Aditya Vision Limited (540205) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '25 Earnings Conference Call of Aditya Vision Limited hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Percy Panthaki from IIFL Securities Limited. Thank you, and over to you, sir.

Good afternoon, everyone. It's our pleasure to host the management of Aditya Vision Limited. With me, I have Mr. Yashovardhan Sinha, Chairman and Managing Director; and Ms. Yosham Vardhan, Whole Time Director. To take you through the results, I will hand over now to the management. Over to you, sir.

Thank you, Percy. Good afternoon, ladies and gentlemen. And welcome to our Earnings Conference call for Q3 and 9 months for FY '25. Today, we will be discussing our company's financial performance and a strategic decisions. Our investor presentation is available on the exchange, and we trust you have had an opportunity to review it. We are happy to support a strong performance in the first 9 months of FY '25 with consistent results across all key financial metrics. For the first 9 months of FY '25, our revenues grew from INR 1,367 crores in 9 months FY '24 to INR 1,773 crores, an increase of 30%, and our PAT grew from INR 69.22 crores in 9 months FY '24 to INR 89.51 crores, an increase of 29%. In 9 months FY '25, we have already surpassed the entire revenue impact of FY '24. While EBITDA and PAT margins have remained stable due to our deliberate focus on scaling the business, we continue to remain committed to driving operational efficiencies and sustaining long-term growth. We have reported a good performance in third quarter as well despite overall subdued consumption and sluggish demand. Our revenues grew from INR 413 crores in Q3 FY '24 to INR 508 crores in Q3 FY '25, reflecting a growth of 23%. Our EBITDA margin stood at 9.16% for the quarter. Profit after tax grew by 9.25% year-on-year to INR 24.22 crores. We success -- we successfully opened 5 stores in Q3 FY '25, taking our stores count to 161 by end of Q3 FY '25. We are on track to scale up our business and open stores strategically. As on date, we have 167 operational stores. We are now present with 29 stores in 18 districts of UP out of total 75 districts. This financial year, we have started expanding our operations in UP beyond Purvanchal Eastern UP. And now have around 8 stores operational in central UP, including 4 stores operational in the state capital Lucknow. In Purvanchal, Eastern UP, we have established a strong presence in key cities such as Varanasi, Prayagraj and Gorakhpur. In this financial FY '25 we have already opened 22 stores and surpassing our guidance. We are on track to open 8 to 10 additional stores by the end of financial year '25. We have made significant progress in Jharkhand and Uttar Pradesh, which is reflected in the increasing revenue contribution coming from these regions in Q3 FY '25. In Q3 FY '25, Bihar was the largest contributor to our revenue at 79%, followed by Jharkhand at 13% and Uttar Pradesh at 9%. In 9 months FY '24, Bihar's contribution stands at 81%, followed by Jharkhand and UP at 11% and 8%, respectively. Our focus remains on expanding our retail footprint by strengthening existing locations and entering new markets in Hindi Heartland, which represents substantial growth potential. We are confident to surpass the target of 200 stores by FY '26. The same-store sales growth for 9 months FY '25 stands at impressive 15%. Finally, I would like to emphasize that we continue to invest in future growth as long-term tailwinds are very strong in consumer durable industry, as well as geography where we have chosen to operate. We remain confident in our future and our ability to set the new industry standards and records. I will now hand over the floor to Ms. Yosham Vardhan to provide an overview of the financial highlights for this quarter. Over to you, Yosham.

Thank you, sir. Good afternoon, ladies and gentlemen. We are pleased to present the robust financial performance of Q3 FY '25 and 9 months FY '25. Here is a summary of our financial achievements. In 9 months FY '25, revenues surged by 30% from INR 1,367.62 crores in 9 months FY '24 to INR 1,733.08 crores in 9 months FY '25. Gross margins were maintained at 15.37% with EBITDA reaching INR 161.75 crores. EBITDA margin stood strong at 9.12% during the period. PAT grew by 29%, rising from INR 69.22 crores in 9 months FY '24 to INR 89.51 crores in 9 month FY '25. SSSG for 9 months FY '25 stood impressive at 15%. In Q3 FY '25, revenue saw a Y-o-Y increase of 23%, reaching INR 508.45 crores compared to INR 413.26 crores in Q3 FY '24 driven by operational expansion and strong same-store sales growth. Gross margin stood at 15.58%. EBITDA for the quarter was INR 46.5 crores with EBITDA margin at 9.16%. PBT for the quarter stood at INR 31.20 crores, and PAT grew by 9.25% year-on-year to INR 24.22 crores. Our store count stood at 161 as on 31st December and 167 stores as on date. We can now open the floor for questions.

