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Ladies and gentlemen, good day. I am Rochelle, the moderator for this conference. Welcome to the Q1 FY '23 Earnings Conference Call of Tribhovandas Bhimji Zaveri Limited, organized by Dickenson World IR. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Sandhya Sutodia. Thank you, and over to you, ma'am.
Thank you, Rochelle. Hello. Good evening, everyone. I welcome you all to the earnings call of TBZ Limited for the first quarter of FY '23. Today on this call, the management of TBZ Limited will be represented by Mr. Binaisha Zaveri, Whole-time Director; and Mr. Mukesh Sharma, Chief Financial Officer.
Before we get started, I'd like to remind you all that remarks made today might include some forward-looking statements, and actual results may differ materially from those contemplated by forward-looking statements. Any statements made today on this call is based on our assumption as of date, and we are under no obligation to update the statements as a result of any information or future events.
I'd now like to invite Ms. Binaisha Zaveri to make the opening remarks. Thank you, and over to you, ma'am.
Good afternoon, everyone. I'd like to welcome you to the Tribhovandas Bhimji Zaveri Limited Earnings Call for the First Quarter of FY 2023. I'd like to thank everyone for taking the time to join us today. After 2 years of COVID-induced lockdowns in this period, we had an excellent start to FY 2023 with robust sales in Q1 FY '23 on the back of the rising demand during the festival such as Gudi Padwa and Akshaya Tritiya in April and May, respectively. This financial year began with opportunity to expand and grow with all our stores fully operational. To put it in context, Q1 of FY '23 was the first nondestructive first quarter in the last 3 fiscal years. This quarter also saw a continuation in consistent footfall growth with new customer walk-in increasing Y-o-Y. Several strategic marketing activation programs helping the performance.
To begin with, around 12% of dormant customers returned to our winback campaign, indicating the result of a resilient demand. To increase our footfall and conversion rate, we also implemented brand-centric marketing campaigns in both the gold and diamond category. Our extensive digital advertisement also had to increase store footfall. Through these numerous activities, TBZ maintain the prominent position as a top multi-retailer that offers jewelry for every occasion, including wedding and everyday deals.
Furthermore, the government's mandatory hallmarking has helped us to better compete with [indiscernible] and organized sector. As an established and renounced brand, we have been selling hallmarked jewelry for a very long time. So there's nothing new in regard with TBZ hallmarking. Customer preferences for branded jewelry remains stable, giving us a distinct advantage. Other factors such as the strength of our brand and the breadth of our [indiscernible] scheme and our adaptability to market dynamics have put us in a strong position to absorb driving demand. Going forward, we will also concentrate in increasing customer engagement, generating healthy profits and acquiring new customers.
We believe in our strong position to capitalize on the increase in customer spending in the coming months. We are laying the ground work for our strategy of emphasizing modern design, consumer-friendly tech interventions and maintaining a highly motivated sales team. We are well placed to take advantage of the upcoming festive and wedding seasons.
I would now like to give the call over to Mr. Mukesh Sharma, our CFO. Thank you very much.
Hi. Good evening, everyone. I would like to begin with the operational highlights for the quarter 1. We have done the first quarter achievement of the numbers of INR579 crores vis-a-vis same quarter last year of INR193.7 crores, which is hopping 200% [indiscernible] number. We have done -- we have achieved the gross margin of INR60.5 crores vis-a-vis same quarter last year of INR23.2 crores, which is a very healthy growth of 161% over the same period last year. The EBITDA margin earned in the Q1 FY '23 is INR18.7 crores vis-a-vis [indiscernible] in the same quarter last year. The EBITDA margin stands at 3.2% in the Q1 FY '23 vis-a-vis 0.4% negative EBITDA margin in the same period last year. The PAT earned during the FY -- during the Q1 FY '23 INR2.9 crores vis-a-vis INR9.1 crores loss during the same quarter last year. The PAT margin stands at 0.5% in the Q1 FY '23 vis-a-vis negative 4.7% same period last year.
Now we can open the session for the Q&A.
[Operator Instructions] Our first question is from the line of [ Rahul from R Consultants ].
I just want to know like what would be your ideal advertisement expense as a percentage of sales in normalized level or rather let me ask it in a different way, like what is our advertising spend target for next 2 years?
