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S Chand and Company Limited Q4 FY24 Conference Call Summary
Key Achievements • Highest operating revenues, gross margins, EBITDA, and operating cash flows in five years. • Proposal for a final dividend of Rs 3 per share. • Achieved net debt-free status with a cash balance of Rs 600 million.
Financial Highlights • Operating Revenues: Increased by 9% to Rs 6,626 million. • Gross Margins: Improved to 66%. • EBITDA: Surpassed Rs 1,000 million, totaling Rs 1,098 million. • Net Profit After Tax (PAT): Rs 511 million. • Operating Cash Flows: Record Rs 1,211 million.
Future Outlook • Anticipates double-digit revenue growth in FY25. • Plans for a single-digit price hike across products. • Focus on developing new syllabus content. • Expects increased adoption of new syllabus books in schools.
Challenges and Strategies • Addressed challenges in Higher Education and Test Prep segments due to competition and shortened semesters. • "S Chand Academy" Ed-Tech initiative gained traction with over 20 million YouTube views. • Ongoing review of potential acquisitions and cautious revenue guidance due to external factors.
Market and Operational Insights • Awaiting government policy updates on June 4. • Paper prices slightly decreased; expected to remain stable with minor increases. • Plans to reduce paper procurement by 20-30% compared to the previous year. • Open to acquisition opportunities but facing challenges in finding suitable deals.
Margin and Inventory Management • Improvements in working capital metrics noted. • Optimism about achieving margins around 20% in the future. • Acknowledged room for improvement in inventory management.
New Syllabus Impact • New NCERT syllabus expected to increase market share as new books replace old ones. • Approximately 10-20% of schools have adopted the new syllabus; full adoption pending NCERT book release.
Capital Allocation Strategy • Plans for dividend distribution and potential acquisitions post net debt-free status. • Buyback consideration once cash reserves exceed ₹100 crore.
Conclusion • Management expressed optimism about reaching ₹900 crore to ₹1,000 crore in revenue in the coming years, contingent on timely NCERT book releases and market consolidation favoring stronger players.
Financial Performance • Third Quarter Results: • Consolidated operating revenues: Rs 2,254 million (increase from previous year). • Highest nine-month sales in company history. • Increased EBITDA and PAT losses due to higher operating expenses and absence of one-off gains.
Key Highlights • Sales and Opportunities: • Strong sales performance noted by MD Himanshu Gupta. • Launch of National Curriculum Framework (NCF) in August 2023 presents new content opportunities. • Challenges: • Issues in Higher Education and Test Prep segments due to shortened semesters and competition.
Employee and Marketing Expenses • Increased Expenses: • Investment in personnel and content development related to NCF. • Rise in marketing expenses due to promotional activities targeting schools. • Regular wage hikes contributing to overall expense increase.
Future Investments and Growth • Content Development: • Continued investment in content development into 2024, albeit at a reduced scale. • Gross Margins: • Lower gross margins attributed to high-cost paper inventory and smaller print runs; expected resolution in Q4.
Guidance and Market Expectations • FY24 Guidance: • Revenue guidance of Rs 720-750 crores with EBITDA margins targeted at 16-18%. • Market Growth: • Anticipated consistent growth rate of 10-12% post-NCF implementation.
Acquisition and Financial Strategy • Potential Acquisition: • Due diligence complete for acquisition in higher education segment; final agreement terms being finalized. • Dividends and Buybacks: • Decisions dependent on liquidity post-Q4 and acquisition cash availability.
Market Position • Market Share: • Approximately 12-13% market share in CBSE and ICSE segments; 40-50% in West Bengal regional state board. • Growth Expectations for FY25: • Anticipated growth of 18% to 20% based on FY24 performance.
Conclusion • Management expressed optimism about meeting targets and thanked participants for their engagement.
Compliance and Call Details • Date of Submission: August 17, 2023 • Conference Call Date: August 14, 2023 • Hosted by: Prabhudas Lilladher Pvt. Ltd. • Key Management Present: • CFO Saurabh Mittal • Head of Investor Relations Atul Soni • Transcript Availability: Company website
Financial Highlights • Net Debt-Free Status: Cash balance of Rs 546 million • Record Performance: • Highest Q1 sales, gross margins, and EBITDA in history • Consolidated operating revenues: Rs 1,111 million (up from Rs 1,073 million YoY) • Gross margins improved to 69% • Revenue Target for FY24: Rs 7,200 million to Rs 7,500 million • Impact of Pre-COVID Academic Schedules: Positive cash flows and reduced uncertainty
Market and Product Strategy • New Product Launches: Over 500 new SKUs in the school segment • Investment in EdTech: Stake in iXambee • National Curriculum Framework (NCF): Anticipated positive impact on sales
Quarterly Performance Insights • Q2 Expectations: Strong performance anticipated due to college openings • Q3 Focus: Product promotion and settling accounts with channel partners • NEP Adoption Impact: Projected 20-25% impact this year
Pricing and Raw Materials • Price Increases: Previous 15-30% increase did not significantly affect volume; modest 7% hike planned • Raw Material Contracts: 60% of imports contracted at lower prices • Return Rates: Estimated around 14-14.5%, down from pandemic peaks
Capital Allocation and Strategic Plans • Potential Acquisition: Exploring a small strategic acquisition (up to Rs 20 crores) • EBITDA Margin Guidance: 15-18%, with fluctuations based on paper prices • Return on Capital: Focus on improving ROCE and ROE, considering share buybacks post FY24
Conclusion • Focus Areas: Working capital management, cash flow improvement, and content development for educational institutions • Annual Paper Consumption: Estimated at 18,000 to 20,000 tons, with 60% contracted via imports
S Chand And Company Limited Q4 FY23 Earnings Conference Call Summary
Financial Performance Highlights • Operating Revenues: Increased by 27% to Rs 6,103 million. • EBITDA: Rose by 57% to Rs 963 million. • Profit After Tax (PAT): Surged by 616% to Rs 576 million. • Dividend: Proposed at Rs 3 per share. • Net Debt-Free: Achieved in April 2023.