[Operator Instructions] The first question is from the line of Devanshu Bansal from Emkay Global Financial Services.

Sir, our Q3 performance is strong given that the industry growth in terms of volumes for large appliances has moderated sharply to single digits now, right, after a strong H1. In your assessment, sir, what are the key reasons for this moderation? And what are the key figures also that you are watching, which should capitalize the demand again in the industry?

In my opinion, in fact, there has been sluggish demand. This is only because of the macroeconomic in nature. In the sense with high inflation and high interest, this is the main factor. And I think in coming months, I think it is going to ease off.

Understood. And some other peers are also indicating tighter liquidity as a reason. So is that still not a challenge for us? Or how should we see that?

Our liquidity is not a challenge for us, absolutely not.

Understood. Second, sir, I wanted to understand what is the revenue salience of Korean majors for us vis-a-vis non-Korean brands in our business? So if you could just help me understand that.

They are maintaining their level of share of the store. In fact, it is stable.

Okay. So Pan-India, I guess there is some moderation in the market share. So is that not visible in our area of operations.

No. It's not that visible. I will say that it is steady.

Understood. And just if you could also highlight other leading brands apart from Korean majors in the -- across AC, refrigerated and washing machine categories for us. Just 1 or 2 top brands for us across in terms of other...

Of course, Whirlpool is there and Godrej is there.

Whirlpool and Godrej will be in the...

Haier is also there very much. Now the IFB is also catching up.

Understood. Okay. Sir, last question from my end. I wanted to understand the reason for drop in gross margin this quarter. So is it like higher discounting in the wake of being weak demand environment? Or it is something related to the revenue mix for the quarter?

I will put it that it was the sluggish demand, which brought it down a little bit. And the reason was also because every entire festive season was in single month of October. And after that, the market was very sluggish, even in festive season was quite good. But then after that, after October market was very sluggish. So, of course, has been also certainly you are with stock and market becomes flat. Then gross margin will come down by a few bps.

Understood. Understood. Just a continuation to this. So typically, Q4 is an inventory buildup quarter for us, right, sir. So what kind of growth are we projecting for the upcoming season? So Q1 typically like 35% of our mix, and we typically prepare towards Q4 build up inventory in Q4. So what are your initial thoughts around expected demand in the upcoming season?

We are very bullish on this aspect, Devanshu. In fact, we have already started building up our inventory because, as you know, approaching the summer, you -- of course, it becomes very difficult for you to build on the inventories for air conditioner, refrigerators and other cooling products. So we have already started building on inventories, and it will be our constant impact exercise up to going through March.

Understood. So that interest expense that [Technical Difficulty]

Sorry to interrupt, the line for the speaker have been disconnected.

Can you hear me?

Sir, we can hear you. We are moving to the next question, which is from the line of Chirag from HDFC Mutual Fund.

Sir, just a few questions. One is this quarter, what was SSG?

SSG in this quarter was 13%.

All right. Sir, second question was you mentioned that while demand has been sluggish, you are hoping for a recovery and you are also entering the next season with some optimism. So if you could sort of highlight the reasons behind that, what gives you this optimism considering that post festive demand has been sluggish?

Because, in fact, our presence in the entire heat prone area is now quite a lot in the sense that we are now present in -- we have got 25 stores in 17 districts in UP, which is always typically, it has a very hard number. And the second -- the biggest thing is that even we cannot discount the factor of Kumbh Mela, which will bring a lot of crores and crores of money to UP. And UP and, and it is now even Varanasi is also flooded with tourists, Ayodhya flooded with tourist, we all -- everybody knows. So the entire money, we are expecting that in this summer, it will be a very, very good Q1 for our company.

Sure. And have you seen any recovery in the first part of this quarter, which means in January, have you seen any kind of improvement? Or does it continue to be...

No, generally, it has been flattish. So it has been flattish. Of course, we are in growth but I'll say -- I'll put it as flattish. But we are expecting growth in coming in February to March.

The next question is from the line of Manoj Gori from Equirus Capital.

Yes. Sir my question here is on the gross margin. So if you look at gross margins contracted by 96 basis points. So was it that we offered higher promotional schemes and offers to the consumer and probably versus one-off? Or should we expect that to continue in the coming quarters as well, given that there has been sluggish demand environment. So any read on this and probably any outlook on the gross margins for the coming quarters?

