RADICONSEFull Year FY2022June 06, 2022

Radico Khaitan Limited

5,698words
68turns
7analyst exchanges
1executives
Management on call
Abhishek Khaitan
Managing Director, Mr. Amar Sinha – COO, Mr. Dilip
Key numbers — 40 extracted
28%
nother quarter of a strong IMFL volume growth led by Prestige & Above category which increased by 28%. In volume as well as value terms, Q4 FY22 has been the highest ever reported by Radico Khaitan.
26.4 million
We have continued to outperform the industry for the sixth consecutive year with total volumes of 26.4 million cases in FY22 which is 18% y-o-y growth compared to an estimated industry growth of 13%. Our growt
18%
industry for the sixth consecutive year with total volumes of 26.4 million cases in FY22 which is 18% y-o-y growth compared to an estimated industry growth of 13%. Our growth was broad- based across t
13%
f 26.4 million cases in FY22 which is 18% y-o-y growth compared to an estimated industry growth of 13%. Our growth was broad- based across the portfolio and across states. 8PM Premium Black whisky whi
15%
rce our future growth trajectory. We expect to maintain the volume expansion trajectory of 13% to 15% in FY23 with stronger Prestige & Above growth. As you are aware that the cost of key raw materi
7.29 million
veryone, for joining us on this call today. During the fourth quarter, we reported IMFL volume of 7.29 million cases representing an increase of 16.3% on Y-o-Y basis. This was led by Prestige & Above catego
16.3%
ing the fourth quarter, we reported IMFL volume of 7.29 million cases representing an increase of 16.3% on Y-o-Y basis. This was led by Prestige & Above category volume growth of 28.1%. In value terms,
28.1%
g an increase of 16.3% on Y-o-Y basis. This was led by Prestige & Above category volume growth of 28.1%. In value terms, Prestige & Above category registered 30.5% growth. Prestige & Above category acc
30.5%
e & Above category volume growth of 28.1%. In value terms, Prestige & Above category registered 30.5% growth. Prestige & Above category account for 31.1% of total IMFL volume compared to 28.2% in Q4
31.1%
terms, Prestige & Above category registered 30.5% growth. Prestige & Above category account for 31.1% of total IMFL volume compared to 28.2% in Q4 of FY21. Net revenue from operation during Q4 was Rs
28.2%
stered 30.5% growth. Prestige & Above category account for 31.1% of total IMFL volume compared to 28.2% in Q4 of FY21. Net revenue from operation during Q4 was Rs. 813 crore representing an increase
Rs. 813 crore
1% of total IMFL volume compared to 28.2% in Q4 of FY21. Net revenue from operation during Q4 was Rs. 813 crore representing an increase of 18% compared to Q4 FY21. During this period, IMFL sales value incre
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Guidance — 20 items
Abhishek Khaitan
opening
“Magic Moments Vodka is seeing very strong volume traction which will be a key growth driver for FY23.”
Abhishek Khaitan
opening
“We expect to maintain the volume expansion trajectory of 13% to 15% in FY23 with stronger Prestige & Above growth.”
Abhishek Khaitan
opening
“We expect Rampur dual feed plant to be operational by Q3 FY23.”
Abhishek Khaitan
opening
“Both our Rampur and Sitapur plants will be operational.”
Dilip Banthiya
opening
“Going forward, we expect raw material prices situation to remain volatile.”
Dilip Banthiya
opening
“In the long term, we expect to continue our margin expansion trajectory given our portfolio premiumization and backward integration.”
Harit Kapoor
qa
“First was on the on the 13% to 15% growth that you are expecting going forward.”
Dilip Banthiya
qa
“So yes, we will be back to our expansion trajectory from H2 of current year.”
Dilip Banthiya
qa
“And by FY24, we will be back on 16-17% kind of margin with the ongoing premiumization, the price increase, non-IMFL again going back on profitability.”
Dilip Banthiya
qa
“Our production facilities will be on, so backward integration profits will also be derived.”
Risks & concerns — 11 flagged
In the near time, the situation is expected to remain volatile.
— Abhishek Khaitan
During this period of uncertainty, we are focused on value engineering across the brand portfolio to minimize the impact of cost push.
— Abhishek Khaitan
This would help us to offset the input cost pressure to a large extent.
