleum before he joined Stove Kraft. At Stove Kraft [indiscernible] several channels, and was the CEO of our [indiscernible] so he takes care of our revenue of all the channels, media channels. Some of our businesses are related to growth, particularly in the retail business, we have Black & Decker, Gilma and the kitchen business, which are more to be driven with the growth mindset. We are [indiscernible] companies like Bata in the past and been with the company for some time. I think [indiscernible] done extremely well, and he is now taking care of all the growth segments. We have Janardhan who has been for a long time working with various companies like Pfizer et cetera, and he is the CFO of the company, actually we find him extremely able to handle the human resource of this company. We have a Chief Technology Officer who has been with [indiscernible] career with Unilever for a long time, into 15 years there and sometime with Pfizer. So we believe that each of these companies of the future, the scale matters, will have to be driven by technology. We are very confident of what is capability to take this company to the future growth.
And so, if I just ask one more thing. In terms of quality, incentivization, is everything in place or do you have any policy? And if not, then do you intend to have one?
Sorry? Can you repeat...
Do you have some policy for these senior hierarchy?
Yes, we have intra-policy and these leaders have also being granted [indiscernible].
[Operator Instructions] The next question is from the line of Bhavin Vithlani from SBI Mutual Fund. Please go ahead.
A couple of questions. With the [indiscernible] cookware for some quarters now, just help us understand, there's a lot of social media against the use of Teflon. If you could give us some flavor? Is that changing? And are you looking at alternative methods for it?
We continuously work on improving our offering. Of course, like to mention there is some noise around [indiscernible] are all certified 3 [indiscernible] we still are working on this. And so there is a new range of products that we are developing for giving that nonstick feature, probably we will be the first to introduce in this country very soon being sensitive I'm not able to disclose this, but we have developed a new coating for nonstick, which is [indiscernible] these chemicals and is also seen some PCFEs. And we are also, as I explained to you in the call earlier that we are also investing on the certain cookware. This bond will not only manufacture products out of catering, but we also have a special coating, which has nothing to do with anything related to the so-called technology PTFE produces.
Second you see strong growth in the small appliances segment, if you could break up within a couple of large categories that [indiscernible].
[Operator Instructions]
Is it better now?
On appliances category, of course, mixer grinder forms are very important in the small appliances. But for us, mixer grinder is one of the categories is not the largest. But some of the categories in the small appliances for us which contributes very well. Apart from the mixer grinder, it is an electric kettle, we are leaders in this category. Then we have introduced our [indiscernible], which again, I want to say that we are leaders in this category. There are some of these new categories, though this has been general [indiscernible] for common products of daily use. They have started manufacturing our electric irons, and we see very good traction in that. And we believe that it will start contributing meaningfully in the near future. But there in line of various small appliances that we have lined up, majority of them are related to the breakfast appliances. And in the quarter end of first, we will see that they'd be in the market. And all this, we believe that we will move the manufacturing which will give us an advantage, both in terms of cost and the product quality that we are offering to the consumer, which will give us an opportunity to get to leadership of these categories.
Just a follow up on this, could you give us category 4 or 3 Y-o-Y growth in the larger categories for you for the quarter as the growth?
Growth particularly on -- as I mentioned is a new product their prior is very, very large in terms of percentage is in some thousands of percentage because the base is small product and some of those items like Kettle have already seen, last year itself we have grown and subsequent grown on multiple folds, multiple times of the original revenue that they are contributing to this company. And there are some categories, like I mentioned, the electric iron and if I would want to say we were selling some 15,000, 20,000 units a month, we have started selling upwards one lakh things of that and we believe at least 2, 3x of the current number of units that we sell is where we test. So there are categories wherever we have seen that we are able to build good product at the right price with the edge quality, then because of the various channels that we are already present very strong presence in each of the channels we are able to distribute all this. And consumer acceptance for our brand is kind of approval till now.
Just last question. What was the A&P in the quarter? And what are you expected to be for the full year?
For the full year, we believe that we will invest between 3% to 3.5% of our revenue.
Thank you, the next question is from the line of Nirav Vasa from Anand Rathi.
Hello, sir. My question pertains to your retail expansion. Would it be possible for you to help me understand how is it that our stores are able to break even in just 3 months, some numerical examples would be really helpful.
More or less, the operation cost for our stores is in the range of 1.3 to 1.4 lakhs. And for us, at the retail, we are able to get to a margin between 45% to 50%. And even at a revenue of INR 3 lakhs per store, we are able to break even. And all our stores at least 90% of the stores are above this immediately after the first 3 months of operation. I mean on the revenue, we are at a much higher revenue average -- in the range of INR 4.5 to 5 lakhs. So I mean, with the higher gross margin, and as I mentioned, the cost being in the range of 1.4 lakhs, we are able to break even, even if this cross the INR 3 lakh number. And more than 90% of the stores first 3 months of progress.
So sir, considering these wonderful dynamics, would you be open to setting up or expanding these stores on a franchise basis? Because if this is the way it is then I believe a lot of your channel partners would be quite interested in upgrading it or setting up within their own vicinity.
So we want to prove this model to ourselves, of course, investing franchises, one if they are excited, and we believe that there is synergy between our [indiscernible] definitely we open to franchises, but as of now, we are doing it on our own. Of course, I would want to share with you, there is enough and more interest. We are evaluating this and definitely, in the future, you will also see that we'll have a franchise, including the stores that we already build established. So it should be a win-win situation for the company and the franchisee and once there is undertaking both are in same [indiscernible] we believe there is a much more easier format to manage. We also believe that we'll continue to have company-owned company-operated stores along with these franchisee-managed stores.
