ASALCBRNSEfinancial year 202322 November 2022

Associated Alcohols & Breweries Ltd.

7,567words
89turns
9analyst exchanges
1executives
Management on call
Anuj Sonpal from Valorem Advisors. Thank you and over to you sir. Anuj Sonpal
Thank you. Good afternoon everyone and a very warm welcome to you all. My name is Anuj
Key numbers — 40 extracted
Rs. 147 crore
23. Let me take you through the highlights of Q2 FY23. The operated income for Q2 FY23 was around Rs. 147 crores which was an increase of approximately 22% on a year-on-year basis. EBITDA reported around Rs. 1
22%
The operated income for Q2 FY23 was around Rs. 147 crores which was an increase of approximately 22% on a year-on-year basis. EBITDA reported around Rs. 11 crores with a margin for the quarter of 7.
Rs. 11 crore
crores which was an increase of approximately 22% on a year-on-year basis. EBITDA reported around Rs. 11 crores with a margin for the quarter of 7.36%. Profit after tax for the quarter stood at Rs. 7.5 crores
7.36%
2% on a year-on-year basis. EBITDA reported around Rs. 11 crores with a margin for the quarter of 7.36%. Profit after tax for the quarter stood at Rs. 7.5 crores with a PAT margin stood at 5.11%. The r
Rs. 7.5 crore
d Rs. 11 crores with a margin for the quarter of 7.36%. Profit after tax for the quarter stood at Rs. 7.5 crores with a PAT margin stood at 5.11%. The revenue for the quarter was around Rs. 113 crores which wa
5.11%
ter of 7.36%. Profit after tax for the quarter stood at Rs. 7.5 crores with a PAT margin stood at 5.11%. The revenue for the quarter was around Rs. 113 crores which was a significant increase by approx
Rs. 113 crore
stood at Rs. 7.5 crores with a PAT margin stood at 5.11%. The revenue for the quarter was around Rs. 113 crores which was a significant increase by approximately 36% on a year-on-year basis. Sales volume of I
36%
venue for the quarter was around Rs. 113 crores which was a significant increase by approximately 36% on a year-on-year basis. Sales volume of IMIL, IMFL Proprietary and IMFL License Brand were as fo
13 lakh
f IMIL, IMFL Proprietary and IMFL License Brand were as follows. IMIL sale was around 13 lakh cases, IMFL Proprietary was around 3.5 lakh cases, IMFL License brand was around 3.2 lakh cases r
3.5 lakh
rand were as follows. IMIL sale was around 13 lakh cases, IMFL Proprietary was around 3.5 lakh cases, IMFL License brand was around 3.2 lakh cases respectively. And these sales volumes reporte
3.2 lakh
s around 13 lakh cases, IMFL Proprietary was around 3.5 lakh cases, IMFL License brand was around 3.2 lakh cases respectively. And these sales volumes reported a growth of around 48% year-on-year for IMIL
48%
brand was around 3.2 lakh cases respectively. And these sales volumes reported a growth of around 48% year-on-year for IMIL, 55% year-on-year for IMFL proprietary and 38% year-on- year for IMFL licens
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Guidance — 20 items
Tushar Bhandari
opening
“We expect the input price to reach a normalized level in the line of previous year which will favorably impact our business economics enabling us to improve margin and overall profitability.”
Tushar Bhandari
opening
“Further on the progress of the Ethanol project, the same is in full swing and expected to start commercial production by end of Q4 FY23.”
Raghav Chaudhary
qa
“Going forward, do you see ours returning to the 17% EBITDA margins anytime soon or do we have any anticipated time frame for the same?”
Tushar Bhandari
qa
“But as per the motive of the company, we will be the most efficient company in the industry and we are trying to achieve that and we will be able to achieve a double-digit EBITDA margin contribution in that basis.”
Manish Dhariwal
qa
“Can you please convert that into some quantitative numbers as to what will be the market share?”
Manish Dhariwal
qa
“Because I understand that the plant will achieve 100% utilization because it's a regional plant.”
Tushar Bhandari
qa
“Because the government has only been able to achieve slightly lesser than 10% of the Ethanol mix, the target is 10% for this year.”
Tushar Bhandari
qa
“If the target is to move to 20%, so, the government is also pushing the production.”