As I told you earlier that gross margin has come down due to sluggish demand and the other macroeconomic challenges faced by us. So -- and as I told you that after festive season market became very sluggish. So this is the reason for the contraction of gross margin. But we expect that we are going to again maintain this gross margin in coming quarters.

Okay. So from fourth quarter onwards, one should largely expect stable gross margin from Y-o-Y basis, is that understanding correct?

I may say so. At the moment, we are just in the very first month of the quarter. So any projection will not be right. But we do expect.

Yes. And sir, lastly, if we look at recently, there has been a lot of noise on the supplies challenges for the room AC brands. Whatever you are planning to stop for the upcoming summer season. Are there any uncertainties or probably whatever stock you desire or you would have budgeted for? Is there easy availability on the stocking side?

I'll say that this is for the first come, first basis only. And so all manufacturers, they are aware what was our contribution to their sales. So actually, what I've already told that we have already started building up our inventory as earlier as December only. So what happened that when you will start building your inventory early, then you get the desired type of models and in fact, your desired inventories.

The next question is from the line of Aniruddha Joshi from ICIC Securities.

Sir, the question on the store count because we are already have reached to 167. So where do you see the count reaching at the end of FY '25 and at the end of FY '26 also?

We've already, in fact, stated in my statement that we'll be definitely crossing 200 stores by the next financial year. And this financial year, we are hoping to add another 8 -- 8 stores.

Okay. And all the stores will be in UP. That's right?

Not all, not all. There are a few in Bihar also, in such districts where we are getting very good response, we are trying to open another store there. Previously, we were a single store company showroom in that district. So a few will be there, and most it's, of course, UP is story.

Okay. Okay. Sure, sir, understood. An overall, if you can indicate the SSSG in volumes also, is there a change in revenue mix as well, because the gross margin has contracted. So is there any change in revenue mix towards the low-end of the product portfolio?

Yes. That has been because whenever there is a sluggish demand in IT and mobility, they have -- their share of count will get bigger.

The next question is from the line of Arpit Shah from Stallion Asset.

[ In terms of ] numbers from the company. Just wanted to understand, we are taking our store count to 180 store by end of FY '25 or 175, just got the number only.

175 number will be a definite possibility. And we are trying, in fact, so many stores are going under working progress. So 175, we are definitely going to achieve, and we are trying to, in fact, open more stores, even more than 175 stores.

And you believe that, Kumbh Mela, which will be a very big income generation for the state of UP, you'll be able to turn around the seasonality for your business, whereas Q4 is..

Sorry to interrupt you sir, but we cannot hear you clearly.

Yes. I'm also not able to hear him clearly.

Is it audible now?

Yes.

Yes, very much.

Just given the Kumbh Mela going on in UP, and we have a large -- decently large presence in UP, do you think you will be able to turn around the seasonality in the business? Whereas Q4, this year could be possibly higher than Q3 given the Kumbh Mela and what kind of income that is going to bring to the population?

It can, in fact, we are very much hopeful and bullish about it. [Foreign Language] not only in terms of as you and everybody is aware, entire world is aware that [Foreign Language]. And mostly, people are now going to [indiscernible] visiting Ayodhya and Varanasi and all that. So the entire impact, right now, it is disturbed also since Kumbh has started, our, in fact, showrooms are also disturbed but we have -- we expect a very good turnaround in the second half of next month.

Got it. And if you can just put some insights on our operating expenses, which has gone higher this quarter?

Yes, because of -- we have opened around the 30 stores between last quarter and this quarter. And so that has gone up, which I think, since we have opened many stores, which have -- which are yet to mature. So it is -- I think this is a temporary in nature. This is OpEx getting up.

The next question is from the line of Onkar Ghugardare from [ Shree Investments. ]

Yes. My question was regarding, firstly, you mentioned that many of the stores have not reached maturity state. So like in percentage terms, can you quantify at what stages they are?

Actually, you see our growth rate the past record of growth, then you will find that we have added around 40 and 30 -- around 70 stores in 1 year or 1.5 years' time. So these are typically -- as we have already told in several earnings calls that typically all our stores are measured by end of 3 years of opening. But not that they don't start contributing, they start contributing. But as you are opening new stores again and again the operating cost, it is going to go up. And in my opinion, that temporary nature because in coming quarters, this quarter also, current quarter also, in next quarter Q1 of FY '26 also, it's going to do much better.

Okay. The second thing is you had raised around INR 282 crores. And so out of that, how much you have utilized? And because of that, the interest component should have gone down, right? But we can see year-on-year increase in terms of interest component as well. So what's the reason for that? And how is the utilization for INR 282 crores?