Future Outlook for FY24 • Revenue Projections: Expected between Rs 7,200 million and Rs 7,500 million (18%-22% growth). • Price Strategy: Plans for a single-digit price hike across products. • EBITDA Margin Target: Aiming for 16%-18%. • Growth Drivers: Anticipation of growth from the National Curriculum Framework (NCF) and return to normalcy in education.
Inventory and Procurement Strategy • Paper Orders: To be placed by June/July, with arrivals expected in August. • Paper Pricing: Currently softening, especially for imported paper (40-50% of procurement).
Sales and Marketing Strategy • Sales Organization: Diverse divisions with a significant number of salespeople. • Marketing Focus: Direct engagement with schools through demonstrations and workshops. • Budget: 6-7% of revenue allocated to sales and marketing.
Key Metrics and Improvements • Receivable Days: Currently at 159, with a target reduction to 120-150 days in FY24. • Employee Costs: Stable at 22%, with a focus on content development.
National Curriculum Framework (NCF) Impact • Revenue Contribution: Minimal in Q4 due to late implementation. • Gradual Rollout: NCF expected to take 2-3 years for full implementation.
Mylestone Performance • Revenue Contribution: Generated approximately Rs 16 crores last year, currently EBITDA negative. • Growth Projection: Expected 30% growth this year, aiming for EBITDA positivity.
AI Tools and Market Competition • Impact of AI: Limited immediate effects on K-12, potential opportunities in higher education. • Competition: Significant in the CBSE space, with larger players than Navneet.
Capital Allocation and Debt Management • Debt Levels: Average cost of debt at 9.5-10%, focus on maintaining low long-term debt. • Cash Flow Projections: Expected operating cash flows of Rs 90-110 crores for the next year. • Dividend Payout: Commitment to a 20-25% payout while considering small investments in EdTech.
Conclusion • Optimism for Future: Emphasis on debt-free status, improving cash flows, and EBITDA margins.
S Chand And Company Limited Q3 FY23 Conference Call Summary
Conference Call Overview • Date: February 13, 2023 • Moderated by: Prabhudas Lilladher • Key Participants: • Himanshu Gupta (Managing Director) • Saurabh Mittal (CFO)
Financial Highlights • Record performance in the first nine months of FY23: • Operating Revenues: Increased by 58% to Rs 2,198 million (from Rs 1,390 million). • EBITDA Losses: Decreased by 38% to Rs 504 million. • PAT Losses: Reduced by 62% to Rs 441 million. • Improved efficiency: • Reduction in trade receivables and net working capital days. • Net debt decreased to Rs 1,224 million from Rs 1,571 million.
Future Outlook • Anticipated strong performance in the current sales season. • Plans for a 20% price hike across product portfolio to address rising paper costs. • Projecting annual revenues exceeding Rs 600 crores with over 25% growth. • New syllabus introduction expected to drive revenue growth.
Management Insights • Focus on organic growth rather than acquisitions. • Interest in inbound investment opportunities aligned with long-term value. • YouTube channel aims to enhance student engagement and boost book sales.
Q&A Highlights • Revenue Guidance: Projected sales of Rs 640-650 crores by year-end, with EBITDA target of 16-17%. • Impact of National Curriculum Framework (NCF): Optimism about growth opportunities; expected release before elections. • Cash Flow: CFO assured positive cash flow for the full year despite Q3 challenges. • Online Sales Presence: Currently limited, exploring enhancements. • Paper Prices: Rising but may stabilize; gross margins projected around 60%.
Long-term Strategy • Considering a dividend policy as the company approaches net debt-free status. • Growth drivers identified as increasing student numbers and stronger sales strategies. • No immediate plans to diversify product lines or expand into new areas.
Conclusion • Management expressed optimism for future growth and aims for zero debt by the end of Q4.