Stove Kraft Limited (STOVEKRAFT.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Stove Kraft Limited Q3 and 9 Months FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Vidhi Vasa from MUFG Intime India Private Limited. Thank you, and over to you, ma'am.

Thank you, Bhoomi, and good afternoon, everyone. On behalf of MUFG Intime, I welcome you all to Stove Kraft Limited Q3 and 9 months FY '26 Earnings Conference Call. Today on this call, we have Mr. Rajendra Gandhi sir, Managing Director; and Mr. Ramakrishna Pendyala, Chief Financial Officer; and Mr. Hemant Kothari, Vice President, Investor Relations. Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our beliefs, opinion, expectations as of today. The statements are not a guarantee of our future performance and involve unforeseeable risks and uncertainties. And with this, I would like to hand over the call to Gandhi sir. Over to you, sir.

Thank you, Vidhi. Good evening, everyone. On behalf of Stove Kraft Limited, I extend a warm welcome to all participants to the Q3 and 9-month FY '26 Financial Results Earnings Call. We also have MUFG Intime with us on this call who are our advisers on Investor Relations. Along with me is Mr. Ramakrishna Pendyala, our CFO; and Mr. Hemant Kothari, our Investor Relations -- Vice President, Investor Relations. We have uploaded our investor deck and earnings press release on the stock exchanges and the company's website. I hope everybody had an opportunity to go through them. Global economic growth continues to remain uncertain with persistent inflationary pressures in several advanced economies and ambiguity related to geopolitical situation and tariff in U.S.A., impacting discretionary consumption. In contrast, India remains one of the fastest-growing major economies, supported by accelerated urbanization, expanding consumer base, and improvements in the GST policy framework are driving attractive growth opportunities for consumer durable industry, mainly the kitchen and home appliances segment. These structural tailwinds between domestic and international business resulted into 96% business being contributed by our domestic business for the company in quarter 3. This signifies -- this gives significant confidence to the team and affinity to the Pigeon brand, combined with improving affordability, increasing premiumization and rising replacement demand continue to support long-term sector momentum to the consumer durable sector. Although for the current and coming quarters, the export environment remains challenging. Our 9 months FY '26 revenue grew to INR 1,192.9 crores registering a growth of 4.9% in revenue on a Y-o-Y basis with an improved gross margin of 38.8%. Through disciplined financial structure alignment, the company achieved a meaningful improvement in operational efficiency, with working capital days being reduced to 43. This translated into a significant reduction in working capital debt which has come down to INR 80.6 crores at the end of quarter 3. Our flagship brand, Pigeon recorded a YTD CAGR growth of 9.3% reinforcing its position as a truly Pan-India brand recognized for quality, affordability, brand affinity and strong consumer popularity. During the quarter, we recorded robust volume growth of approximately 38% in small appliances category and approximately 9% in pressure cooker category. Further, all sales channels remained active and continue to gain momentum with modern trade and exclusive brand stores delivering particularly strong performance and achieving double-digit Y-o-Y growth. Export sales has faced headwinds due to persistent consistent uncertainty surrounding trade negotiations and tariff structures between India and the United States. Amid this, our IKEA business remains on track with business likely to commence at the end of the quarter -- coming quarter and meaningful revenue contribution expected next year. IKEA with its global presence beyond the U.S. continues to offer strong long-term growth potential. As we progress towards our objective of reaching 500 stand-alone exclusive Pigeon stores by 2027, the company continues to scale its presence through both COCO and COFA retail model for the Pigeon brand. During the quarter, we added 17 new stores, expanding our network to 313 outlets across 21 states and 138 cities, strengthening our Pan-India retail footprint. This growing consumer appliance is expected to drive growth across organized retail categories, resulting in increased demand for higher-quality products and enhanced service offerings. Further, our efforts have remained focused on building a strong foundation anchored in consumer satisfaction, motivating us to continuously innovate. We have successfully launched Pigeon Instamami, idiyappam/snack maker, which has got very high acceptance in the southern states of the country. We are also introducing our instant water heater and uncord dry iron to strengthen our market presence. Our in-house manufacturing capabilities and deeper backward integration have further enhanced our agility, ensuring consistent quality and improved cost efficiency. As we move forward, we remain confident in our strategy, focused on delivering consistent value, strengthening our brand and capitalizing on the opportunities. Now I will discuss the Q3 FY '26 financial performance. The consolidated revenue stood at INR 378.4 crores for the quarter versus INR 404.1 crores in the previous quarter last year, hence, registering a degrowth of 6.4% year-on-year basis, mainly due to lower export sales. Gross profit for the quarter stood at INR 149.2 crores versus INR 151.7 crores in Q3 FY '25, registering a degrowth of 1.7% year-on-year. Gross margins for the current quarter stood at 39.4% as compared to 37.6%, improving by 188 basis points, reflecting the strength and resilience of the company's business model. EBITDA for Q3 FY '26 stood at INR 35.3 crores versus INR 40.5 crores in Q3 FY '25, showing a degrowth of 12.9% year-on-year. The EBITDA margin for the current quarter stood at 9.3%. Profit after tax for Q3 FY '26 stood at INR 4.1 crores versus INR 12.1 crores in Q3 FY '25, registering a degrowth. The PAT margin for the current quarter stood at 1.1%. The quarter, we incurred a onetime expense of INR 4.65 crores. It consists of INR 1.24 crores for additional provision for gratuity and leave encashment, INR 1.9 crores due to ForEx loss and ECL provision of INR 1.51 crores. Now I will discuss the 9-month FY '25 financial performance. The consolidated revenue stood at INR 1,192.9 crores for 9 months financial year '26 versus INR 1,136.8 crores in 9 months FY '25, hence registering a growth of 4.9% year-on-year. Gross profit for 9 months FY '26 stood at INR 462.4 crores versus INR 431.7 crores last year, same time, same period, registering a growth of 7.1% year-on-year. Gross profit margin stood at 38.8% at an increase of 79 basis points year-on-year. EBITDA for 9 months FY '26 stood at INR 127.7 crores versus INR 121.2 crores in 9 months FY '25, showing a growth of 5.4% year-on-year. EBITDA margin for 9 months FY '25 stood at 10.7%. Profit after tax for 9 months FY '26 stood at 35.9% versus INR 37.1 crores in 9 months FY '25. The PAT margin stood at 3% mainly due to onetime extraordinary impact of INR 4.65 crores. The company undertook a substantial debt reduction of INR 80 crores during the quarter, which is expected to result in lower interest expense and support margin enhancement in the upcoming periods. Now I would request the moderator to open the floor for question and answer.