Sir, the reason I was asking is that if you want to become a pan-India based or I can see if we need to have these experience points on a pan-India basis, then we need to have channel partners who are ready to invest in it. So typically, for a company-owned store, what is the average period for which we take a store on lease?
Generally, all our stores are at 9 years. But for exceptions, the all over stores that we [indiscernible] are for 9-year lease.
Right. Sir, second question is how many SKUs do you intend to expand in the forthcoming part of the financial year?
It will be difficult to give you a number on that, but because we keep introducing and rationalizing the products, but we currently work with around 650 SKUs.
658, right?
650.
650 Thank you very much.
The next question is from the line of Darshil Pandya from Finterest Capital.
So I have 2 questions. My first question was answered. My second question is what is the percentage of revenue that comes from your e-commerce stream?
E-commerce is in the range of 30%. If you will only look at this quarter, it will be larger because e-commerce in this quarter has done extremely well. This quarter, it was 40%.
Thank you, the next question is from the line of [indiscernible] from NB Investment, please go ahead.
Good evening sir, this is regarding the company-owned company managed outlet. In the last call, you had mentioned that during the subsequent quarters, more than 75% of these outlets to be open under franchise. But now you are saying that all the ones which were opened during the quarter are all under the company-owned company managed outlets, so is there any change in your plan?
There's no change. We are establishing these stores and based on the plans that the company has we are initially evaluating each of these stores that we were setting up. We have built a good business model. It is very exciting for the countries. And we believe that going forward, we will have both company-owned, company-operated and we also have these stores on the company's books but franchisee-managed. And we are working on that and as maybe guided, we are moving towards that. So in the future, a majority of the stores will be franchisee operated and some of them will be still company-owned company operated.
Okay. But till you finalize your whatever the plan for that, you would continue to open the shops under company owned?
We can franchise into a model, give a store on franchise. It depends on how the [indiscernible] of the stories is. Based on that is our revenue share or the profit shares that we would want to have with the franchisees. And also the deposit also moves with that, basis performance of the store.
Fair enough, sir. Sir, my second question is, we have the aspiration to reach 11% EBITDA margin, so whatever this savings that you get either due to manufacturing by the company itself or due to reduction in the raw material prices or whatsoever, all that you want to pass it on to the consumer to help the company to increase the stock line or the sales? Now the question is you have been telling us that you intend to grow at a double-digit figure, so which is less than 20%. So what we have been seeing with other competitors having making higher margins still they are able to post more than 15%, in the range of 15% to 30% type of growth. So why we are not able to grow at a higher base when our margins we are keeping at a low end level.
They believe that we are the fastest growing company in the category of products that we operate. I don't know from where you derive that 15% to 30%, but the industry average has been in the range of 79%. We've been growing at a target of 19% in the last 5 years.
So are you saying that compared to the industry, we are growing at a faster pace?
Yes, definitely, there's no doubt about that.
The next question is from the line of Natasha Chan from Nirmal Bang, please go ahead.
Thank you for the follow up. This question is basis what you answered to one of the previous participants. So sir, in terms of gross margin, am I to understand that there was no price hike. It was just a benefit of raw material softening as well as your backward integration. You actually took a price reduction. Is that right?
It's not right. To say that our overall the company [indiscernible] cost plus margin. Otherwise correctly in the price, we adjust the price based on some SKUs, and we have reduced the scheme to higher margins, also it was aided by the [indiscernible] the prices are generally before the beginning of the quarter and during the quarter, we also saw some contribution coming from softer cost. So in other words, it means if you have not reduced the price when your price has gone down, mean your cost have gone down, it amounts to price increase. If you say that this will change the price at which the retailers get the product, yes, if it is the channel at what price we advise that product, we did increase. So there were some projections on the various discounts that we allow.
Okay. And on the CapEx side, sir, you mentioned that this year's CapEx is going to be around INR 750 crores. Was that figure correct?
In the range of 75 crores.
Sir, you've mentioned in your previous calls that you are going to delay your CapEx a little bit probably spill it over the next year because this year seems comparatively muted year. So and in fact, at that point, your CapEx guidance was lower than this number. Now your CapEx guidance is higher and are you still filling over to the next year? Or how is it?
No. Some of the CapEx is spilling over to the next year. There's also the retail business and the committed [indiscernible] I only said that we will move some of the CapEx from the [indiscernible] for the next year. So apart from the in passing, there is a line that [indiscernible] there is also line with the finishing that is a coating, particularly the coating line, we are moving it to them next year.
Okay. So sir, it would be fair to say then that this is the kind of CapEx that we can also assume for the next year, considering some of next year the spillover of this?
The largest CapEx that we have in the recent time taken is to both the warehouse on individual units, both the warehouse and [indiscernible] 2 large CapEx. We believe we do not have any large CapEx lined up for the next year, but there will be continued CapEx setting up new lines. I mean more of these lines are related to assembly line or [indiscernible] or with our retail. These 2, we still believe that it's going to be ongoing. Relating to the current year and the previous 2, 3 years to be investing, we believe there will be a lot more reduction on our CapEx in the coming years.
All right, okay, thank you sir.
[Operator Instructions] Ladies and gentlemen, at this time, I would like to now hand the conference back to the management for their closing comments. Thank you, and over to you all.
Good evening, and thank you, each one of you for patiently hearing to us answering your queries, we hope that we are able to answer your queries and to your satisfaction. But if you have any questions to ask you may reach out us directly or to our Investor Relationship Team. Thank you again for joining us this call this year.
Thank you very much. On behalf of Stove Kraft Limited, we conclude today's conference. Thank you all for joining us. You may now disconnect your lines.