D. P. Abhushan Limited (DPABHUSHAN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the D. P. Abhushan Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ajit Mishra. Thank you, and over to you, sir.

Thank you. Good evening to all the participants on this call. I'm Ajit Mishra from Ernst & Young Investor Relations. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risk that could cause future results, performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. Please note that we have mailed the press release results and the same are available on the exchange and company website. In case if you have not received the same, you can write to us, and we will be happy to send that same over to you. To take us through the results and answer your questions today, we have the top management of D. P. Abhushan Limited represented by Santosh Kataria, Chairman and Managing Director; Anil Kataria, Whole-Time Director; and Mr. Vikas Kataria, promoter. We will start the call with an opening remark on company performance and quarter gone past, and then we will conduct a Q&A session. With that said, I will now hand over the call to Anil, sir. Over to you, sir.

Good evening everyone. [Foreign Language] Vikas, please take.

Thank you, Anil bhai. Good evening, everyone. I'm Vikas Kataria, Promoter of D. P. Abhushan Limited. I do now like to take this opportunity to share our financial performance for the first quarter of FY '26. Total revenue for Q1 FY '26 stood at INR 541 crores compared to INR 505 crores in Q1 FY '25, registering a moderate growth, 7% year-on-year growth. The elevated gold price did impact overall industry demand and volume growth, leading to more cautious consumer spending. Our EBITDA stood at INR 55 crores with a margin of 10.21%, up from INR 38 crores in the same quarter last year, a 44% increase. Profit after tax come in at INR 36 crores with a PAT margin of 6.73% compared to INR 25 crores in Q1 FY '25, showing a 45% year-on-year growth. Looking at our revenue mix, gold remained our dominating category, contributing 91% of total sales, diamond contributing 6% and silver made up 3%. With that, I do now like to hand over the call to Mr. Santosh Kataria, who will take you through our key initiative and development during the last year. Over to you Santosh bhai.

[Foreign Language] Thank you so much.

[Operator Instructions] We take the first question from the line of Viraj Jain, an individual investor.

First of all, sir, congratulations on a great quarter. So my first question is, sir, since this is a generational business and the fourth generation is currently running the business, how are the roles divided between the family members? And how is the succession planning done?

Thank you so much for asking this question. So the business is a family-owned business. [Foreign Language] Currently the business is managed by the fourth generation, Mr. Anil Kataria, Sanjay ji Kataria, Santosh ji Kataria, and myself Vikas Kataria. [Foreign Language] Fifth generation has already joined [Foreign Language] From service to procurement to like everywhere [Foreign Language]

Sir, my second question is, who do we think are our major competitors in the organized and unorganized market? And how do you see the market shifting from unorganized to organized players? I mean are the unorganized stores facing a lot of trouble and are they shutting down?

So in the organized market, we see large national and regional chain like Tanishq, Malabar, Kalyan. [Foreign Language].

And my last question is, we have done very well in our Ratlam and Indore stores, which constituted nearly 50% of our total revenues. How have we achieved such high revenues from individual stores? And how are we going to replicate the same growth in other stores as well?

So Ratlam and Indore are our flagship stores. [Foreign Language] Ratlam store we've like more than 85 years. [Foreign Language] Indore like almost like the 15 year store. Again a flagship store 15,000 square feet. [Foreign Language]

The next question is from the line of Manav, an individual investor.

Congratulations on a good set of numbers. I just had a few questions. Firstly, I wanted to understand as to what is our revenue split? And do we have any bullion sales in this split as well? Also, if we have any bullion sales, are these B2B or do we sell it through our stores?

Yes. So currently, our revenue excluding bullion comprised of like the 60% of bridal jewelry, 20% is the festival and 20% is the self-purchase and gifting. So mostly [Foreign Language] product mix such as silver [Foreign Language] revenue from bullion is around INR 275 crores, broadly 10%. This revenue basically goes sold to vendor for a payment for the jewelry purchase. So basically [Foreign Language]

Okay. Sir, my next question is around inventory turns. I wanted to understand how our inventory turns are for the old flagship mature stores. And also, I wanted to understand how will these inventory turns grow for the new stores that we are planning to open up?