[Operator Instructions] The first question comes from the line of [ Khush Gosrani ] from [ Geojit PMS ].

Just congratulations on decent set of numbers given the market environment. How should one thing growth in the coming quarters, given that the domestic demand is on the...

Thank you. Of course, the domestic business is quite strong and robust, and the demand continues to be better than the previous period. Of course, we are -- the last quarter and the first quarter generally are softer quarters for us. But compared to that, we are seeing good January so far.

Got it, sir. And in terms of the commodity cost, despite rising commodity costs, we have reported highest gross margins. So going ahead, how should we think about it because they have been very volatile over the last 2 months?

Yes. The commodity markets are going through very, I can say, volatile times, while we protect our margins by having a price -- I mean, purchase mechanism, which can take care of a quarter. All our arrangements with large commodity buyers is linked to the previous quarter. So we are protected for the quarter. But going forward, we also -- we have no choice, but to pass on the price impact to our consumers. And we have already taken enough measures to address this. We are actually passing on the price increase to our consumers.

And sir, last question, despite the one-offs, the other expenses still on the higher side. So is there any element that of higher advertisement cost or any operational cost coming in?

Yes, the third quarter and our -- we have been very successful in launching a product in South India. Maybe you are in a different part of the country, and we have very good acceptance of this product. So there is a little increase in the advertisement spend in this quarter -- in the third quarter.

