Stove Kraft Limited (STOVEKRAFT) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q1F527 Earnings Conference Call of Stovecraft Ltd. As a reminder, all participant lines will be in the lesson only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal and operate there by pressing star 10-0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Vidhi Vasa from MUFG End Time. Thank you and over to you.

Thank you, Nesha. On behalf of MUSG InTime, I welcome you all to Stowcraft Limited Q1 FY27 Earnings Conference Call. Today on this call, we have Mr. Rajendra Gandhi, Sir, Managing Director, Mr. Subhadeep Pahl, Sir, Chief Financial Officer, Mr. Chandru Kaluru, Sir, Vice Chairperson, and Mr. Hemant Kumar Kothari, Sir, Vice President, Investor Relations. Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements which are completely based upon our belief, opinion, and expectation as of today. The statements are not a guarantee of our future performance and involve unforeseen risk and uncertainties. And with this, I would like to hand over the call to Gandhi, sir. Over to you, sir.

Good afternoon. Good afternoon, everyone, on behalf of Stowcraft Limited. I extend a warm welcome to all participants to the Q1FI27 Financial Reserves Earning Call. We also have MUFG in time with us on this call, who are our advisors on investor relations. Along with me is Chandru Caldwell, our Vice Chairman. We have uploaded our investor desk and earnings press release on the stock exchanges and the company's website. I hope everybody had an opportunity to go through that. We are pleased to report our strongest ever first quarter performance since inception. A particularly noteworthy achievement given that Q1 has traditionally been a seasonally softer quarter for the kitchen appliances industry. Our revenue has grown by 41.3% over the same period last year. This performance was delivered against a backdrop of global economic uncertainty, geopolitical tensions, supply chain disruptions, commodity price volatility, and currency fluctuations. Despite these external headbands, Stowcraft delivered a strong performance, outperforming the industry's growth, trends, and further strengthening our market position, reflecting the positive impact of the strategic initiatives undertaken over the last few years. The quarter was marked by healthy revenue growth, meaningful margin expansion, and profitability growth that significantly outpaced revenue growth. Driven by the increasing benefits of operating and financial leverage. More importantly, the quality of growth continues to improve, supported by strong momentum across our general trade business, expanding retail footprint, premiumization-led product innovation, and disciplined execution across the value chain. These results reinforce our confidence that the investments made in distribution expansion, brand building, supply chain capabilities, and product development are beginning to develop sustainable outcomes. As we look ahead with strong channel momentum, continued traction in premium categories, an expanding retail network, and onset of the festive season in the coming quarters, we believe we are well positioned to build on this strong start and continue delivering profitable market-leading growth. Turning to the product-wise performance. Growth during the quarter was brought based across our key product categories, reflecting the strength of our diversified portfolio and ability to capture consumer benefits across multiple segments. The induction cooktop category delivered exceptional growth of 315.9% year-on-year, driven by strong underlying demand trends and our ability to effectively capitalize on the market opportunity, following geopolitical disruptions. While the category witnessed extraordinary growth last year, demand continues to remain substantially above pre-war level, indicating a structural shift in consumer adoption rather than a temporary spike. ICT contributed 27% of our product revenues during the quarter, reaffirming its action as a key growth engine for the business, reflecting our manufacturing capabilities and bringing agility to meet demands. Beyond the induction cooktop, growth remained healthy across our core categories, underscoring the resilience and depth of our portfolios. The pressure cooker segment grew by 41.3% year-on-year and contributed ...to our overall revenues. While non-stick, it were recorded robust growth of 21.8% year and year, accounting for 21% of our revenues during the quarter. These performances were supported by strong brand acceptance, product innovation, expanding distribution reach, consumer inclination towards premium products, and affordability due to reduction in GST. While small appliances and gas cooktop categories witness temporary moderation, The small appliances category was affected by deficiency on the supply side, as this was the lines and other resources that were allocated to the small appliances were utilized to gather to the surge in sudden demand for induction cooktop, which now has stabilized with all the additional requirements for induction cooktops in place. They continue to represent a significant 27.5% of our revenue needs. The sustained growth across our core categories demonstrate the benefits of our diversified business model, ongoing premiumization initiatives, and focused investment in product development and market expansion. The broad-based growth strengthens our competence in the sustainability of our growth trajectory and enforces our ability to deliver consistent value creation over the long term. Premiumization is emerging as a key growth theme at Stokra. As consumer preferences evolve towards higher value and feature-rich products, continue to invest in innovation and category creation. Our focus on introducing differentiated products and other technology-led kitchen solution is helping us create new consumer segments while improving product mix and realizations. These initiatives are not only strengthening our brand positioning, but also enabling us to drive industry-leading growth across categories. We believe premiumization will continue to be a significant growth lever for the company and play an important role in driving both revenue growth and market expansion in the years ahead. Moving on to channel-wise sales, our diversified distribution portfolio continues to deliver strong results during the quarter, reflecting the strength of our omnichannel strategy. General trade was a key highlight, registering an impressive 56.2% year-on-year growth, the strongest growth witnessed in the last three years, signaling a meaningful recovery and improving channel productivity. E-commerce remained at our largest channel, contributing at 31.8% of our total revenues, while general trade accounted for 28.6%, followed by exports at 13.3%, modern retail at 13%, And our own retail at 8.7%. Notably, our retail channel delivered an outstanding 86.3% year-on-wear growth and 88.5% for three-year talent, supported by network expansion and increased consumer engagement. Further, we added 17 new stores under franchise model during the quarter, reinforcing our retail expansion strategy and advancing our long-term objective of establishing 500 standalone pigeon-exclusive outlets by the year-end, 2027. This continued expansion not only enhances brand visibility and consumer accessibility, but also centers are connected with the consumers through a belated retail ecosystem, supported by deeper distribution, growing retail partnership, and a well-diversified channel mix. We remain well-positioned to sustain our growth momentum, strengthen market share, and drive long-term value creation of key geographies. Now I will discuss Q1A527 for financial performance. Q1 FI 27 was marked by strong operational execution and improved profitability, resulting in earned growth, the significantly outpaced revenue. The consolidated revenue stood at 480.6 crores for the quarter versus higher than 340.1 crore in the previous quarter last year, hence registering a growth of 41.3% year-on-year basis. Gross profit for the quarter stood at 190.4 crores versus INR 130.4 crores in Q1 F526, a growth of 46% year-on-year-old, despite ongoing supply chain challenges and elevated raw material costs. Also, gross margin is expanded by 127 business points. Year-on, we are reflecting the strength of our brand portfolio, pricing discipline, and operational excellence. EBITDA is 53.8 crore in Q1 of 527, compared to INR 35.6 crore in Q1 of 526. Resisting a robust 50.9% year-on-year. Consequently, VTAM had improved to 11.2% from 10.5% in the corresponding period last year, expanding by 71 business points, supported by operating leverage, a favorable product mix, and disciplined cost management. Pat for Q1F527 stood at INR 17.1 crore versus INR 10.4 crores in Q1F526. Showing exceptional growth of 63.5% year-on-year. The path margins for the current year quarter stood at 3.5%. Our return metrics also witnessed meaningful improvement during the quarter, reflecting capital productivity and prudent capital allocation. ROCE improved to 13.9% from 12.6%, while ROE increased to 9.3% from 8.3% in the corresponding period last year. These improvements demonstrate our ability to generate stronger returns from the capital employed in the business in greater value for shareholders. From a working capital perspective, the net working capital increased to 45 days in Q1, FI27, which is much better than the Q1, FI26, and FF25, but is higher than the quarter four of FI26. Primary demand by strategic inventory build-up undertaken to ensure adequate quality availability, product availability ahead of the upcoming festive season, and anticipated demand. This proactive approach is aimed at supporting sales momentum, minimizing supply disruption, and enabling faster market servicing during peak demand periods. Now, I would request the moderator to open the floor for questions and answers. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Manoj Ghori from Aquarius Capital. Please go ahead.