Yes. So our inventory turn as like the older store is somewhere around like the 8x. [Foreign Language] So, we're very good like in inventory terms.

Yes, sir. This inventory turn is the -- unheard of in the industry 8x. So just want to understand one more thing. Since we have such high inventory turn, how much would be a dead inventory that we have? And like how do we rotate or move forward with this inventory? Like do we rotate it within our stores? Or do we give it back to our vendors or business...

So we've a sets of high, high inventory turns. [Foreign Language] Almost close to zero.

The next question is from the line of Raheel Shah, an individual investor.

Congratulations to the company on a great set of numbers. Sir, my first question is what does the store level economics look like? How does -- how long it takes typically for a store to reach EBITDA breakeven and start generating profit? And how much inventory and CapEx do we need for store.

Thank you, Raheel. Typically, a new store reach EBITDA breakeven within six to nine months depending on the location. Most stores started generating profit within 12 months. So we operate our store under two formats, a large format, which is like more than 1,000 square feet and the other format is a midsized format where the store size is less than 5,000 square feet. [Foreign Language] inventory is like INR 50 crores, and the bigger store, we need like INR 100 crores inventory. And the CapEx is for small store is INR 2.5 crores to INR 3 crores and the bigger store is INR 5 crores to INR 7 crores is the CapEx contribution.

Understood, sir. Understood. Sir, what is our current studded mix? And how do we see this going forward in the next three, four years, given the markets which we cater generally, gold rather than diamond or studded, studded jewelry, how are we looking to increase this mix in the market?

Yes. So currently, our studded jewelry contribution is around 6% of total sales. Over the next three, four years, we are planning, we are aiming to reach around 15% for the studded jewelry. By FY '30 we're aiming [Foreign Language]

Understood, sir. Sir, given our current margins, what are our current margins and how do we expect them going forward given we are planning to increase our studded mix in the upcoming years? What is the average making charges for gold jewelry versus studded jewelry? And also how much making do we give to our suppliers?

Okay. So our current margin is around like the 7% to 8% and we're expecting to improve gradually. [Foreign Language] making the diamond is somewhere around...

The next question is from the line of Sagar Shukla, an individual investor.

Excellent set of numbers. Just had a few questions. First one was I wanted to understand our hedging policy and how much of our inventory would be currently hedged? Also given the rise in coal prices, how we are hedged against any decline going forward? And what would be our cost of hedging?

Yes. Thank you, Sagar, for asking question. So currently, we do not have hedge our inventory. However, we grow and expand into more markets, we are actively looking at introducing a hedging policy to manage price risk. And we are planning to get GML, our GML cost will be somewhere around 3.5% to 4%.

Understood. The second one was considering that gold pricing are on the rise, correct. So I believe there would be a natural shift to lightweight jewelry. What are your thoughts on that? And also wanted to hear about how we are going for lab-grown diamonds? Are we planning to add lab diamonds to our collections.

Yes. With the rise of the gold price, we are definitely seeing a shift in customer preference. [Foreign Language]

Understood. The last one was given that we have taken Board resolution of raising INR 600 crores. I wanted to understand what would be the time line for the same and how we are looking to deploy this fund? Also when I see last five years, we have opened six stores. And going forward, we are planning to open six stores every year. So how fast are we moving there?

So we are planning to open six additional stores in FY '26 and store in FY '27, as mentioned earlier. We need a large format store 1,000-plus square feet and inventory of around 100 kg required for the large format store and the small 50 kg inventory we require and CapEx somewhere around INR 5 crores and INR 2.5 crores. And as for the pace of expansion we've opened six stored over the five years but we believe the brand is now ready to scale. [Foreign Language] We get a good business. [Foreign Language] Now we're set with the expansion plan. [Foreign Language]

The next question is from the line of Akshay Choudhary, an individual investor.