Got it sir. And what would be the percentage of exports in the total top line in this quarter? Or in the 9 months?

You're talking about the third quarter?

Yes, third quarter. Yes.

Yes, it's very small. It's about 3.5%.

Got it. Got it, sir...

Generally, we are at 12%. And we wish to grow there. But this quarter, we had a more challenging situation. It's not so very bad always, but this quarter was very bad.

Okay. Okay, sir. And in terms of ramp-up of IKEA, we should see from Q4 or it has delayed?

The end of this quarter, revenues will start. But meaningful revenue from next year.

Our next question comes from the line of [Vinod Krishna] from [Avendus Wealth].

Are you able to hear me?

Yes, yes. You're clear, sir. Loud and clear.

Sir, first question is on the business model, sir, in a sense of, can you explain because we see a lot of competition when we go to e-commerce. But if you see general trade and modern trade, we only have 3, 4 brands and that too we can't consider Hawkins and the premium brands as competition. So if you can explain in the cookware and the kitchenware segment, how do you see yourself positioned? And whom should we see as your competition and compare your growth to? In these segments, if you can -- if you can give us outlook on the growth -- domestic side outlook on the growth and more about competition because everybody comes and tries and e-commerce, you see too many brands. But on ground, you don't see that many brands. So how do you see that? And how are you positioning yourself and you are now -- you are one of the 2 players who have own retail outlets along with the Prestige. So how should we look at this business, let's say, as in the industry? So if you can please help us.

Let me explain to you, the TG that we address, we are the leaders in the category that we do. The opportunity is immense and large. We are currently, of course, in the small appliances growing disproportionately to the industry. And even in the pressure cooker segment, we grow disproportionately to the industry. The opportunity on cookware is large. We are still to address that opportunity fully. But to answer your question, of course, there is a huge headroom for us to acquire more market share within the opportunity that is available. And we are fully available through the general trade also. And apart from the general trade, network that we have, we are expanding our stores. So for us, it is a stack of e-commerce, modern trade, general trade and our own retail. We would want to be present in all this. All these channels are very important for us. We will give equal attention to all of them and will want to grow all of them. We want to see ourselves as leaders in -- continue to get to leadership in business in total, while we are the leaders in the TG that we address today.

So when you say TG, if you can expand and you can talk about who should we see as your competitors and compare with, if you can -- and your general commentary on competition...

So we are only acquiring market share. We are only acquiring market share. So I don't see -- we are the competition actually. We continue to acquire market share in each of the segments that we are present in the domestic market.

But if you see Prestige growth is higher than our growth. So how should we see -- I've got the -- in domestic, they have grown 12%. So how should we see, not just this quarter in general, their growth is higher. Hawkins, I'm not comparing. So I'm just trying to understand, when you say leader, can you tell me exactly what is your market share in pressure cookers, at least?

So we are moving towards being the largest by units on pressure cooker in this country. And since you mentioned the brand, I want to say in the last 5 years, we were 2/3 of their revenue, which we are closer to 60% of the revenue. So the growth is by far, I can say, disproportionate. There is no way that any other brand in the country in the category that we are operating in the last 5 years have grown faster than us. No way near rather.

So can you at least guide us, sir, 15% growth you were guiding in previous con call. So can we stick to the 15% growth on the domestic side at least till this...

I can say that -- while our aspiration is there, we will still be on the double digit. Though you don't see the double digit, we are at about 9% on the Pigeon growth for this quarter. But for the annualized, we will still be better than -- I mean, if not at the 15%, definitely higher than the double-digit base point.

But given IKEA and, if at all, let's say, we have brief deal in the next few months...

Those are export businesses. We actually anticipate in the future our export business to stabilize again and grow much faster than the domestic business. We are talking about these 2 businesses separately. The impact of -- in the current quarter, let me explain to you the impact in the quarter -- current quarter. We have witnessed a quarter, which was minus Diwali -- Diwali sales. So the comparable quarter may not be appropriate. But in spite of that, the domestic revenue was in line with the previous quarter of the same time the without Diwali. Because overall revenue got impacted on exports, we have a degrowth.

