Gopal Snacks Limited (GOPAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Gopal Snacks Limited Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that, this conference is being recorded. I now hand the conference over to Mr. Nitin Gupta from Emkay Global Financial Services Limited. Thank you. And over to you, sir.

Thanks, Nidhi. Good afternoon, everyone. I would like to welcome the management and thank them for giving us this opportunity. We have with us today Mr. Naveen Gupta, Chief Business Officer; and Mr. Rigan Raithatha, Chief Financial Officer. I shall now hand over the call to the management for opening remarks. Over to you, gentlemen.

Thank you, Nitin. Good afternoon, and thank you for joining us for the earnings call. We hope you all got a chance to go through our investor presentation updated on the stock exchange. We'll share some operating and financial highlights for the quarter ended June 30, 2025. Q1 FY '26 was a quarter of steady execution and strategic realignment for Gopal Snacks, amidst a dynamic market environment. While demand trend remain moderate, we delivered moderate performance supported by focused product mix and operational efficiencies, as well as we launched popcorn and wafer biscuit, as a new product in current quarter. Revenue from operations stood at INR 322.2 crores, reflecting a sequential growth of 1.7%. Y-o-Y revenue is down by 9%, mainly due to supply chain issue, which we are geared up to bring down, and achieve top line as per our guidance. Despite the suspension of core operations at Rajkot facility, we tried minimal disruption in product availability and distribution. The Gondal unit continues to play key role as a replacement facility operated at over 60% utilizations, helping sustain supplies. Our Modasa and Nagpur plants performed steadily supported by regional structured supply chain model that enabled further cost effectiveness and improved delivery timeline. The implementation of our distribution management system continues to enhanced real-time visibility and enable distributor to manage orders more efficiently. We remain focused on -- between our market presence across key geography. During the quarter, new micro-distributors were appointed under the super stockist model to strengthen our regional reach. This focused market approached continue to support improved accessibility – under foul areas. Modasa facility is expected to start by production September '25. This will ensure faster and smoother execution of deal orders since the total market requirement will be fulfilled form single – unlike the currently to address to multiple locations. We also stepped up our marketing and brand-building effort during the quarter initiatives such as different packaging design, improved in-store branding, and enhance visibility across airports and public spaces that are contributing to stronger brand recall. Our growth presence across digital platforms and partnerships with e-commerce and modern retail channels are already beginning to yield results. Looking ahead, our priorities remain centered on expanding our product portfolio, increasing customer reach, and leveraging technology to drive improvement across manufacturing, distribution, and marketing. With a strengthened distribution network, expanding manufacturing base, and a committed team, we are well-positioned to capture opportunities and reinforce our presence in the packaged snack segment. I now request Mr. Rigan to provide to provide the cost and financial performance during the quarter.

Thank you, Naveenji. So good afternoon, everyone. Let me begin with sharing of few key financial highlights for the quarter ended June 30, 2025. As we reflect on the quarter gone by, I'm pleased to share the progress we have made and outlined our priorities as we move forward. During the quarter, we reported the revenue from operations of INR 322.2 crores. While our topline showed sequential stability, gross profit stood at INR 83.7 crores, translating to a gross margin of 26% as compared to 29% in Q1 FY '25. The margins are lower mainly due to the custom duty, which was levied by Government of India on palm oil in September 2024, and also due to lower revenue due to supply chain issues on account of fire which happened in December 2024. However, we witnessed a sequential improvement in gross margins driven in part by softening of the key raw material prices as compared to Q4. This provided us partial relief to our cost structure, helping to offset inflationary pressures from other inputs and supporting margin expansion during the quarter. EBITDA for the quarter stood at INR 15.2 crores resulting in EBITDA margin of 4.7% as compared to 1.5% in the corresponding quarter of the previous year. The decline was led by lower gross profitability and higher advertising and sales promotion expenses, which increased by 1.3% of the revenue and impacted the EBITDA margin. We also reported an exceptional profit of INR 0.2 crores during the quarter. This is pertaining to the scrap sale of the fire impacted plant and machinery. The insurance claim process is progressing well, with the asset restatement and claim recognition expected to happen in Q2. Despite this disruption, we ensured minimal impact on product availability and disruption. Looking ahead, we remain confident in the business outlook for FY '26. Our strategic priorities will center around expanding our product portfolio, enhancing customer reach, and leveraging technologies to drive efficiencies across the value chain. With the Indian snack market continuing to grow trajectory, we are focused on deepening our presence across both traditional and modern trade channels. Supported by an experienced leadership team, a strong distribution network, and growing manufacturing capabilities, we are well-positioned to capitalize on emerging opportunities and create long-term value for our stakeholders. Thank you. Over to you, Nitin.

