PGILNSEQ2FY23November 18, 2022

Pearl Global Industries Limited

6,443words

75turns

7analyst exchanges

0executives

Key numbers — 40 extracted

53%

e reported the highest ever H1 performance. On a consolidated basis, H1 FY23 revenue increased by 53% Y-on-Y to Rs.1711.4 Crores on account of increase in overseas revenue by 30% and India by 60%. On

Rs.1711.4 Crore

highest ever H1 performance. On a consolidated basis, H1 FY23 revenue increased by 53% Y-on-Y to Rs.1711.4 Crores on account of increase in overseas revenue by 30% and India by 60%. On a standalone basis, reven

30%

venue increased by 53% Y-on-Y to Rs.1711.4 Crores on account of increase in overseas revenue by 30% and India by 60%. On a standalone basis, revenue for H1 FY23 stood at Rs.628.4 Crores, a growth o

60%

by 53% Y-on-Y to Rs.1711.4 Crores on account of increase in overseas revenue by 30% and India by 60%. On a standalone basis, revenue for H1 FY23 stood at Rs.628.4 Crores, a growth of 62.7% over H1 F

Rs.628.4 Crore

in overseas revenue by 30% and India by 60%. On a standalone basis, revenue for H1 FY23 stood at Rs.628.4 Crores, a growth of 62.7% over H1 FY22. Improved overseas business performance can be attributed to imp

62.7%

nd India by 60%. On a standalone basis, revenue for H1 FY23 stood at Rs.628.4 Crores, a growth of 62.7% over H1 FY22. Improved overseas business performance can be attributed to improved realisations w

119.6 Crore

ces shipped along with improved realisations. On a consolidated basis EBITDA for H1 FY23 stood at 119.6 Crores a growth of 106% while margins improved 180 bps year-on-year from 5.2% in H1 FY22 to 7% in H1 FY

106%

proved realisations. On a consolidated basis EBITDA for H1 FY23 stood at 119.6 Crores a growth of 106% while margins improved 180 bps year-on-year from 5.2% in H1 FY22 to 7% in H1 FY23. On a standal

180 bps

nsolidated basis EBITDA for H1 FY23 stood at 119.6 Crores a growth of 106% while margins improved 180 bps year-on-year from 5.2% in H1 FY22 to 7% in H1 FY23. On a standalone basis EBITDA for H1 FY23 stoo

5.2%

r H1 FY23 stood at 119.6 Crores a growth of 106% while margins improved 180 bps year-on-year from 5.2% in H1 FY22 to 7% in H1 FY23. On a standalone basis EBITDA for H1 FY23 stood at 38.1 Crores a grow

119.6 Crores a growth of 106% while margins improved 180 bps year-on-year from 5.2% in H1 FY22 to 7% in H1 FY23. On a standalone basis EBITDA for H1 FY23 stood at 38.1 Crores a growth of 109.6% whil

38.1 Crore

-on-year from 5.2% in H1 FY22 to 7% in H1 FY23. On a standalone basis EBITDA for H1 FY23 stood at 38.1 Crores a growth of 109.6% while margins improved 140 basis points year-on-year from 4.7% in H1 FY22 to

Guidance — 20 items

Pallab Banerjee

opening

“We have been servicing the customers from multiple manufacturing locations and we continue to do that and that is definitely a strength that Pearl will be encashing upon.”

Pallab Banerjee

“So far the sentiment says that this bipolar world is going to continue that means there will be a lot of policies and moves against China being the world factory so that means that the other producing regions of the world will have something to gain compared to China.”

Sanjay Gandhi

“Well in some day if the partnership factory’s revenue is increasing there will be increase in other expenses there will be less increase in the employee expenses so you will see the other expenses will go high because we are doing more of a CNM model where we pay to the subcontractors or the partnership factory as the goods gets delivered to us.”

Pallab Banerjee

“Now spring and summer of 23 was directly proportional to the sentiments that the western markets had in the spring and summer of 22 and the fall 23 bookings or the planning that will be happening over the next couple of months would be in proportion to the sentiments that we are having now in the market.”

Vignesh Iyer

“Ok Last question from my side I just want to know if you are going to revise your guidance for FY23 that you gave in Q1 which was around sales of 3,200 Crores and margin you said it should be around Q1 FY23 which I presume it is 7.5% roughly so is there any change in your guidance or it is going to still stick to it?”