Very interesting question. Marketing costs, if you see in the TBZ it's in the range of between 2% to 3%. But it always varies quarter-to-quarter seasonality to seasonality. Specific for next 2 years, it is very difficult to predict today because marketing is a combination of the competition and the market situation, the various festivals which falls into a different period in India, where Diwali may fall in some different period in this year, maybe next year, it will be a different month and the festive moves around within the month. So quarter-on-quarter, the marketing pay will also see that in terms of the percentage to be sales. On the yearly basis, we would like to maintain the same percentage of the spend being to our revenue. So if you evaluate these, the absolute number may keep on increasing. However, the percentage will be maintained at the same level.
Okay. And my second question is like as we understand that diamond jewelry has high margins, so what could be the triggers for growth in that part of jewelry? And how can we see increased share in the overall revenue point?
Yes. So it's a market driven because it besides the percentage. As an organization, we would not like to be any opportunity in terms of these sales in the gold jewelry or be it in the diamond jewelry. Yes, you are right in terms of saying that the diamond jewelry has a higher margin percentage, but the number of customers buying the diamond jewelry, where the customer buying the gold jewelry are completely different. However, we are very conscious about it. But if you see the data in terms of the percentage of the diamond in sales, it is going into the same ratio. So as our gold jewelry sales are increasing in the same proportion of demand jewelry sales is also improving. But you're right in terms of the margin percentage is much better in the diamond jewelry segment. And we are -- we know about it, and we will be working to improve details on that category.
Okay. And my last question is, last time when we were on a call, same investor call, management mentioned about the inventory turns. Can we know what are the current inventory turns for diamond and gold?
Rahul, inventory turn will always be different for different quarters and different months. For every festive, we have to top up the inventory and the after festive, the sale is to trade with -- the inventory numbers are different. When you see the balance of those inventory are on a particular benefit date. But internally within the organization, we keep on working on the inventory turn and the different month, different years and it's a continuous activity. To come specific to your numbers, the inventory turns are around 2 for the company in the gold jewelry and around 1.3 in the diamond jewelry, which is current numbers as of now. However, it's a continuous activity in terms of the improvement. So we are very conscious about the inventory holding. We must have seen benefits that the inventory business are there. We are constantly working towards improving the number on the inventory turns.
Our next question is from the line of [ Sonali Rao from SR Financial Services. ]
First of all, congratulations for the results. I have 3 questions, which I'll shoot one by one. So the first question is, what would be the ideal step to be taken by the management to improve the gross margins relatively? And an internal assessment, was the ideal gross profit margin TBZ should have versus stable earnings growth?
Okay. So Sonali, there is no ideal scenario in terms of the gross margin percentage. It again depends on gross margin is a combination of what discount you are giving during different festivals. How much inventory you are looking to sell during the [indiscernible] period? The quarter-on-quarter, the gross margin number defers because of the different festive periods. You see during the quarter 1 of financial year '23, we have achieved a gross margin of 10.4%, whereas the same quarter it was 12% last year.
Last year was even a lockdown period. So the gross margin numbers are different. The Q1 FY '23, there was a different content, which we have done during the FY '23 [indiscernible] Akshaya Tritiya festival and because of those discount fee that the gross margin has come down. So it's actually the input margin, however, we are maintaining the numbers when we achieved, the output margin we have deferred from a quarter to quarter.
So the theme of the idealistic scenario that we will end up at so and so gross margin though we have internal targets. Obviously, we work with those targets in terms of achieving the margin, but it will be very difficult to pinpoint a particular gross margin to be idealistic in a good way.
Okay. So there's a follow-up question to that. The question would be seen in last 2 years, we have rationalized certain costs, thanks to COVID. However, we have seen some costs are coming back to the system again. So how will investors should see a margin [indiscernible]?
Cost, you are talking about operating costs?
Okay. Hello?
So I'm asking -- you are talking about the operating costs?
Yes, operating costs.
Yes. So look, if you compare with financial year '20-'21 or '21-'22, which is really a period due to the COVID, there was a lot of disruptions, which has happened. Those numbers may not be exactly comparable with the current financing years. So if we see the numbers in line with the pre-COVID period, we are actually catching up in terms of the revenue, in terms of the EBITDA margin, in terms of the cost as well with the same period of pre-COVID period. So it is more or less in the same line. Cost will always vary with the revenue percentage. So actually, the variable costs will go directly in line with the revenue numbers. So absolute numbers when you see, you'll see a huge jump into the absolute number, but when you put in your perspective with the revenue percentage, the cost may remain in the same range bound.