We have already utilized INR 282 crores, and we have already filed all the details, you can find it from there. And regarding interest cost, we are a growing company. We are not idle company who's sitting there with the cash. We are utilizing a cash, we are making new investment CapEx investments. So inventory is also needed. In fact, we are going into very -- summer season, which is supposed to be a very, very good one. So we are fully invested in our stocks also, inventories also. So interest cost, of course, is this something -- it is a static in nature also when you have to stock buildup of your stock according to the quarter-to-quarter.

Okay. So like, for example, what is the sustainable kind of EBITDA margin we can model when we model your company?

We have already uploaded on our investor's presentation. September margin will be around 8% to 10%.

8% to 10% of EBITDA margin, right?

Yes.

Okay. And as far as you mentioned that you have used the entire process from the fund raise. So that has mostly utilized for inventory or like store expansion or a combination of both?

Combination of both. We cannot invest it down only on the working capital. Otherwise, we have to make CapEx also. So, it is a mix of both things.

Okay. Just one last one thing. You have recorded around 23% revenue growth, 30% here in Q3 and 9 months, respectively. I mean, when can we see operating leverage coming in?

There is the operating leverage in 9 months, if you'll see there. Overall, 9 months of FY '25. Our operating leverage has been quite good because CapEx are as much as our sale has gone.

Yes, correct. But this has -- this quarter, this has declined because of the sluggish demand you are seeing, right?

Yes, entire -- in fact, entire our manufacturers were also reeling under this. So it has been a sluggish quarter.

So if you are basically seeing 8% to 10% EBITDA margins are sustainable. So you are targeting around 20% to 25% revenue growth. So can we expect around similar 20%, 25% growth on the profitability?

Yes, you can assume that but we give our guidance that you can find our guidance in our investor presentation, where we are very clear about it. We have been always surpassing our guidance.

Yes, this 20%, 25% kind of growth it's from your investor presentation earlier, I'm talking about that only.

So we have repeatedly, we have, in fact, exceeded the guidance.

The next question is from the line of Vivek Gautam from [ GS Investment. ]

Hello, am I audible?

Yes, you are.

Yes. So I just wanted to know, sir, why the -- our top line growth is quite good but why the PAT growth is on the lower side, sir?

Because operating costs are there because of many new stores.

Because now only operating leverage should come in because our number of stores is also quite high. So the 7, 8, stores, 9, stores, the operating leverage should come out?

[Foreign Language] plan to come, which is going to happen. But right now, for we have been opening stores, and they will start contributing to our top line. And that will ease off our operating costs.

Okay, sir. And how is the future looking like, sir, slowdown is here, but our Bihar State and Jharkhand state, UP state potential is also quite large, sir. So we are much better than the other markets, sir?

Yes, we have much better place in view of manufacturers also. In fact, this geography is doing very well. And yes, we do expect that even that very worst deal also we have been doing well at a 23% growth of top line. And we can expect that there is some turnaround. And this area is going to do very well. And I told you [Foreign Language] where such a big event is happening.

OEMs are quite happy with our performance versus other geographies then, sir?

Yes.

The next question is from the line of Aniruddha Joshi from ICICI Securities.

Sir, sorry, just one follow-up question on.

Please go ahead, Anirudh.

Yes. Sir, now obviously, we have done good amount of work already in UP. So is the margin in UP, Bihar and Jharkhand, all three are different? I mean, essentially, the question is now we are expanding aggressively in UP and there is a slight margin impact. So is it the margins in UP are relative to growth that the margins that we are generating in Bihar and Jharkhand?

Anirudh, it's a basket in fact, you have to understand. It's not about state, it's about a basket in, let us say, even in UP, there can be several stores, we can -- where -- in fact, where there can be a very big competition and somewhere there is no competition. So it's a mix of -- margin is a mix of locations. So it's not about only UP or Bihar or Jharkhand. So there's a management strategy there, how you manage your margins. I hope it is clear to you, Anirudh?

Yes, yes. Sure, sir. It's clear.

The next question is from the line of Varun Singh from AlfAccurate Advisors.

Am I audible?

Yes, you are. Please go ahead.

Yes, please go ahead.

Sir, my questions is regarding Maha Kumbh Mela, which has started from 13th of January. So we are already maybe more than 2 weeks down into this event. And as you pointed out that the -- maybe this month has been relatively subdued and the second half is expected to be much better driven by whatever impact on disposable income of the local population out there. But considering that our exposure to that city itself maybe or UP at a large won't be -- I mean, I don't know that number maybe 15%, 20%, and given that this is -- this event is going to last till 26th of February. So on account of general disruption, et cetera, don't you think that maybe the fourth quarter numbers are likely to be more impacted than getting benefited. I mean just led by the analogy of disposable income improvement, I mean how would you think about this, sir?