Tushar Bhandari
qa
“The day we start the ethanol manufacturing, it will be 100% utilized.”
Management
qa
“As far as the numbers go, the numbers are in line with the Q1 and the margin percentage will be aligned in Q1.”
Risks & concerns — 6 flagged
EBITDA margins were lower due to lower sales realization and inflationary pressure on the input material.
— Tushar Bhandari
If management says that in this quarter there was inflationary pressure.
— Ashok
So, what exactly we are doing to up come or to get relief from this pressure?
— Ashok
Because the reason why I'm asking this question that our main plant is situated in the center of MP which is a food basket, still we are not able to overcome the inflationary pressure.
— Ashok
Increase of inventory concern it may be slightly in lesser in comparison to last year but look into the volume and increase in prices
— Management
I think you're rightly pointed out as far as the financial fundamentals of the concern with the associated and Everest Mount is concerned but the merger is not purely on the basis of historical fundamentals or only the future or the future fundamentals?
— Management
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Q&A — 9 exchanges
Q
Congratulations on the Q2 performance. Question what I had is: we have grown YoY our revenue but what is the reason for depleted EBITDA margins because our profit has dropped quite a lot. What is the reason for the same?
Tushar Bhandari
Good afternoon Raghav, as I mentioned in my speech that this year was an exceptional year wherein we aggressively tried to capture the maximum amount of market share. In the quest to capture the market share, there has been a lower in sales price realization. Apart from that the margin has been impacted because of the increase of the commodity price. As compared to last six months, the grain price has gone up by approximately 40% and coal price has gone up by approximately 80%. Because of the increase in the grain price and the coal price, the margins have been impacted and as you are aware th
Q
In the quarter, you said that there were some price allegations basically that's why the EBITDA margins were affected. For the coming quarter, is there any indication whether it'll stabilize? Because you said that the commodity prices have been affecting your business.
Tushar Bhandari
Yes. We have seen a slight downward rain in the commodity prices which will help us in getting back our margin. As I already said that in certain other places wherever we can take a price increase, we are trying to do that. As an excise item, we have to take an approval every year. And government is very strict in giving price increases. If you would see that wherever the cases have been like ENA prices and all we've been able to take the price increase and we have been able to get the realization better. So, just for an example, RM contribution in this year was around 55%, and last year it wa
Q
The performance has been pretty tough this time I guess as you explain that you spend money on gaining market share and the raw material cost is also pretty high. So, my request was to understand the market share movement of the company. What has it last year and how it is now? We understand that this quarter was tough because there was a twin effect: one at the raw material side and the second the investment on the marketing cost to gain market share. So what is the status? How was the market share right now?
Tushar Bhandari
Basically, market share has improved drastically and it is a segment wise improvement in the market share. Basically, in IMIL my market share is almost doubled with the help of that in IMFL also we are able to gain across the board; we are able to gain around 5-7% of market share. Apart from that in other states also were able to gain a substantial amount of market share. Like in Kerala, we have doubled our sales in other states also our sales are increasing. Our market share has increased because of this aggressive strategy and the increase in the market share will help us in a long-term basi
Q
I have a couple of questions. First one on your Mount Everest numbers you can share both top- line and EBITDA.
Management
As far as the numbers go, the numbers are in line with the Q1 and the margin percentage will be aligned in Q1. We don’t have an exact number and we will…. So, would it be in the range of Rs. 190 odd crores with an EBITDA of Rs. 35 crores? That's what you have put in Q1. Breweries is seasonal business and the second quarter is a little lean than the first quarter because the first quarter is in full swing. So, the numbers will be grown from the last year YoY basis and it will be aligned and the growth will be there. And in the Mount Everest breweries also it is one of the leading breweries in c
Q
Basically, my question is that I can see that since last year June 2021, operating margins are going down and it's a trend. If management says that in this quarter there was inflationary pressure. So, what exactly we are doing to up come or to get relief from this pressure? Because the reason why I'm asking this question that our main plant is situated in the center of MP which is a food basket, still we are not able to overcome the inflationary pressure. Why the management is not opting to enter into a kind of a future contract for food grains to move out? Because since it's almost one year,
Tushar Bhandari
Basically, we have also been concerned over this and apart from that what we have done is that; not advanced purchase of food grains we have at certain point of time when we think that the advantage to our company is one is: we are debt free company and second is that we have got a huge cash also on us so we take these to our advantage. As you said that the company should also go in advanced purchases. So, we've got a research team which researches across the India the price of the grain movement. On that basis if they feel that it's better to book the price at a lower end and stock it, we do
Q
My question was basically on the P&L front, we can see a big change inventory and showing a pile up in the inventory of the ending inventory. Are these finished goods or is this raw material? What's leading to this increase inventory?