Sanjay Gandhi

“Overall as we look at a full year basis we should improve EBITDA margin compared to what it was there in last year, we should be able to get a complete hang of it I think by end of December as to where we should have a complete full year picture but definitely there will be improvement compared to last year.”

Riddhesh Gandhi

“Hi, sir just wanted to understand with this increasing base of revenue and the operational efficiencies kicking in and the utilizations kicking in yet our EBITDA margins are roughly still the same and we are not seeing an uptick is this because of the RM pressure and do we expect this to the normalize going into FY24?”

Riddhesh Gandhi

“Got it understood so we are like 90% plus in terms of H1 and we expect H2 given we have probably got a reasonable amount of visibility in line with H1?”

Riddhesh Gandhi

“EBITDA I think the last year we did roughly I think if I recall at about 8% EBITDA margin so this year we are tracking slightly lower at about 6% so do we expect to close this year above 8% so effectively H2 would have reasonably higher EBITDA margins?”

Riddhesh Gandhi

“Just to understand obviously the EBITDA margins of the company obviously depends a lot on to the product mix as well given what our product mix is in terms of if you look at FY24-FY25 how high can we go to in terms of EBITDA margins?”

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Risks & concerns — 4 flagged

My second question was despite actually being a seasonally weak period we have delivered a highest ever H1 revenues so was that a result of prebooking of the orders and are we confident that this revenue trajectory going ahead?

— Parth Vasani

Hi, sir just wanted to understand with this increasing base of revenue and the operational efficiencies kicking in and the utilizations kicking in yet our EBITDA margins are roughly still the same and we are not seeing an uptick is this because of the RM pressure and do we expect this to the normalize going into FY24?

— Riddhesh Gandhi

The kind of the growth that we had in H1 may not be there in H2 because of the market how it is nearing, so our focus would be to maintain the market share that we have had, the growth might slowdown, the topline might slowdown but whatever we have gained we should not be losing out that market share, again that as the market normalizes then we should again grow so that is the kind of strategy that we would have.

— Pallab Banerjee

The kind of customers that we are talking about are the people like who are the major retailers across the globe, so as I said like otherwise this insurance, or the risk mitigation is not possible.

— Pallab Banerjee

Q&A — 7 exchanges

Hi, thank you for the opportunity. I had couple of questions. First one would be could you tell us what is our business mode and what differentiate us from our competitors?

Pallab Banerjee

Pearl has been positioned for multiproduct and multicountry manufacturing company, so we do various products right from woven tops, knit tops, dresses, bottoms, pants,denims, then we have got the outer wear, the active wear so that again brings in quite a wide amount of product for our customers. The strategic customers that have been working with us have been working in multiple products and they have been also using our multiple countries of manufacturing. So during the kind of the recent upheaval that we have had regionally whether during the pandemic or during the logistics challenges that

Congratulations. Good set of numbers in a very tough circumstances and my question is on the fact that, so I am going through the consolidated P&L right so what I am seeing here is we have not deteriorated in the gross profit margin revenue in fact we have actually improved a bit so why the opex expense is so high that our EBITDA is getting impacted? Is there anything specific or is there anything one off to this quarter so I just wanted to understand that?

Sanjay Gandhi

Hi, There is no one-off as such we have in the opex in this particular quarter I think this quarter is having all operating expenses which are normally supposed to be in Q2 of the last financial year when we compare a like-to-like quarter-on-quarter comparison that is why you see the EBITDA margin is showing a slight improvement compared to the last year we had 5.9% in Q2 FY22 against 6.1% in Q2 FY23. OIf like-to-like say the revenue from operation has gone up by 26% Y-o-Y but your other expenses is more than 33% if I get a rough estimate of it? The other expenses includes the manufacturing co

Pallab Banerjee

The raw material price is fluctuating and in our industry like normally we pass on the raw material price difference to the customers so yes so that trend will continue. In terms of the efficiencies yes like if we are regularly with this growth and the kind of volume or the kind of capacity utilization that we are targeting towards year-on-year definitely the efficiency should be stabilizing and improving I would say. Right now how much is the kind of capacity utilization which we are running at? The H1 that we had was definitely 90% plus. Got it understood so we are like 90% plus in terms of

Hi, I have few questions. Starting with on the margin front so how did you manage to deliver such good margins despite an increase in revenue from partnership facilities and will margins not affect going forward assuming contribution from partnership facilities improved?