Yeah, thanks for the opportunity. Go by an audible.

Yes, sir, you are audible. Please go ahead.

Sir, first of all, congratulations on this set of numbers. Now, as we look at the...

Sir, if you'll have to be a little louder, I think yes, we will.

It's better now? Yeah, so if we look at, obviously, we had a very strong quarter during Q1, and when we look at the breakup of categories, induction cooktop obviously remains way out there, but when we look at the cooker and cookware, even there, we have seen a healthy traction. So, you have already highlighted about your preparedness for Q2 and Q3 in terms of supply chain management to avoid any disruption. Can you throw some light on how the growth is panning out? How should we look at from...

Of course, your voice was not very clear, but I still, whatever I gather, let me try to address it. Yeah, you are looking at the growth for the remaining three quarters. That means, IDO, while you will already know that the second and third quarter are larger quarters, they are all amidst the various festival seasons. Fortunately, this year, it is well spread. We have Onam in August, then early October, we have Desera kind of festivals. We have November. So in November, we have Diwali. These are spread over the period. This allows us to address the demand better. We are seeing strong kind of consumption in various of our product categories, and all the manufacturing facilities that we have set up in the last few quarters are all now up and running. So we are very confident of a strong performance vis-a-vis the last year. And the current period, this quarter, we could not roll out many of the innovations that we are in the pipeline. And some of our smaller appliances we could not actually produce during this time because a lot of impetus given to the induction cooktop, some of our lines and the resources. When I say resources, people, being a manufacturing company, we had to reallocate some of these capabilities to produce induction cooktop. That being the case, but there is a strong structural shift in the consumption of this product itself, the cooking, the way people cook at Indian homes now. We believe that the traction for induction will continue. It will not be at the level of the spike that was there in the beginning of the quarter, but then we still see very high growth in the induction cooktop, followed by cooking category. So, overall, the quarters ahead look very strong.