Congratulations on a great quarter. So my first question would be that what are our expansion plans going forward for the next four to five years. As you can see in the investor presentation that you're planning to expand to new geographies such as Gujarat, Chhattisgarh. So what would be the rationale behind this?

So we currently have 11 stores as on June '25 and we are looking to open seven to nine stores every year going forward. We have target to reach 50 stores in total by FY '30. This year, we are testing in more market of Gujarat and Chhattisgarh because we feel there is a huge potential in this market. This market are still underpenetrated in addition to our internal database that we have a lot of customers coming from bordering cities of the Gujarat and Chhattisgarh. So that's why we are planning to open in the new state.

Understood, sir. But don't you think that before we go for these new markets, you can expand further in the city of Rajasthan and Madhya Pradesh. Also how do we test the market before actually planning to open a store? How do we look to compete in these new geographies where already well established players are playing?

Yes, you are absolutely right. We will continue open stores. [Foreign Language]

Now just one last question. So what is our customer conversion ratios? And how do we track them? And how have we achieved these ratios? And what is the mix of existing and new customers and how it has moved over the years?

So our customer conversion ratio is from walking to conversion is somewhere around 85%. And the old customer like our new customer and older customer [Foreign Language] 70% is the old customer and 30% is the new customer. [Foreign Language]

The next question is from the line of Anjali Singh from Bansal Family Office.

So my first question is you recently had a INR 600 crore QIP that use of proceeds for the INR 600 crore QIP. So can you tell me it will be primarily used for store expansion or product diversification? What is the expected time period you are assuming?

No, no. It is purely the expansion only for the growth plan. [Foreign Language] This is the only like the focus area.

Okay. Okay. Also, can you give me an update on your current debt levels and whether any part of the QIP will go towards debt reduction?

No, QIP is not going to the debt reduction. And currently, our like the debt is somewhere around -- total debt limit is the INR 210 crores and use limit is INR 150 crores somewhere.

Okay. INR 210 crores and the use limit is INR 150 crores.

The next question is from the line of Abhishek Jain from Jain Securities.

Congratulations on a very good set of numbers. My first question is regarding the margin guidance and the sales guidance for FY '26. My first question is regarding the sales growth guidance for FY '26 and margin guidance for FY '26.

So margin for FY '26 is somewhere around like the 8%.

8%, sir.

Yes, 7% to 8%.

Sir, last year, you also guided margins will be around 6% to 8% -- 7%, 8%, but it fell short actually to 6%. So this year, you can achieve 8%.

Yes, yes, 7% to 8%, yes.

Currently our GP is around 14%, which is last year is around 10%. GP margin. Yes, Vikas ji telling about overall financial basis.

Okay, sir. And sir, what is the sales growth guidance for FY '26?

Our [indiscernible] turnover is around 7% increase quarter-on -- Y-o-Y basis.

And sir, what can you achieve in FY '26 as a whole?

As a whole, we are predicting that around 10% to 15% growth we will achieve by the end of financial year '26.

Okay, sir. And by when -- by which time QIP will be done? In how many months, sir?

Yes, we are planning to close in this month only, in August.

The next question is from the line of Vikrant Kasha from Asian Market Securities.

Just wanted to seek your clarity on growth during the quarter. So you have reported 9% growth in gold jewelry sales, whereas the prices for the quarter has been shot up by 28% to 32% on a Y-o-Y basis. So first, is there any significant drop in gold volume that you have seen during the quarter? Please provide some clarity on that? And second, on -- you have been guiding for your focus on increasing sales of studded jewelry. But this quarter, again, has been lower compared to last year same quarter. So I need your clarification on this too. So is this your -- the phenomena for you or every company in and around areas that you operate?

[Foreign Language]

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[Foreign Language] But this is not for the D. P. Abhushan. It is for the entire industry. [indiscernible]

[Foreign Language]

Okay. One more thing. [Foreign Language]

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The next question is from the line of Ashish Khurana from AMP Capital.

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