Sanjay Gandhi

You see the H1 margin improvement has been largely because of the product mix we have that is where the USP of Pearls comes into while we are expanding to the partnership factory to get maybe at a slightly lower margin at the same time our factories in Vietnam, Indonesia are in high end categories outer wear segments where the FOB price which is a realization per piece has been increasing at least in some products while it has been 75% to 80% growth compared to what it was last year. So when you look at a basket of all the product put together overseas and India, Bangladesh, Vietnam and Indone

Good morning Sir, I have two questions on the customers and the capacity utilization, so first on the customers who are the new customers that have joined our kitty over the last quarter or half year?

Pallab Banerjee

We have a strict policy in terms of inputting our customers so normally the customer has to be that means there should be insurance factoring will be available, so we are not bringing in any risky customers, we are going for the kinds of customers where we do have the insurance or the factoring completely available. Ok and Would there be any inventory pileup on the customers end and how would that affect us? The kind of customers that we are talking about are the people like who are the major retailers across the globe, so as I said like otherwise this insurance, or the risk mitigation is not

I just have a couple of questions. Firstly being can you throw some light on the growth drivers of the business going ahead, what give you the confidence of the strong order book?

Pallab Banerjee

Sorry the second part of the question can you repeat. What give you the confidence of a strong order book? As I said like Pearl is very strongly positioned with our strategic customers because we are supplying multiple products from multiple locations so that gives us the confidence. Our presence in the more matured manufacturing markets like Indonesia, Vietnam and Bangladesh which all three of these have significant advantage and maturity compared to India so that gives us the second part of the confidence. The kind of strategic relationship that we have with our top five or six customers whe

Thank you everyone. I hope we have been able to answer all your questions satisfactorily. However should you need any further clarification or would like to know more about the company please feel free to contact our team or SGA, our Investor Relations advisor. Thank you once again for taking the time to join us on the call.

Management

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Speaking time

Pallab Banerjee

Sanjay Gandhi

Moderator

Vignesh Iyer

Riddhesh Gandhi

Prachi Sharma

Parth Vasani

Ashay Jain

Akash Mehta

Opening remarks

Pallab Banerjee

Hi, good morning, and I welcome everyone to our Q2 & H1 of Financial Year 2023 Earnings Conference Call. Along with me we have our group CFO, Mr. Sanjay Gandhi and SGA our Investor Relations Advisors. I hope all of you have gone through our Investor Presentation uploaded on the exchange and our company website. I am happy to state that the growth momentum continued for us during the first half year of Financial Year 23 and we achieved a path breaking highest ever H1 revenue. Our capacity utilization has improved substantially which has increased the overall efficiency of our operations. On the geographic mix of sales our overseas sales have grown on the back of increase in the unit value realizations while the domestic sales that means in India have risen both due to the increased volume and increase in the realization that we have done.With the backdrop of the macro challenges we have focused on the geographical diversity in our customer base. This should help us to maintain our overa

Sanjay Gandhi

Thank you. Good morning everybody and welcome to our Q2 & H1 FY23 earnings conference call. Coming to the financial and operational performance of the Company we have reported the highest ever H1 performance. On a consolidated basis, H1 FY23 revenue increased by 53% Y-on-Y to Rs.1711.4 Crores on account of increase in overseas revenue by 30% and India by 60%. On a standalone basis, revenue for H1 FY23 stood at Rs.628.4 Crores, a growth of 62.7% over H1 FY22. Improved overseas business performance can be attributed to improved realisations whereas in India improved performance is a combination of increase in number of pieces shipped along with improved realisations. On a consolidated basis EBITDA for H1 FY23 stood at 119.6 Crores a growth of 106% while margins improved 180 bps year-on-year from 5.2% in H1 FY22 to 7% in H1 FY23. On a standalone basis EBITDA for H1 FY23 stood at 38.1 Crores a growth of 109.6% while margins improved 140 basis points year-on-year from 4.7% in H1 FY22 to 6.1

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Pearl Global Industries Limited

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