Right. Thank you, sir. Just to continue on this, so you said like there were a few launches which have been delayed and now it has been done, which will act as a growth driver for you guys. So cookwares or probably cookers, so are these launches into these categories and should we expect the growth? In these two categories, to continue in the coming quarters as well, because even the growth year was very healthy during the first quarter.

Yeah, I think actually all the three, we are, generally our business is in product category divided over three categories, the small appliances, cooktops, and cookware. For us cookware is pressure cooker and cookware. We see growth in all the three, but for the LPD store, I think all the categories we see very high growth. The opportunities are very high growth. We also have a pipeline of innovation in all the three categories of products. So, that gives us the additional confidence of high growth overall in the business.

Sure, sir. And, sir, lastly, on the margin side, this quarter we have seen wire wire margin improvement. There would have been some pricing power also because of the, especially for the cooktops. Now, when we look at from a Q2, Q3, and Q4 point of view. Are we still left with some price ics or probably most of the RM pressures or rupee depreciation impact that has been passed on? And this margin improvement on YY basis should be sustainable for the rest of the FY27.

So, yeah, while there has been input cost pressure continuing, we have also addressed this by correcting our realization, we have increased our prices for the domestic market. We also are... There is a favorable situation even in our exports. They have corrected their buying prices upwards to address the input cost. With these initiatives and with the efficiencies that are set in, we are very confident of the current margin levels, and we are also confident of improving from here.

We hope that on a year-on-year basis, we will still, there is some headroom and we will be able to improve at least 1% on cross-margin year-on-year.

Sure, sir. Thank you, sir, and wish you all the best for the quarter guide. Thank you.

Thank you. The next question is from the line of Vinod Krishna from Avendis Health. Please go ahead.

Thank you, sir. Am I audible? Yes, sir. We can hear you. Sir, can you highlight, because we had these disruptions on export side from the last one and a half year, so how is the export panning out? Is it just U.S. or more than U.S., and then IKEA, and how should we think about revenue contribution from these two in the current year? Because last year, we had projected a very high growth rate on exports, and because of the tariff situation, we lost out on the opportunity. And if you can give this year export plus IKEA, and over a two, three year where this export plus IKEA revenue can go to.

So, yeah, the disruption of last year is behind us. We are back to normal, and we will actually grow even the current year. But the way ahead for export is, as of last year, we had about 12% contribution to the revenue. As the company grows, we believe, even in spite of the growth overall as a company, our export contribution in the next two years, that is the current in the next year, should get to 15%.

Sir, like, export and IKEA, how is, like, if you can give the absolute numbers also, how much IKEA will be and how much exports will be over the next two, three years?

Absolute number will be difficult, but I am telling you as a percentage of the revenue, it is definitely in the range of 15%, would be in the positive range of 15%.

IKEA will be apart from this, right? IKEA will be apart from this?

No, we consider IKEA as a deemed export. For us, both IKEA, Walmart, Asda, all these companies' revenue we consider.

So, this year will be good for us in terms of exports?

We are continuing to grow, sir. Even the first quarter, we had reasonable growth.

Sir, and second question, if you see, September, like Q2 was always the best quarter for us, if you see, and we had a really good Q1. So, can we grow on last year's Q2? This Q2, like, I am not asking you the exact growth number, but can we grow on? Because last year itself, it was 480, 475 growth, September 25.

Historically, the Q2 is the strongest. And we will continue to be there. Obviously, because the Q1 was stronger, the Q2 has to be in line with that. It may not be exactly at the same rate of growth of Q1, but definitely there is a very strong demand that we are witnessing.

So we believe that the Q2 will be as strong. Sir, can you highlight where is the growth coming from? Is it just, again, the induction cooker and cookware, or it's like, can you, if you can, or is it something that's not a cost?

It is across the three categories. Our pressure cooker business has grown by 41%. It continues. The demand is very high. We have to augment this demand. We are equipping ourselves with additional capacities. In fact, by now, at the run rate that we are, we are already, by volume numbers, the largest. But then there is still unmet demand. And so we are addressing it with additional capacities. On the small appliances, we have capacity. In the first quarter, we had to let go some of our capacities being used for some other, used for induction and other infrared products. But we have now augmented those capacities as well. So we are confident of a growth even in our small appliances. On the cooktop business, on the base of pre-war level, definitely there is a huge room for growth. We continue to see the demand being higher than the pre-war level. So for us, it's a mix of all these three products, and all our channels are also growing. Our EBOs are growing at a good pace. We are seeing very high growth in general trade. E-commerce continues to drive the overall contribution to the company's revenue, and we are confident also about the export. So these are all a combination of all this is not driven by one particular category or one particular sense.

So we should see growth in Q2 also over the last year, even though it's a high base. Sir, when will we see TAT margins going above 5% because you used to guide us around 7% we can achieve in the long run. So when will we start growing about 4-5% like how many years or how many quarters?