Okay. And I have one more question. On growth front, I would like to understand what has been the growth volume year-on-year and quarter-on-quarter in terms of grams of gold?
Yes. I think we have achieved a very help from, if you see, from a gram perspective, the quarter 1, we have done the sales of 600 kg in the gold because in same period, if you see, last year, it was around 50% of that volume, yes a similar situation in the diamond sales as well. So in '21-'22 and '22-'23 may not be exactly comparable numbers because of the COVID situation. Even if you compare it to the quarter, there has been a huge jump of 20% in the number achievement.
[Operator Instructions] Our next question is from the line of [ Neha Sharma from VK Capital. ]
Can you please elaborate on which quarter of the year the company would be having the maximum inventory and which quarter can we see the liquidation or the sale of buildup of the inventory?
So Neha, the answer is very straight and simple. Any festive, before festive, you can count [indiscernible] before the inventory data start. During the festive, the inventory goes to the street and the sale happens. And after the festive inventory gets neutralized. So really, if you see the cost, the inventory and sales go in hand-in-hand in terms of going up and then sales is also going up during those particular periods of festive during the -- and then comes in normal period. So we really try to maintain the ratio of the stock turns and all, so that the absolute volume value numbers, we should not increase the inventory number.
Okay. And so one more question. How are we targeting the growth of one in marketing campaign, as mentioned in your presentation? First also, what I see is what is the inventory size for the same? I mean what are you chasing as an organization margins or top line market share, ROE, what it could be clear if you could share some road map to understand in detail.
Neha, I think there are too many questions in one question. I'll answer one by one. So I think one part is we are talking about the inventory, obviously, as I answered that the inventory goes hand-in-hand with the festive. We try to maintain the inventory turns. So if we are able to achieve the inventory turn, we are actually maximizing the gross margin. Gross margin, as I said, it again depends on the festive, how the festive go and offers are rolled out, talking of particular number. We are very conscious about internally, there are targets which we are very conscious about hitting our particular sales number and then hitting our particular gross margin number. And we have not listed any of these numbers in the Q internally. Coming back to the expenses are also in the same line of the target whatever we have fixed. And we are very hopeful of achieving at least 30% sales growth in terms of the number what we have achieved quarter-on-quarter. I'm talking about the comparable numbers of the pre-COVID level. So that is what we are seeking currently.
Okay. And one last one from me. In regards to opening of stores, we have seen addition and deletion in last 5 years. So now what's the road map? What are your targets?
So we are definitely looking forward to grow the business into newer markets. We are expecting to open new stores in the next 3 quarters to spend multi-billion, currently.
[Operator Instructions] Our next question is from the line of Sagar Shah from Shah Investments.
I would like to understand what component of revenues from [indiscernible], if any? And whether it would be a recurring one, if any?
Yes. Sagar, [indiscernible] is very negligible part of our business. In terms of percentage, if I quote, it will be hardly 2% to 3%.
[Operator Instructions] Our next question is from the line of [ Barka ].
So my question is, I see the personnel expenses in '21, it was INR54 crores. FY '22, it was INR63 crores. Now if we analyze Q1, it's INR70 crores already. My understanding is when we are not growing on profit front, why is personnel expenses increasing?
I think you are right in terms of the numbers. Current year FY '23, you have just multiplied the most the 4 quarters. You're right, we are at [ INR17.5 crores ] in the Q1 in the personnel cost. But if you compare immediately with the financial year '20-'21 and '21-'22, it may not be a very comparable number. However, if you see as a percentage to the revenue, you will see the movement is in line. So personnel cost is again catching up at a pre-COVID level because to achieve a particular number, we have to have the similar trend in terms of the man power. And that's the reason of bringing this number, if you see '18-'19 number also, our man power costs used to be around INR22 crores only.
[Operator Instructions] As there are no further questions at this time, I now hand the floor over to Ms. Sandhya Sutodia for closing comments.
Thank you, everyone, for joining us today for this call. In case you have any further queries, you can get back to us or our coordinates provided in the investor presentation. Thank you so much. Good day.
Thank you very much, members of the management team. Ladies and gentlemen, on behalf of TBZ, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.