— Abhishek Khaitan
The impact of the cost push has been much severe in the non-IMFL business where we are expecting a price increase soon.
— Abhishek Khaitan
Going forward, we expect raw material prices situation to remain volatile.
— Dilip Banthiya
However, over the last few weeks, the trend of certain commodity globally seems to be stabilizing now, but it is difficult to comment on the way forward.
— Dilip Banthiya
The Company is taking all efforts to optimize cost and to mitigate any margin headwinds which along with recently received price increases shall help in offsetting the inflationary pressure.
— Dilip Banthiya
It is very difficult to give you state-by-state performance, but I'll give you some very specific highlights.
— Amar Sinha
In last quarter Q4, it has become negative and because of that, there is a two-third of the pressure on the operating margin is on account of non-IMFL and rest one-third is on account of the increase in the ENA and the grain price and the packaging material [in IMFL].
— Dilip Banthiya
Or the entire price hike was 3% because you may have got a hike in different periods of quarter, so the full impact of that may or may not have come in the quarter.
— Sonaal Kohli
There has been near-term margin pressure due to commodity inflation but we are confident of maintaining our long-term margin expansion given the premiumization of our portfolio and backward integration.
— Dilip Banthiya
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Q&A — 7 exchanges
Q
Just had two or three questions. First was on the on the 13% to 15% growth that you are expecting going forward. Would that be at an overall level? Or are you saying for IMFL or for P&A? What's that guidance for?
Dilip Banthiya
So we are expecting this 13% to 15% growth on the overall IMFL, where the Prestige & Above category are going to grow at strong double digits. Second thing, you mentioned that you will get back to historical margin level, which is that 16%, 17% kind of a number which you had achieved in FY21. Would it be fair to assume that the full year FY24, given the benefits that you've got to get from the Capex as well as possible price hike, by then you can achieve, is that something that you'll be targeting to get back to? So yes, we will be back to our expansion trajectory from H2 of current year. And
Q
We've got the price increase in the state of Uttar Pradesh. So that is overall in the range of about 8-10%. And then we've got in states like Uttarakhand which is in the range of about 10-15%. Rajasthan, we've got 6% price increase and MP also, we've got about 10% price increase. So overall blended, it comes to 300 basis points. Kaustubh Pawaskar: Okay sir, so blended comes to 300 basis points. And plus there would be a mix improvement which will add on to your realization in FY23, right?
Abhishek Khaitan
Yes, absolutely. And we are also expecting price increases from other states where we are working very hard. So hopefully, we should be getting price increases in the coming months. 5 | Page Q4 FY2022 Earnings Call Transcript Sir, my second question is, you have presence in some of these large markets. So can you just give some perspective on highlights of how was the performance in these markets in FY22? And what are your expectations considering the fact that you have been expanding your capacity? It is very difficult to give you state-by-state performance, but I'll give you some very specif
Q
Sir, the Capex that just you mentioned is Rs. 180 crore plus Rs. 550 crore?
Dilip Banthiya
Yes. Both will become operational this year or next year? 6 | Page Q4 FY2022 Earnings Call Transcript Rampur dual feed will come in operation from Q3 FY23 and Sitapur plant will come in operation at the end of Q4. So from the beginning of '2023-2024, this will be fully operational. So this grain alcohol is meant for substituting what you purchased from outside or it is meant for the growth? So yes, as we have earlier guided when we have announced this Capex and given a full background about the reason and rationale behind doing the Capex. The UP state government has created one category, which
Q
Congratulations on a good set of numbers with strong double-digit growth. I wanted to understand, sir, our year-on-year growth has been really healthy on the volume trend, even on the regular and above. But in P&A, we saw 4% de- growth quarter-on-quarter. Any specific reason? Or in January Omicron was probably the thing that impacted it?
Dilip Banthiya
Quarter 3 from the seasonal point of view is the highest quarter for industry. However, but this is a marginal impact. It is consistently growing. And in this quarter again, overall volume growth has been 16%. And for the full year, we have grown 18%. Overall, the Prestige & Above has been 24.5%. Understood sir. And second question was probably on the gross margin again. You have well explained like what was the impact. But if I probably refer to the market leader who reported the numbers recently, although we have a higher gross margin, like historically, regarding the market leader. But here
Q
I had some questions regarding the EBITDA margin extrapolation which you have given. So when I look at your Capex which is coming up, is my understanding correct based on certain calculations we have done that you have at least 350 basis points addition in your EBITDA margins in FY24, based on the Capex you have done?