So small request, sir. This is not a question. If you can -- in your presentation, if you can do also channel-wise sales division, it would be very helpful because now you have become omnichannel. Your large part is coming from e-commerce. It will help us to see channel-wise what is your sales and volume like you give the category-wise, product-wise, if you can also give the channel-wise, it will be very helpful for us, sir.

We generally provide you the growth that we do on each of the channels in our presentations, and that's -- but if you want I will just give you the 9 months and the quarter gone by numbers.

Yes. Yes. e-comm, channel e-commerce, GT...

I'll give you all the channels. You can write down if you require. For 9 months the contribution of GT for the quarter gone by was 38.5%, e-com was 34%, 12% came from modern trade. We have corporate sales is 3.3%. Our own retail contributed to 8.5% and OEM export was 3.7%.

Got it. Got it. So -- at least in the domestic, we can take double-digit growth for the next 2, 3 years, right? On the domestic?

Yes, we are very confident, sir.

Sir, on margins, sir, if you can give guidance about EBITDA margin, I'm not talking about -- I know you can easily pass on because, given your pricing, you can easily -- on backward integration, you can easily pass on the cost and still be affordable. But in general, EBITDA margin, any guidance?

You will see improvement on both our gross margin, EBITDA margin and the price margins, at least 1% year-on-year.

At least 1% year-on-year. And debt, sir, this is the last question, sorry. Debt, it will be debt free by this year-end, right? Because that was your guidance.

Yes. Cash debt free. There is an accounting that -- so we have already reduced -- our total working capital has come down to INR 80 crores from its previous INR 160 crores.

No. Leave the lease part, sir. But normal debt, like real bank borrowing that was I would say...

Normal debt should be close to 0.

Except the supply...

By year end, sir...

So there is a supply -- no. So debt is the money that we borrow from the bank will be close to 0.

Yes, sir. Yes, sir. Not the lease liability. Leave the lease liability.

Yes. Yes. Then we'll be close to 0.

Already, sir? Or by year-end?

By the year-end.

Our next question comes from the line of [ Rachana K ] from [SIL PL].

Am I audible?

Yes, you're loud and clear, Madam.

Within the other appliances category, could you provide some color on mixer grinder as a category, excluding Nutri blenders, including trends for us in terms of revenue scale and profitability over the last 2, 3 years?

It's very difficult to give you product-wise, but we can definitely share it with you. We'll have to dig out those details. But in the small appliances category, we are growing very fast. For us in the small appliances category, the mixer grinder is the weakest one. But we are growing very fast in the Nutri blender.

Okay. So how do we position our mixer grinders across channels? And has our mixer grinder portfolio seen any pressures related to competition. Some qualitative color only on the mixer grinder category, if you could provide?

So we believe that mixer grinder is a cluttered category. And we believe that it is a margin drainer. We'll continue to be in the mixer grinder until, unless we innovate, we are able to get some cutting-edge innovation I don't see very high numbers coming from mixer grinder. Still, it is INR 100-plus crore category for us. But it is a very cluttered, low-margin business. For us, we are agnostic to margin, and we will not want to have differential margin between different products. Being a highly competitive appliance in -- the mixer grinder being in that category and could be -- that could be the reason for our lower -- I mean, we don't stand. Generally in any of the category that we are, we'll be in the top 3. But mixer grinder, we are far away from any of those. So I will want to guide you on the mixer grinder alone. I don't think we will put all our efforts to build only the mixer grinder. We would want to build more of appliances and we get to leadership in the appliances as a whole rather than only focusing on the mixer grinder.

Okay. Understood. One more question. Cooktops as an overall category used to contribute around 25% to 30% in FY '22. And now, annually, it contributes around 20%. Within this, the mix of induction cooktops has remained stable, while the gas cooktops has declined. Could you help me explain the reasons for this decline in mix, whether it is driven by competition or whether as per our ambition of profitability, it was not favorable compared to other appliances and broader categories?