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

I just wanted to check around -- could you help us guide on Modasa plant commissioning date? And do you see any headwinds further for the commissioning or sort of a delay from September -- [Technical Difficulty]

So Nitin bhai, this is the latest estimation from our operations team as well as project team. According to...

Sir, sorry to interrupt. But I request you to come -- your audio is a little distant, can you come closer.

Am I audible now?

Yes, sir.

Due to confirm update from our operation as well project team. According to them, we will start trial production by mid-September.

So like I'm just checking like if -- would there be any sort of headwind we see something, like maybe early monsoon might have affected your civil work and that's where like we might have seen a delay? But like I just want to check out on any further delay possibility in the commissioning?

As on date, there is no headwind visible. Just reconfirmed with our project team. They are confident to start the trial by mid-September.

Okay. So this is good. So my second question is around, like, given festive season is approaching, so do you see any demand impact during this season because of sort of a delayed commissioning? Or you think that you will be able to address the demand because the commissioning is happening right at the same time?

See, in our earlier commentaries as well, we have stated that we don't see any challenge in demand as such. We have been -- we have production capacities as well, but this is disrupted supply chain, which -- pulled us down. So, typically, we have been stabilizing our -- this particular challenge as well. In last 4 months, we have been, doing 10 crores delta over every preceding month. So things are stabilizing and improving. We will be able to supply, to meet the needs of the market.

Sir, this is positive. So thanks for highlighting that monthly improvement in your run rate. My question was in terms of, like, the entire festive season demand will be there. So I just wanted to check on like whether we'll be able to address the demand. It is more of a supply-related question, not the demand-related question.

So in case we fall short of delivering from our Modasa plant or Gondal plant, we will take help of our Nagpur plant.

Okay. Okay. And the last question is around like sequential gross margin recovery. If you can sort of throw some light in terms of the -- while Y-o-Y, there is a drop or sort of a contraction in the gross margin, but sequential recovery, if you can help us understand, like what are the factors which has helped us sort of improve the gross margin?

Yes. So sequentially, yes, our gross profit margin has increased by 6%. So that is primarily coming out of the 6%, primarily it is coming 2% from the palm oil price, which has reduced by 10% as compared to the Q4. Second is similarly, we have seen the reduction in the price trend of packaging price material giving benefit of around 1%. Similarly, chana, which has reduced by 5% benefiting us 1% and potato. So this all sequentially helps us to have the 6% incremental gross profit margin as compared to Q4. Now, answering to your second part of the question, when we see Y-o-Y, yes, there is a 3% decline as compared to 29%. We have declared this 26% in the current quarter. So this is primarily coming because the custom duty was impact by the -- was implemented by Government of India in September '24, and that remains part of the cost structure still in the current quarter also. So that is one of the main reasons why there is a reduction in GP by 3%.

Okay. So my last question is a follow-up around this is that – like, do you think that this INR 300 will remain, or like any effort we have in terms of like taking a price hike or waiting for the raw material prices to ease? My basic question is like, by when we can get to the historical sort of margin levels, or can recoup this 3% delta?

See, it will remain gradually because this will come majorly from the product mix and the other profitability improvements, which will come gradually because the custom duty remains part. So we cannot pass on the full duty impact to the consumers. So slowly, gradually some of the things we have already passed on in the last year, which remains as a part of P&L in our current quarter also. But going forward, this will be coming to your answering that when we'll reach to the earlier levels, it will happen gradually through the product mix and other profitability improvement plan.

Nitin bhai, to answer it differently, once we are able to roll out our marketing endeavor, we'll be in a better position to take some more money from consumers pocket. So going to a little delay in plant commissioning, we delayed our marketing campaign rollout as well by 2 months. So definitely, by quarter 4, we intend to take some more money from consumers pocket. That will help us to improve margins.

The next question is from the line of Resha Mehta from GreenEdge Wealth.

So the first question is again on the plant. So, is this Modasa plant expected to completely replace the lost capacity of the Rajkot plant, which caught fired?

So it will – so what will happen, the Rajkot facility will be split into 2. So, 60% will be replaced in the Modasa and 40% will be restated at the Rajkot faculty.

The same existing one where there was fire, right?

Yes, yes. But that will be replaced in 2 different places.

In 2 different locations. Okay. Okay. And then what happens to the Gondal unit?

So Gondal unit has been operational because of the temporary mix shift arrangement because of Rajkot facility and Modasa taking a little bit of more time. So over there, whatever machines are there or plant and machinery portions are there, that will be shifted to Rajkot and Modasa.

And then we stopped the operations at Gondal unit, right?

Yes. Right.

Okay. Okay. So basically, the -- so 60% will move to the Modasa plant of the lost capacity of the Rajkot plant which caught fire and balance 40% has already been moved to 2 different locations within Rajkot itself, right?