Dilip Banthiya
So Sonaal, the EBITDA margin overall for the year has been 14% vs last year 16.9%. As I said that two-third of our margin erosion in EBITDA as well as in gross largely is on account of non-IMFL. I'm sorry. Let me repeat my question. I wasn't referring to this year, I'm talking about FY24. So you are doing the new Capex, right? The Capex will fully pay you off for the full financial year in FY24. It will partially pay you off in FY23. So when you take the benefit of this Capex, ENA which you are going to make from molasses, my understanding is the benefit would be conservatively 350 basis point
Q
What will be the debt outlook for the debt in another maybe two, three, four years down the line as we are doing a lot of Capex.
Dilip Banthiya
So as per our plan, our debt at this point of time on a net basis is Rs. 119 crore. With the current cash flow and internal accrual being deployed in the project expansion, our debt will be at March ’23 in the range of Rs. 600 Crores to Rs. 610 Crores. And thereafter, we will have a free cash flow. In two years' time, we will be a debt-free company. So as per our plan by the year 2025, we'll be a debt-free with some surplus. And secondly, what's the vision for maybe five years down the line? Because since I'm a long-term investor, I'm an investor since last seven, eight years and so on. So vis
Q
Thank you, everyone. We have continued to deliver upon our premiumization strategy which is reflected in the strong P&A volume growth during the quarter and the full year. All our core premium brands are registering a strong growth. The two new luxury brands are also doing very well and continue to receive positive consumer and trade feedback in the new markets that they are being rolled out. Next year, we will roll them out on pan India level. There has been near-term margin pressure due to commodity inflation but we are confident of maintaining our long-term margin expansion given the premiu
Management
Speaking time
Dilip Banthiya
21
Moderator
9
Sonaal Kohli
8
Abhishek Khaitan
7
Amar Sinha
5
Pritesh Chheda
5
Harit Kapoor
4
Chetan Cholera
4
Nikhil Chowdhary
3
Saaksha Mantoo
1
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Opening remarks
Saaksha Mantoo
Thank you. Good afternoon, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Abhishek Khaitan – Managing Director, Mr. Amar Sinha – COO, Mr. Dilip Banthiya – CFO and Mr. Sanjeev Banga – President, International Business. I shall now hand over the call to Mr. Abhishek Khaitan for his opening remarks. Over to you, sir.
Abhishek Khaitan
Good afternoon, ladies and gentlemen. Thank you for joining us on our fourth quarter FY22 results conference call. I hope you are all doing well and keeping safe. Building upon the momentum from the first nine months of the year, we have delivered another quarter of a strong IMFL volume growth led by Prestige & Above category which increased by 28%. In volume as well as value terms, Q4 FY22 has been the highest ever reported by Radico Khaitan. We have continued to outperform the industry for the sixth consecutive year with total volumes of 26.4 million cases in FY22 which is 18% y-o-y growth compared to an estimated industry growth of 13%. Our growth was broad- based across the portfolio and across states. 8PM Premium Black whisky which achieved a million case mark last year has crossed two million cases volume. It is now available across 20 states and will continue to contribute to our growth. Recently launched Royal Ranthambore Whisky and Magic Moments Vodka are now available across
Dilip Banthiya
Thank you, Abhishek. Thank you, everyone, for joining us on this call today. During the fourth quarter, we reported IMFL volume of 7.29 million cases representing an increase of 16.3% on Y-o-Y basis. This was led by Prestige & Above category volume growth of 28.1%. In value terms, Prestige & Above category registered 30.5% growth. Prestige & Above category account for 31.1% of total IMFL volume compared to 28.2% in Q4 of FY21. Net revenue from operation during Q4 was Rs. 813 crore representing an increase of 18% compared to Q4 FY21. During this period, IMFL sales value increased by 21%. As a percentage of total revenue, IMFL sales account for 81.7% of net revenue compared to 79.5% in Q4 last year. Gross margin during the quarter was 42.7%. This was impacted due to the ongoing commodity inflation, particularly in non-IMFL business. On Y-o-Y basis, some of the key commodity prices have increased in the range of 30% to 50% during Q4. Despite a significant increase in the raw material pric
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