As we grow, both revenue growth will lead to higher, also there is an improvement on gross margin will lead to higher EBITDA, and definitely because there is a kind of a fixed number below the EBITDA, all incremental growth will flow. So you will see this continuously, quarter on quarter.

So, this year also, we will see a good growth despite Q1 being a very high growth. So, that we can take.

Though Q1 was very high growth, of course, we are very excited about this. Q1 is one of the smallest quarter of the year. Generally, it is the highest.

Oh, yeah. But still, we can expect Q2 growth and Q3 growth, even though they are bigger quarters, right? We are very positive, sir. Sir, thank you very much and all the best, sir.

Thank you. The next question is from the line of Rehan Syed from Trinitra Asset Managers. Please go ahead.

Oh, great. Am I audible? Yeah, it is a little feeble. Yeah, now, okay. So, sir, I have two questions. First, on your working capital side. So, we have seen that working capital increased due to our inventory built-up for the first few seasons. So, assuming a normal price to demand. Assuming a normal fast-to-demand environment, so where do you expect working capital days to settle by the end of financial year 27th?

This is the first question. 60 minutes.

So, to answer to your working capital days, see, Q4, for us, Q1 is the base, but Q1, we built the inventory for the year. So historically, if you go to Q4 of FI25, we were at 75 days. And if you will go back to Q4 of FI26, sorry, Q1, Q1 of FI25 and Q1 of FI26, we were at 69 days. We have improved to 45 days. So relating, because our business is a little cyclical, seasonal, and so you'll have to look at it seasonally. And also, we are now going to a straight line production plan. So irrespective of the cycles that we have, our Q1, Q2, Q3, Q4, we would want to have uniform production around the year. This optimizes our cost and better supply chain. It addresses the supply chain better. So overall, I will tell you, we are only improving on our working capital and so are the other issues.

So, my second last question is around your integrated manufacturing capabilities. So, as we have learned about your integrated manufacturing capabilities, so are you witnessing any improvement in sourcing advantages versus import dependent competitors, particularly in the current geopolitical environment?

I think the demonstration of addressing the market for induction cooktops when the whole Southeast Asian region was grappling for supply chain challenges is itself a demonstration of our capability. We have a very strong capability of manufacturing within our facilities and a very, very strong supply chain side capability both within the country and also from the importing countries. We import a lot of our inputs from China. We have a very strong capability. I think definitely that is a differentiator with stovecraft when you compare with our peers.

Oh, okay, sir. Okay. That's just from my side, and we'll talk about coming part of.

Thank you. The next question is from the line of Anand Munra from Soarvet. Please go ahead.

Good evening, sir. Congratulations on good results, and thanks for giving out detailed information in the presentation. Sir, I wanted to check about the benefit of JV with a Chinese entity which we have entered last month, I guess.

Yeah, the Chinese, too, we have a WS, Holy One subsidiary, where we would, in the future, want to domestically buy from China and export so that we get some advantage on the buying costs and drawbacks that accrue to the exporters from China, also to streamline our large import of inputs that we do into the country. But we have a subsidiary, JV, where we want to address the challenge that the current producers have. Right-light cookware and pressure cookware are facing. We want to be strong before we get into this category fully. So we are getting into a manufacturing arrangement with JV partner in China. The facility itself is among the largest or the largest in China itself. And we have started installing the machines and the current process is in progress. We believe by the end of this calendar year or before December, we'll be able to produce commercially the circles that are, I mean, tri-flight circles that are required for malpracticing the pressure cookers and cookware. There is a huge demand for this globally and also in the country. Both induction cooking is also aggravated the demand, but overall the efficiency of these pressure cookware is far higher compared to plain stainless steel. So there is a huge opportunity for us and is also to augment our own business for both pressure cookware and cookware.

Not it, sir. Sir, other expenses have gone up significantly in quarter one. So, that is in line with the revenue growth or slightly higher. So, any thoughts on that, sir?

Yeah, hi. Good afternoon. Shubhadeep here. So, as you can broadly see, the increase has happened in four clear buckets. We know we have grown well above our plan, and that has been possible only by a constant focus on ensuring supply for our products, and this has driven demand fulfillment. To do this, we outsourced manufacturing of some key products on job work basis in the first quarter, and as a result, the job work charges as a percentage to sales grew by 1.2%. This has helped in service fulfillment and also helped in flexibility for later. Second is marketing and business promotion expense grew by an additional 1.2%. As a strategy management, we believe to allocate a focused investment on product marketing at around 3.5% to 3.6%. And this is being charged with P&L on a linear straight line linked with sales spaces. The third point I want to highlight is, while overall retail sales grew 86%, we have been consciously moving towards a more franchise-operated store structure, which resulted in higher commission pay-up. Franchise-operated sales mix moved up from a 43% last year same quarter to 55-56% this year in Q1. This resulted in a higher submission payout, approximately 1% of sales. Additionally, we did some advanced CSR this first quarter, which will get annulized in coming quarters. So, with all this above, we explained around 3.5% higher percentage to sales, which partly got offset by some operating leverage, and net net, we landed at around 18% of sales as other expense.