Tushar Bhandari
Most of it is relating to the finished good only. As you see the sale of our own products in IMIL, IMIL has increased by 48%. IMFL proprietary brands have increased by 54%. License brands have increased by approximately 38-40%. This is because of the increase in inventory the inventory only. Because you're holding inventory for future demand because you've taken the price cuts. Sales have increased. According to the increase in sale, you have to maintain the inventory and you have to maintain your packaging material according to the increase in sale. Increase of inventory concern it may be sli
Q
Can you give me the exact enterprise value for MEBL? What is the date that you're looking for exactly for getting?
Tushar Bhandari
You're asking for exact MEBL value, enterprise value? Enterprise value or equity value? Either one. We have already uploaded the valuation report from the registered valuer so that can be referred, that represents the entire value of both the enterprises. Basically, as for the value of enterprise is concerned the seasons pertaining to valuation that is already said as Mr. Keith has pointed out. What we are saying as far from the merger perspective is concerned, one company is the B2C company where we are having the substantially the branded positioning in the market and we are going. Another i
Q
My question is mainly on the merger proposition with Mount Everest. I have also gone through the evaluation report uploaded in your website and it is fair to mention that there is no enterprise value mentioned there and out of this approved method for valuation, this net asset value has been completely disregarded. Mounted Everest company, it is only in one product which is only the brewery of the Beers. It has only three products like quoting with three brands whereas our company, Associated has about seven products. Seven products and the multiple umbrella brand. That is number one. We canno
Management
I think you're rightly pointed out as far as the financial fundamentals of the concern with the associated and Everest Mount is concerned but the merger is not purely on the basis of historical fundamentals or only the future or the future fundamentals? Basically it is something different what we are trying to explain to you and it is already there in the report. One company is a financially very strong diverse product company having consistent the fundamentals but it was in the process of creating the brand from over the years whether it created 10 brands, 5 brands or whatever the brand, but
Q
Thank you all for participating in the earnings concall. I hope we were able to answer your questions satisfactorily and at the same time offer insight into our business. If you have any further questions or would like to know more about the company, please reach out to our Investor Relationship Manager at Valorem Advisors. Thank you.
Management
Speaking time
Tushar Bhandari
34
Moderator
11
Manish Dhariwal
8
Dhruv Shah
8
Management
6
Ashok
4
Arjun
4
Raghav Chaudhary
3
Shri Krishna
3
Jainesh Shah
3
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Opening remarks
Anuj Sonpal
Thank you. Good afternoon everyone and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Associated Alcohols and Breweries Limited. On behalf of the company, I'd like to thank you all for participating in the company's earnings call for the second quarter of the financial year 2023. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundame
Tushar Bhandari
Thank you Anuj Ji and good afternoon everybody. It is a pleasure to welcome you to our earnings conference call for the second quarter for the financial year ending 2023. Let me take you through the highlights of Q2 FY23. The operated income for Q2 FY23 was around Rs. 147 crores which was an increase of approximately 22% on a year-on-year basis. EBITDA reported around Rs. 11 crores with a margin for the quarter of 7.36%. Profit after tax for the quarter stood at Rs. 7.5 crores with a PAT margin stood at 5.11%. The revenue for the quarter was around Rs. 113 crores which was a significant increase by approximately 36% on a year-on-year basis. Sales volume of IMIL, IMFL Proprietary and IMFL License Brand were as follows. IMIL sale was around 13 lakh cases, IMFL Proprietary was around 3.5 lakh cases, IMFL License brand was around 3.2 lakh cases respectively. And these sales volumes reported a growth of around 48% year-on-year for IMIL, 55% year-on-year for IMFL proprietary and 38% year-on-
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