No. So that is -- see, when the fire broke up, we started as a mix shift arrangement at Gondal, okay. So now as Modasa will become operational, the original capacity of the Rajkot, 60% will be to Modasa and 40% will be restated at the Rajkot plant.

Yes. But then, is that 40% going to be operational from mid-September onwards just like the Modasa plant? Or is that going to take more time? So, what I'm trying to understand is basically the path to sales recovery, does that start happening October onwards? I mean, assuming our plants, the full lost capacity comes on stream by September end?

No. So, plant capacity is not a constraint for us. What is -- what would happen is 4th September which we are seeing once the Modasa facility become operational – our Gondal facility will continue to support. The Rajkot facility will come up probably in Q3 and by end of this financial year. So at that time, Gondal facility will be stopped and Rajkot facility will commence. So it will be the replacement of the capacity which will happen.

But is it fair to assume that once the Modasa plant is fully operational, right, then we will have recouped the complete lost capacity because 60% comes from Modasa and the balance 40% for now, the Gondal unit will supply. So, all I'm trying to say is that, then there are no supply chain disruptions or capacity basically.

Correct. Correct.

But from a margin perspective, would we be at a disadvantage? Would we continue to be at a disadvantage because the Rajkot units would not be up and running and we continue with the 40% from Gondal, from a cost structure standpoint?

No. So, there will be no margin impact due to Modasa becoming operational. In fact, there might be some benefit which might flow over see.

No, no, my question was not the margin impact because of Modasa, because Modasa, we would have resumed by September end, right? But because we are continuing at the temporary facility in Gondal, the 40% capacity, lost capacity and while the Rajkot facility -- because the Rajkot facility would still take time maybe by the end of the financial year to come up. So hence, do we see like inflated cost structure because we'll be continuing with the temporary unit at Gondal? Or from a cost structure standpoint, we would not see elevated cost and the margin structure should kind of normalize?

The margin structure would have kind of normalized, and we don't see much of the impact because of the Gondal facility. It might be 0.2%, 0.3%, not much of that.

Got it. And the gross margin improvement that we saw sequentially, which you addressed to the previous participant also, so that is largely only due to the raw material prices cooling off, right? You elaborated on that. So, it has got nothing to do with reduction in outsourcing, right? Is that understanding right?

Yes. So, the 1% has come up due to reduction of the outsourcing, which was there in Q4.

So now, there is no outsourcing?

No.

But we are still not manufacturing all the products that we used to, right?

No, we are manufacturing all the products. So our outsourcing stopped in Q4 FY '25 itself, in the later -- almost last part of the Q4. So all the products which are currently being sold are all being produced in-house.

Okay. Because in the last call, you had mentioned that, let's say, there are some products which we are not manufacturing because it's not possible to outsource them from maintaining quality standpoint. So, I was referring to that basically.

Yes, yes, I remember that point. So, what Rigan bhai is stating that whatever we are manufacturing are 100% in-house only as on date. However, what – supposedly, we were manufacturing 95 products free buyer. So currently we are manufacturing 90, 91 products in our facility. We are not manufacturing shearing hair, we are not manufacturing Vanilla Ball here, we are not manufacturing Sabudana Chivda here. So there are four, five products which we are not manufacturing in Gujarat, because we cannot go -- for those products, we cannot go to the third party because of quality issues. It's better not to...

So once the Modasa plant comes on stream, then do we kind of start manufacturing those 4, 5 products also?

Yes, yes, very much.

Right. And just last 2 questions. So basically, on the insurance claim, so this quarter, we were expecting to book some INR 4 crores, INR 5 crores of more loss. Any indication that you all can give with the talks that you all would be having with the insurance company that how much would be the claim that would be coming in? And how much more losses do you need to book?

No. So see, our insurance policy is based on restatement of the assets. So we don't expect any further provisioning in our profit and loss account and whatever was provided in Q4, that remains stand still. And no further provisioning is expected in any future quarter. And yes, our insurance claim is running well on progress, and we are expecting to have positive results in probably in Q2 something.

Right. And lastly, on the guidance. So we had guided for around INR 1,800 crores of revenues, INR 800 crores in H1 and balance INR 1,000 crores in H2. So, considering there's a slight delay in the commissioning of the Modasa plant, so do we still stick to that guidance? Is that still achievable? Or would we like to revise that downward? And a related question is that the gross margin at 26%, this is your outlook of the raw material prices. Do you think at least 26% gross margin is sustainable? And from there on, once we move to our own manufacturing at Modasa, the EBITDA margins would also kind of start inching up?