No, we are growing the cooktop business, both in induction and gas top. But we let go one channel completely in the past. We were leaders in the channel. It was a co-branded channel with the oil companies, which we completely let go. So we are building the cooktop business minus that channel. At some time, it was contributing to about 60%, 70% of our cooktop business. Today, we don't do any business in the co-branded channel. And that's why you will see realignment on the numbers. But we are -- when you take other channels stand-alone, we continue to grow.

So after the exiting business with the oil companies, how has the business grown profitably, if you could explain that as well for cooktop?

Definitely, it is a higher-margin business compared to the co-branded oil company business. And for us, as far as margins are concerned, I again want to reiterate that we are agnostic on the margins by product or by channel. More or less, we'll be in the same range. For us, even the cooktop or the induction cooktop -- of course, induction cooktop, we are carving very large market share. By absolute numbers, we are leaders in this country and growing. On the glass cooktop business, we are also still building the business without the oil company business. So we are able to get back to leadership again. The margins are agnostic.

So what would be the efforts for building cooktops business, if you could again provide some color.

We have a very strong backward integrated facility for making cooktops, particularly we make -- none of the brands that in the country that operate will have a facility like that. We make -- we also process the glass ourselves. So we have a complete cost and quality control along with the supply chain control. So with that, we are continuously working on innovation. And as we innovate, we'll be able to get more and more market share, but we are growing.

Okay. And about steel cooktop?

Stainless steel cooktop is slowly trading. At some time in the past, it was only stainless steel cooktops. It's a very small contribution to the overall cooktop business is less than 5%, 6% of our business, 5%, 6% of our LPG cooktop business.

[Operator Instructions] Our next question comes from the line of Pallavi from Sameeksha.

Yes, sir. This was regarding right now, the -- you mentioned about the exports hitting the cookware segment. So what would be the number of excluding exports, the 3Q growth in cookware? And have we also introduced nonstick -- apart from nonstick cookware the other cast iron or other types of cookware stainless steel?

So stainless steel is one range that we will build. But the rest of the cookware, we have a complete stack -- we continue to make nonstick cookware that is what you mean by nonstick cookware is the PTFE coating. So the variant is a nonstick cookware. The emerging coating is ceramic coating. We are actually both when you combine exports and domestic, they are by far the largest in that category now. And we also, of course, have a completely automated line for making cast iron cookware. And we are gradually just started -- we have introduced to the market a new range of cookware, we called this [ CERACLAD ]. It is a stainless steel aluminum ceramic coated cookware. So I think with the addition of stainless steel range of cookware we'll be complete on the cookware. We are again in the cookware business growing very fast.

And sir, what would be the growth excluding the export number in the domestic market for cookware?

We'll have to work on that because currently, that...

Yes. And my second question, sir, was on cooker category...

I'll have to subtract the -- because for us cookware -- we have a number that includes export business. I will separately make and send it through our Investor Relationship.

My second question was on cookers. What is the kind of growth we expect in the future? This quarter, we have been slower than the leader Hawkins in terms of growth in the cooker category, just wanted to understand that slower growth because GST...

But unit numbers we are growing faster than -- by unit numbers, we are definitely growing faster than any of competing brands. And for us, Y-o-Y absolute value growth on pressure cooker alone is at about 4%.

Right. So the price hike you mentioned you've taken -- have you taken in this category also in this quarter?

No. Yes. We are working on that. We are protected for this quarter. But for the coming quarter or the end of this quarter, we have already announced those price corrections and which will be effective from, say, March, and we'll start seeing real-time correction from April.

Our next question comes from the line of Varun Ghia from Equitree Capital Advisors Private Limited.

Sir, my first question, if you could throw some light on what are the challenges in export, because Q2 was very good despite tariffs. So what has changed now? And previously, your growth outlook on exports was 40%, 50%, so how would you see that going forward? And also...