Sir, how much CSR we have done as a percentage of PBT this quarter, sir?

So, we have done around 94 laps, around 3%.

Okay, 1% higher than the stipulated numbers.

Yes, this will get analyzed in coming quarters as per the company's expectations.

Yeah, thanks. Thanks, sir, for the detailed clarification. This is really helpful. So, the job work charges which has increased in this particular quarter, so this will remain elevated or we will manufacture in-house and it will not? How do we read it as an annualized expense for the company, sir?

No, these are not continuing costs, but definitely they were elevated during the first quarter. We are a manufacturing company. We would prefer to do that way, but to address that spurt, we had disordered to contract manufacturing, contractors, and outsource manufacturing. It may not happen that immediately everything will get subsumed, but in the quarters ahead, This will all be part of our own manufacturing and this will not, I mean, this will come down in terms of percentage. Both the annualized spend, CSR, I mean, all these that you are seeing, that increase 3% of other expenses will come down back to the normal levels. When you analyze it, it will look normal.

Okay. Sir, one more question I had was about finance costs. Since we have hardly any debt, why our finance costs are so elevated? Can you give the break-up between finance costs and lease expenses, so that we know the actual finance costs of the company, sir?

You want to do it immediately?

Yeah. So, on a YTD basis, we are at 7 crore finance cost. Our finance cost is... Hello? Can I order it? Our finance cost comprises of broadly three components. So, one is fund-based facilities. Where we have a cost of working capital nines, which is cash credit and working capital LCs. Second is the ROU leases. And third is the asset lease that we have taken. So clearly on the fund-based limits, we have saved close to 2 crore year-on-year. Whereas the asset lease that we took last year in Q3, that shows up as an increase. So, while on a fund based in working capital cost, we have done better, the additional of two-throw is happening because of the asset that came in last year, you see. Overall, as a percentage to sales, I would also like to add, on a year-on-year basis, we reduced from 2.1% to 1.6%.

What is our interest on CCMO? The rest is all India is supporting.

Sir, one question I had, sir, we have guided for in the TV interview which you gave today, you have mentioned that or the anchor was mentioning that you have guided for 7-8% PAT margin in 2-3 years. So, from current 3-4% to 7-8%, the key lever, I think, would be gross margin, sir, and any other or some operating leverage which may flow in. So, any thoughts, sir, where do you see gross margin over the next 2-3 years so that you can reach to 7-8% pack margin?

We are confident of increasing our gross margin at least a percentage year on year. Ideally, we would want to get, of course, we want to be above 40%, and I think the gross margin should settle between 40% and 42% on an ongoing basis. Definitely, there will be financial leverage now that you will play out, and with that, I think we will be able to get, the trajectory will be towards the 7%, 7%.

Because then 7 to 8 percent will only translate to 18 to 20 percent ROE which is which And FMCG... That's our endeavor, sir.

That is also our endeavor to get to there.

Okay, sir. Thank you, sir. Thanks a lot, sir. Thank you.

Thank you. The next question is from the line of Maghav Agarwal from Emoj Capital. Please go ahead.

Hi. Many congratulations on a great set of results. So, I just wanted to understand how you're looking at the material costs, and are there any further price highs in the plan in the near term? So, I believe we're a brand company, but still we are given by cost plus model. Any price increase in the input cost, we pass it on.

Definitely, there are some challenges in the input cost further to the Q1. We have addressed that by increasing our realisation, both for domestic and export. I think that is not a worry. There will definitely be price increase in the input process. And so we have addressed this by our adjusting the realisation prices.

Sure, sir. Sir, second question I wanted to understand since we've seen significant growth rate in the induction cooktop category. Should we build in similar growth rates going forward for the Q2, Q3, or can we see some moderation in that?

On an annualized basis, we still believe that we'll be 2x of last year.

This is helpful, sir. That's all from my point. I'll get back. Thank you.

Thank you. The next question is in the line of Nikhat Kour from Dalit. Please go ahead.

Hi, thank you for taking my question. So, in the 41% revenue growth, how much can we attribute it to volume? And my second question is, is this EBITDA margin of 11% is sustainable? And in the next three years, are we on track to clock 14% kind of EBITDA margin? And another question is on channel inventory, if you can give some color on the channel inventory.