No, I'll put it like this actually impact when such big events happen, it's not only invigorate that area only. In fact, it drips to other areas, [Foreign Language] catering to let's say, 8 crores, 4 crore or 2 crore people. It's not only people Prayagraj can only handle that type of business, people from other districts, they also come in to handle the business there. So it is about the whole area. In fact, it benefits the whole area. So what we are seeing is that already we are doing well in the UP. And what I -- what we see that let us say before Maha Kumbh will end. I think money will be there with everyone and that money has to come to such aspirational things what we are selling.

Does that answers your question, Mr. Varun?

Sorry. Yes. So basically, you are saying that -- I mean, I get your point that so many people will be positively impacted from the income side of it. But given that so much of crowd is also there, I think our store level operations would also be getting disrupted. I mean I was thinking from that point of view over and above the positive side as you highlighted.

But I'll tell you like we are having 25 stores in UP out of that, three stores are in Prayagraj. Yes, they are impacted because of huge rush and all that. But other stores start performing well because of that.

Understood. Understood, sir. And just secondly, I just wanted to understand, given that 70 stores as we pointed in 1.5 year old compared to the total stores that we have as on today, so roughly 40% of other stores are very, very young. Yes. So like the same-store sales growth number, which is currently a reflection of these maybe non-new stores. So do you think that when the total number of new store addition or the new store, that ratio comes down from 40% to let say 20%, the pressure on SSG will start mounting. And how would you think about this?

I have been repeatedly saying that is this geography population is very large, penetration is very low. And this is even our very old stores are also having a double-digit SSG growth. So this is the old factor we have to take into account.

Understood, sir. And sir, now definition of same-store sales growth, we will consider more than 1 year old store in both numerator, denominator.

Yes. I think so. Mostly given in investor presentation also.

Okay. Understood, sir. Understood. And the top -- sir in our store and please pardon my ignorance, I'm tracking this company relatively new. Would you also be selling private labels, meaning your own brand of AC and fridges or it's all branded stuff?

No. As per our policy, we won't be selling any private label.

It's all branded. And when you called out about Whirlpool being the top brand, what would be the revenue contribution of this brand, maybe in any one particular segment, if you can give us some sense out of.

For Whirlpool you're asking.

Yes. I mean Whirlpool and Godrej as you said that these are the top two brands in the AC category.

I didn't say that were the two brands, right? I said that after Korean, there were other big brands. And they contribute around the -- we do not, in fact, divulge how much they contribute because of manufacturers' reluctance.

Okay. Okay. And sir, maybe I mean any sense if you can give us, it will be helpful with regards to the #1 player, Voltas or the maybe #2 player in Blue Star, et cetera, their revenue contribution or you don't think it will be a fair to share.

That will not be appropriate to share with you but definitely, they're doing very well.

The next question is from the line of Devanshu Bansal from Emkay Global Financial Services.

Just one bookkeeping question. I wanted to know about the contribution of category-wise in home appliances, digital and others, what is the revenue in 9 months for these categories?

I think it must be given on the investor presentation, it must be updated.

It's not there, and that's the reason I'm asking.

We disclose it only half yearly, so that will be there in the next quarter.

The next question is from the line of Dagas Shah, an Individual Investor.

Just one question, sir. On the product side, how do we look at seasonality in terms of different product categories per se, if you can help us understand a bit?

I could not understand your question. Can you please repeat it and speak clearly?

Sure. So my question is, sir, for the different product categories, what sort of seasonality do we see? So for example, AC will be higher in the summers. So for the other, sir, if you can just help us understand a bit on that aspect.

Usually, it is mixed. Apart from summer cooling products, it's always mixed categories. In the sense that, yes, like washing machines will do very well in -- during monsoons or during winters. In winter, heating products, heating products will be -- will have a better sale like user and all that. But mostly, it is mixed only.

Okay. So is the understanding correct, sir, then that there were washing machines -- sorry, the air conditioners would have a higher share of revenue?

Definitely, yes, their contribution is highest.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

We trust that we have addressed all your queries to your satisfaction. If you have any remaining questions, please do not hesitate to reach out to our Investor Relations agency Go India Advisors. They will be more than happy to assist you further. Thank you for your time, and we look forward to continuing our growth journey together. Thank you.

Thank you.

Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.