There are 2 -- yes. Yes, please continue your question.

No, you can -- I'll ask the second question later.

Okay. So there are 2 aspects to the export. We did have some challenges in the first quarter and which we had to complete those orders in the second quarter. So there was a stack-up of the inventory at the customer's point. And so from the fourth quarter, it is back to normal on that particular -- and we have developed 3 other product categories for exports. We have also had alignment with our customers, but they are unable to initiate those orders until this tariff stabilizes. We are very confident that in the near term this -- there will be some clarity and stabilization of the tariff. And so these are on pause at the moment, while we have developed it. And our export growth potential is also driven by our new customers like IKEA. So considering all this, we were very optimistic on our growth. We will end at growth for exports in the year. But definitely, the quarter gone by was very, very subdued.

Till the tariffs stay, the export outlook is not clear, basically?

Can you please reframe -- so I'll tell you, our existing categories continue to grow. The new business is yet to start. The new business is -- the IKEA business is yet to start. We are also working on some other countries. But the existing business with our U.S. customers continue. The new development of new product categories with our American customers are in pause.

Okay. And secondly, what was this ForEx loss of INR 1.9 crores, is it due to some hedging because we don't input anything, right, under the depreciation of INR.

So while we have a hedging policy, there was very disruptive volatility in the ForEx. And this mainly is actually an unrealized provision that has been made for some CapEx, which have deferred payment. We would have bought these machines -- they are on LC payment. And so these are unrealized loss that we have provided.

And what is the ECL provision related to INR 1.5 crores?

The rest of -- we generally hedged both our receivables and payables. Our payables are mostly in CNY and receivables are in dollars. Because the receivables [Foreign Language], the export business is the long term, we'll have a plan for a year. We are able to hedge for longer periods. And the payables are for shorter periods. Generally, we pay them in 30, 60 days. And so our payable hedging policy for the -- I mean, whatever we have imported and aware of the payment we hedge. So both sides we hedge.

Okay. And what was the cash flow from operations for 9 months, if you could provide that number?

Yes, just 1 minute -- CFO from operations is -- INR 242 crores.

INR 242 crores?

Yes.

Okay. That is -- okay. And lastly, you mentioned that you will still continue to do a double-digit revenue growth. So you will have to do almost INR 400 crores of top line in Q4 and...

Hopefully, we should be closer to that, hopefully.

Okay. And lastly, you gave a breakup of the revenues for 9 months, there was some mismatch in numbers. You mentioned export was just 3.7%, which comes to only...

For the quarter? For the quarter?

For 9 months?

No, no. 9 months is much higher. Just -- I will give you, just a minute. My mistake, 11.4% is for the 9 months and for the quarter was 3.7%. The numbers I gave you was all for the quarter 3. If you want the number for 9 months, I'll separately give it.

Our next question comes from the line of Anubhav Goel from Cosma Ventures.

Sir, just confirming, if I got it right? You're saying exports for the year, we will see growth on top of the INR 160 crores sales number you recorded for FY '25 and 4Q will be back to normal, is that correct?

You're right.

And the 9-month sales number for exports comes to around INR 136 crores, based on the 11.4%...

So for the 9 months, we don't have a big degrowth. But [for] quarter there was a huge dip.

And sir, any...

For the 9 months, we have a small growth, 2.2% growth for the Y-o-Y for export.

Got it, sir. Sir, and any color for FY '27, like do we see export sales remaining around INR 160 crores, INR 170 crores sales or we can head up higher to say, INR 190 crores, INR 200 crores?

You're talking about FY '26 or FY '27?

FY '27.

'27 will grow over the current year. We have this complete new business coming from IKEA. And the current business itself, if it normalizes will be in the range that you mentioned. So we have the 9 months about -- export business is INR 136 crores, right? So we'll be closer to the number that you mentioned for the year. But for the FY '27, definitely, we have a complete new business with IKEA coming.

Got it, sir. So sir, regardless of the tariffs being lifted, we at least at the bare minimum, expect these numbers to sustain?