So, we always believe that we keep the channel healthy and never choke the channel. So, we are not going to practice because it's an everyday affair. It's not that one of events that we do. On the contribution of growth is a combination of product mix, the value growth, and the volume growth. We have contributed, and the higher growth, of course, has come from the induction cooktop. Otherwise, the overall growth is a combination of all of these three. We are seeing a lot of premiumization into various categories of products that we are. Example is our pressure cooker. We have grown higher in our stainless steel pressure cooker versus our aluminum pressure cooker, which also means it's the product mix which is contributing. There has been continuous cost increase, which has led to price increase and real-efficient increase. So, there is a value growth, and definitely there is a volume growth in all the categories that we are currently catering to. On the EBITDA margin, yes, that is where our endeavor is. We believe that we will be able to grow at least a percentage, even on the margin side, year on year, which will ultimately... In the range, in the next 2-3 years, we should be in the range of 14-15%.

Thank you very much. Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and 1. A reminder to all the participants to press star and 1 to ask a question. The next question is from the line of Sajal Shroff from Dimitri Advisors. Please go ahead.

Thank you for the opportunity. Most of my questions are answered. I just had one question. Have we started supplies to Ikea this quarter?

No, not in the quarter reported.

But, and when do we expect that?

No, no, in this quarter Q2 is when IKEA business is starting.

Okay, it's already started in Q2.

Yes.

Okay, thank you.

Thank you. A reminder to all the participants to press star and 1 to ask a question. The next question is from the line of Resham Mehta from Green Edge Wealth. Please go ahead.

Yeah, thank you. Okay, congrats on, you know, an industry-leading growth rate. So, you know, while there seems to be a secular growth trend in the entire category, you know, driven by a few macro factors, being, you know, GST, tailwind, and premiumization, and, of course, induction cooktop, right? So, the question is basically on the growth of, like with this draw, you know, what kind of growth rates are we expecting, you know, say Q4 onwards, you know, Q3, Q4 onwards, when all of this will be there in the base, like the GST effect would have gone away. And of course, induction, cooktop demand would have also 10 points. And the reason I'm asking this is, you know, because this kind of growth rates of course do look sustainable. And, you know, ultimately, I mean, it's not a toothpaste or a soap, you know, which gets over and it has to be refilled, right? So, the replacement cycle would, demand would have also kicked in, you know, with the post-COVID refurgence. So, then, you know, Q3, Q4 onwards, are we looking at, you know, let's say around 8% to 10% kind of growth for the category where, you know, largely premiumization would be, you know, the driver of this category? Or how do we look at, you know, the growth outlook, Q3, Q4 onwards?

Okay, let me try and answer this question. See, there are a few themes that are very obvious. You must have heard from the others also. Premiumization is one of them. Where Stovecraft has been focusing its synergies is to build a slew of products which are differentiated, unique, and which will address the premiumization theme and also Try and drive impulse to upgrade. So what we are trying to do is actually create category growth and lead category next few quarters. And our endeavor is to actually take the non-induction growth to nearly 20% if possible, if we are able to do everything right. And we believe that that is possible given the way the economy is growing and the way consumption is growing at the cohorts that we are addressing at this point in time. So that's what we are trying to do.

So, you're saying, like, once the high base sets in, then it's more of, you know, which will probably start with double-digit revenue growth. Would that understanding be right?

I could not. So, can you say that again, please?

Yes, what did you say is that basically once the high base has set in, from there on the growth rates for us would be largely driven by, you know, these company-led initiatives rather than, you know, the similar category.

It will be by both, but we are looking at 15% plus going across consistently in the categories we are operating in, given the kind of product development and innovations that we are finding.

Okay. The second question is on margins. So, what has led to this quarter-on-quarter gross margin expansion of 100 bits? Is it that, you know, we were sitting on low-cost inventory or, you know, is it the privatization, the induction cooktop, you know, that has helped us? And the other related question is that on a blended basis, at a company level, what is the kind of raw material inflation that we have seen and the blended price hikes that we have taken at a company level so far in the calendar year?

Generally, our procurement is linked to the cost for a quarter, and our prices to the market are also for a quarter. Other than the exports, we are able to play that very safely. Though we are a brand company, we still are costless. If there is a pressure on the input cost, we pass it on. But there is also an endeavor to now improve our margins. So whenever we correct our prices, we also want to account for the additional margin that we want, and that's how we are able to improve our gross margins. It's a purely costless situation for us at Stokart. We are not, while we would ideally want no price increase, cost increase, which will not lead to no, definitely passing on price increase is always a pain, but then that is how we work. And generally, we control our input costs by having arrangements with our large suppliers for a quarter.

So, should I express that whatever cost inflation we have seen, we have kind of passed it on since it's a cost-plus model?

Absolutely.

And what explains the 100-bit quarter-on-quarter gross margin expansion?

That again, when we address the price correction, we have also addressed the increased aspiration of our gross margin.

And, you know, the last one is on this exchange program, exchange campaign that, you know, we ran. Typically, we see this for a lot of bands, right? So, you know, what are the revenue salience that, you know, we see from exchange programs that have generally, I mean, you know, in the past several years, what has been the revenue contribution from such exchange campaigns? This particular, you know, quarter, since, you know, there's been a big, you know, uptrend that we are seeing in terms of the category growth, has this, you know, this number really shot up or is really diverging from our usual past trends?