So Reshaji, let me answer on the guidance thing first. We had stated that we would be giving 20% growth on annualized basis. So that translate into INR 1,750 crores roughly. And the rest INR 50 crores, we said that, we'll figure out from where we will deliver. So, we were giving a guidance of INR 1,500 crores, right?

Right.

So, we stand by our original guidance of INR 1,750 crores. We are yet to figure where to bring that INR 50 crores from because we are contemplating certain revenue either from some sort of joint venture or some export opportunity or some sort of third-party manufacturing, some opportunity kind of things. Modasa, we are still confident that we deliver 20% growth on annualized basis.

Got it. So INR 1,750 crores is still something that is doable for us, right? And I'm assuming H1, INR 800 crores may something that we may probably be missing because of the delay in commissioning of the plant. Would that be a fair assessment?

You're right. So we'll try to cover those INR 25 crores, INR 30 crores in Q3 and Q4.

Right. And on the margin side, both the gross margin, 26% from here on, how do we see that shaping up? And also how do we see the EBITDA margin moving up once we have the Modasa plant fully running?

Yes. So gross margin, at least for the new quarter, that is Q2, we are expecting to remain somewhere in the same range, plus/minus 1%, since the commodity prices currently are also almost in the same range as they were in the average for Q1. So, we are expecting H1 to have good margins as we have in Q1. And for the full financial year, there might be, yes, going forward as the crop season would end over the crop, whatever we have sold will come in. So Q3 might have some dip. But for the full year, we are very hopeful that we should be having higher gross margins as compared to the last financial year. And yes, coming to second part of your question, EBITDA, yes, we would see the improvement as compared to Q1 in Q2 and Q3 since our Modasa facility would become operational in Q3, and we should be seeing the higher sales coming from the Modasa facility in Q3 and Q4. So, we should be going in upward trajectory as far as EBITDA margins are concerned.

So Q4 exit EBITDA margins, can we see that in double digits?

Double digit means it would be – I don’t think so.

Like around 10% -- exit margin, Q4 exit margin.

Exit, you mean to say full year?

No, no, not full year. Just the Q4, Q4 EBITDA margin because our new Modasa facility would have stabilized by then. Q4 EBITDA margins to be around 10%?

It would be, I would say, near to double digit, slightly between single to -- near to double digit, somewhere in the middle.

The next question is from the line of Bhumin Shah from Shameksha Capital.

My first question is on wafer segment on a Q-o-Q basis [Technical Difficulty]

Bhumin, your voice is -- there problem with clarity of voice.

Yes. So my first question is on the wafer segment. On a sequential basis, value and volume have been stagnant. So if you look at other products, gathiya, namkeen, which have grown in terms of volume on sequential basis, but wafer has not grown. So, what is the reason behind that?

Wafers are always a pushed product for us, Bhumin bhai. So, we purposely took a call that we were earlier selling at a deeper discount vis-a-vis market leader and we purposely took a call that we will increase our realization from wafer. So we increased our selling price almost or we can say that we reduced our trade marketing support almost by 5% in wafer. So that brought wafer a little down, but recently, we revealed consumer offer on wafer category, so wafer's growth come down -- wafer numbers had come down.

So had it come back to around 20% growth or more than that?

Yes, wafer number will grow by 20% because of 2 reasons; one is consumer offer which we just released last week itself. And second is, before we go full with our marketing campaign, I will start some print campaign before that. So we just released a good print campaign in Maharashtra last week. So we got good response. So, we are expecting, delta from that sector.

And second question is on, some dealer loss. We have lost some dealers or distributors in specifically MP and UP, and our Nagpur capacity utilization is also on the lower side. So, is it because of the filling rate issue or something else? [Technical Difficulty]

You’re audible now.

Yes. So my second question is, we have lost some distributors on a sequential basis in MP and UP, and our Nagpur facility is operating at around 10%, 11% capacity. So, are we facing any challenge over there also in terms of filling rate or something else is happening over there?

So, from Nagpur facility, we are facing accelerated challenges only in the wafer category because we had constraint in the wafer category in Nagpur. So every month we are sending roughly 25 containers from Modasa to Chhattisgarh and even up to Central Maharashtra and eastern part of Maharashtra. So we are not facing any challenge from Nagpur facility assets insulate other than wafer category. In terms of numbers of dealers, so we converted almost 65 direct distributors in parts of Rajasthan, MMR, as well as in Gujarat to manage this supply chain issue. The total number of dealers we purposely you know stop increasing number of distributors. However, we have restarted that exercise from last month. We are expecting that at least we will be able to add 60-70 distributors by end of December. Most of those distributors will be surrounding Nagpur facility only.

And on the lower capacity utilization, like Nagpur is operating with around 11%, 12%. So, any comments on that?

We are operating around at 15% -- that will gradually improve as we start moving more and more. [Technical Difficulty]