See, while our business is seasonal, second and third quarter are driven by festivities, festival seasons, so we call that manage the demand. We manage, try to cater to the requirement, and the first and the last quarters are when we have to sell, create remotes. So, for the first quarter, generally, we have this exchange offer program that we encourage our customers to upgrade themselves to new products and such things. So, this is an everyday affair, every year affair. In the first quarter, generally, we have this. We saw a very good response from our consumers, but then that is been every year.

Got it. And would you like to quantify? Like, I understand it may probably be a small part of it because we generally do this in Q1.

So, if you are not doing any of these programs, probably the Q1 will be even softer than what it is. So, if this exchange offer program is a regular affair, maybe the consumers also wait. There is no otherwise generally a reason to buy other than the regular buying. And unlike the activities and driven by festivals and marriage season where there is a compulsive buying requirement. So, the first quarter, some of the sales traditionally is coming from exchange.

Just to add, you know, there is a theme of upgrading that is anyway very prevalent, number one. Number two, what happens is people move homes during the first quarter because their, you know, school time transfers get affected, etc., etc. So, actually, kids get refurbished. We are using this. Now, most of these exchange programs happen only in our EBOs and general trade. And that's what excites them. And you're seeing the benefits there. The EBOs have grown by 80 odd percent, and the general trade is grown by 50 odd percent, and those are things that are actually doing that. After these exchange programs, then we get into the festival sale, like Mr. Gandhi said, where, you know, there is a clear shopping potential for people.

Sure. Thank you. Thank you. The next question is from the line of Vinod Krishna from Avendis Wealth. Please go ahead.

Sir, thank you for the opportunity. This is the same question, actually, because everybody has the same doubt that we can spend more time that because of the GST, Benfrey Tandi, induction, cookware, because of the Iran war. There's a huge growth that we have seen. So, on this base, what are the factors, both external and internal, that the store client is doing differently that we can sustain and not, like you, Sir mentioned that, I don't get the name, sorry, but Sir mentioned that 20% growth, non-injection cooker, we are very confident. So what gives us this confidence, both external and internal factors, if you can please elaborate, that would clear us because people, I think there is a doubt weighing on investors, if I can make myself clear.

Fundamentally, we have very strong levers at Staukra. We are a manufacturing, brand marketing, distribution company. The three levers for us is, of course, the cost. We are able to control costs at the manufacturing and also the operational cost of the company. It is a very strong driver. We believe the consumers that we are addressing are highly cost conscious. As long as we can make right quality products and then attract the price and then... Make it available to the distribution, through a proper distribution channel, the various channels that we address through, and the ever-growing brand. This is a unique position that we have. We are able to continue to acquire peer over the years. We are probably the youngest company among the peer group, but we are able to definitely get to leadership position by volume in many of the categories. This will continue to happen. I don't see a reason why this can stop. Along with this, we continue to innovate. We are also stronger today with having a very strong team, both domestic here in the country and also with the capabilities that we have set up in China. We are able to develop and bring to market products much faster at the right price and make excite the consumer, even if this is not the customer that was looking for this product, if we can excite them to be consumers for this. All of these cost, distribution, and brand is what I believe is unique to Stovcroft. The combination of all these three in one company is what is driving the growth. We are historically also growing in the last 10 years at about 70-18%, but for some setback with some product categories in the last 2-3 years, we have offset that growth with actual growth that you have reported. So, we believe that we will be able to grow at the same CAGR that we were in the last 10 years. And it is not too surprising for us to grow at 15% plus in the range of 15 to 20%. I don't think there is a challenge.

Just to add to that, you said what are the external factors? The external factors are obviously, you know, mature categories that are largely looking at upgrade and impulse buying. The external factor is also that there is a general overall growth in the economy, especially in the middle and upper middle end. Internal factor, apart from whatever Mr. Gandhi says, is one major thing. We have the most IET backwood integrated factory. So every kind of technology for metalworking, for coating, for electronics, we are probably best placed to bring out the innovative products quickly to the market. It should be very, very agile, not just. You know, cost-effective.

Got it. Sir, on retail, what would be the average sales per store beyond which it will start contributing reasonably to the company?

For us, anything beyond the 2.5 lakhs per store is profitable. We are currently trending at about 4.5 lakhs, and ultimately our target is to at least stabilize at 5 lakhs per store per month.

The last question, exports, you said you are adding beyond U.S., any updates on it, or mostly our target is U.S.?

IKEA supplies are for global markets. We are also working with one large retailer in the U.K. already, Walmart in U.S. and small other retailers. For us, at the moment, with the current customers that we have, we are having enough of... But we will always look at some quality customers, and then in the years ahead, we will add some. Thank you and all the best, sir.

Thank you. The next question is in the line of Rohan Advent from Pratt Capital. Please go ahead.

Yes, sir. Thank you for the opportunity, and congrats on a good set of numbers. Sir, our induction cooktop revenues were 27% in this quarter, which is around 130 crores. Sir, could you tell us what were they in April, May, June, and where they are right now on monthly basis? Because the spike must have been very high, and then there would have been some normalization. So, where we are, and where was it pre-war at the monthly run rate, if you can share that?

There is a good traction, there is a demand, it is in excess of pre-war levels. So, before the year, we began at the level that we were. We are confident of this contribution from induction cooktop to be in the range of at least 20% and a little above that as we progress over the year.

Okay, so 20% contribution from this for the full year FY26 revenue. This is what you are confident. Okay, got it. Okay, thank you, sir. That was my question.

Thank you. The next question is from the line of Anand Munra from Saurveldh. Please go ahead.

Sir, thanks for the opportunity again. I wanted to check about Chibneys. Chibneys is a category. So, Chantru, sir, view on that category. We are very small, and this category is under-penetrated, so we can grow fast.

Yeah, see, look, I mean, we've got some fantastic movement in the chimney category. What we have done is actually revamped the entire range from normal AC motors to BLDC motors, all but one. So that makes us extremely, you know, current and in fact ahead of many of our competitors. And given that we've got our own retail also to drive this, we are very confident that the chimney business is going to grow quite substantially. Manufacturing is our internal manufacturing, which makes us actually very competitive. And what we are also doing is constantly building new designs and new features in this. We are very cognizant of the fact that this category has tremendous potential as we go along. And therefore, we are going to actually push the envelope on these two categories. It's both Chimneys and Wilton talks also as we go along.

Noted, sir. And for Gandhi, sir, I had one question about IKEA business, sir. So do you think IKEA can increase because the base of this year will be high, next year IKEA revenue can help us to report good numbers because domestic market may not grow so much, particularly induction because of the high base.

No, I appreciate that your confidence only on the IKEA business. Of course, we are also very, very excited about the IKEA business. It's a very high quality business, which is also giving us a lot of learning. But our business is diversified into so many channels and so many products and with a huge innovation pipeline. Of course, this will also contribute. At the best, even at a large scale, I mean, the full-bloom, the IKEA business, it may be 5-6% of our business. Today is nothing, of course, but then that is where it can. There are several growth opportunities and drivers. You just now asked Sandro about the chimney. It's a huge opportunity. There are several opportunities that we have built. We have, of course, built our strong capability on cast iron. We are setting up a completely automated line for pressure cookers for tripline. We have not even started this. This will be ready, up and ready in the end of third quarter. And to augment and ensure that we get to leadership in that, we have backward integrated even before we have fully invested in the Tri-Fly. We will be, we have not still harnessed the power and the demand of the Tri-Fly cookware. Within our cooking appliances, we are seeing very high traction in our rice cooker segment, the OTG business. We have a huge headroom available in our Mixer Grinder. Very soon, you will see a... A range of products in the mix of vendors. This is one of the largest category in the small appliances, which either to we were, our contribution from this category was very small. This line, this list of product categories is very large to be explained in one answer. And also our channels. We have opportunities in multiple channels. Our EBO stores growing at 86%. I mean, in the years to come, at a larger base, there is a huge opportunity to grow. The general trade, which was kind of muted for the last two, three years, particularly, we are seeing very high growth. We continue to see that high growth. There is definitely a scope for expansion in exports, including the IKEA business. So I am not underplaying the IKEA opportunity. It is a huge and very exciting opportunity, but we have too many possibilities, avenues to grow.

Noted, sir. This is a very helpful thing. Thank you, sir.

Thank you. The last question is from the line of Nikhat Kaur from Dalit. Please go ahead.

Hi, thank you again for the opportunity. So, can you highlight the growth in the south market as well as the non-south market separately?

We continue to grow on the south. That is our larger base. The north is... Bigger opportunities, smaller base, absolute percentage growth, we are growing faster in the rest of the country versus the south. Particularly, this division has only the contribution of our general trade. But other channels, we are more or less equally divided over the various regions of the country. E-commerce, we are there across every pin code in the country. We are thankful to the players, apart from the new e-commerce players. They have taken our products to every weekend corner of the country. I can say, to answer to your question, in the general trade still, the growth opportunity in terms of percentage is larger than the rest of the country, and we are growing. South is our strongest, followed by West, and then the North and the East. So that is the sequence of our current.

Okay, and what is the south contribution currently?

It is upwards of around 50, around 50 percent.

Okay, got it. Thank you. Due to interest of time, that was the last question. I would now like to hand the conference over to the management for closing comments.

We thank you all for... Having shown so much keen interest into the company's performance, and we hope that we are able to answer your queries. But if you have any queries or want to know more, you can always reach out to our investor relationship team, both at MUFG or Nehman. We will do a good answer to all of you. Thank you. Have a great evening.

On behalf of MUFG End Time, that concludes this conference. Thank you for joining us and you may now disconnect your lines.