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S.P. Apparels Limited Q4 and FY24 Earnings Conference Call Summary
Conference Call Overview • Date: May 23, 2024 • Hosted by: Elara Securities India Private Limited • Key Participants: • Mr. P. Sundararajan (Chairman and Managing Director) • Other senior management executives • Structure: • Welcome by moderator Ms. Prerna Jhunjhunwala • Opening remarks by management • Transcript shared with BSE and NSE for compliance
Industry Insights • Growth potential in India's textile industry due to: • "China Plus One" policy • Instability in Bangladesh prompting shifts to India and Sri Lanka • Expansion plans: • Growth in kids wear and diversification into adult wear and innerwear • New project in Sivakasi launching in June
Financial Performance • Q4 FY24: • Revenue growth: 9.3% (Rs. 254 crores) • EBITDA margin: 15.1% • Full Year FY24: • Adjusted revenues: Rs. 938 crores • PAT growth: 13% • Future outlook: • Targeting topline doubling in UK division by FY25
Q&A Highlights • Customer demand: • Positive outlook for Garment business in Europe and US • Supplier consolidation benefits S.P. Apparels • Capacity utilization: • Current: 78%, target: 85-90% by end of FY25 • Margin concerns: • Recent drop due to airfreight costs; maintaining 18% margin guidance for FY25
Retail Segment Performance • Positive EBITDA margin achieved for the first time • FY25 turnover expectation: Rs. 100-110 crores
Young Brand Acquisition • Potential revenue: Rs. 450 crores at full capacity • Existing customers eager to increase orders • Capacity in Bangladesh not expanding; focus on India and Sri Lanka
Capacity and Operations • Current machine capacity: ~5,000 machines • Planned additions: • 1,000 machines in Sri Lanka • 500 machines in Sivakasi • Future capacity: 1,800 machines for Young Brand
Debt and Financial Outlook • Post-acquisition net debt expected: Rs. 150-160 crores • Commitment to sustainable growth emphasized by P. Sundararajan at the conclusion of the call.
Strategic Acquisitions • Acquired Young Brand Apparel Private Limited and assets from Bannari Amman Spinning Mills for Rs. 223 Crores. • Aims to enhance market presence and diversify product offerings.
Financial Performance • Quarterly revenue: Rs. 225.28 Crores; flat revenue for nine months at Rs. 684 Crores. • Adjusted EBITDA margin: 17.2%; EBITDA growth of 18% for the quarter. • PAT increased by 37.5% for the quarter and 12.2% for nine months.
Segment Performance • Garment segment utilization increased to 78%. • Spinning division achieved break-even due to stabilized margins from lower cotton prices. • SP UK division recovering with new customers and increased revenue. • Retail division faced challenges with reported losses but has growth potential.
Future Outlook • New factory in Sivakasi expected to generate Rs. 60-80 Crores by FY2026. • Anticipated 10-15% revenue growth in FY2025, primarily in volume. • Young Brand acquisition expected to add Rs. 20-30 Crores in revenue over the next 12 months.
Customer Base and Synergies • Young Brand's customer base includes American Eagle and Jockey. • Management team to remain unchanged post-acquisition. • Plans for cross-selling products to leverage synergies.
EBITDA and Revenue Projections • Targeting EBITDA margins of 18-20%. • Additional factory could contribute Rs. 80-100 Crores to revenue. • Total projected revenue of approximately Rs. 460 Crores over the next two years.
Retail Division Challenges • Significant EBITDA loss reported, but some brands like Crocodile are profitable. • Ongoing negotiations with a struggling brand may impact future results.
Debt and Shipment Issues • Manageable net debt situation after accounting for investment capacity. • Estimated backlog of Rs. 6-7 Crores due to shipment delays.
Expansion Plans • Capacity expansion in Sri Lanka with plans for 1,000 machines. • Adding new customers interested in Sri Lanka production.
Overall Growth Potential • 10-15% growth estimate pertains to existing garment operations, excluding new initiatives. • Optimism about the acquisition and future operations in Sri Lanka.
S.P. Apparels Ltd. Q2 FY24 Earnings Conference Call Summary
Company Overview • Held on November 9, 2023, led by Chairman P. Sundararajan and CFO V. Balaji. • Focus on the growth of the Indian textile and apparel market.
Market Conditions • Increased garment export demand expected due to macroeconomic shifts. • Challenges include reduced international demand and inflation in the UK and Europe.
Financial Performance • Q2 revenue: INR 246.1 crores; consolidated revenue: INR 287 crores (18% YoY increase). • PAT: INR 29 crores. • Order book: INR 410 crores, with realizations expected at INR 130 crores.
Division Highlights • Spinning Division: Recovery from previous losses; targeting 90% utilization and double-digit EBITDA. • Garmenting Division: Revenue impacted by lower unit prices; diversifying into higher-value segments. • Retail Division: Q2 revenue of INR 27.69 crores; EBITDA loss of INR 1.19 crores due to new brand introductions.
Strategic Initiatives • Plans for factory expansions and onboarding three additional customers by 2024. • Transition of the UK division to a new office in London, stabilizing operations. • Exploring opportunities in Sri Lanka to enhance business for European and UK customers.
Future Outlook • Management remains optimistic about future demand and operational improvements. • Anticipated revenue growth of 20% in the garment division due to favorable market conditions. • Plans to list SP Retail Ventures by FY26, contingent on performance improvements.
Employee and Operational Plans • Employee recruitment manageable with a two-week training period. • Capital expenditures projected at INR 30-40 crores for expansion and workforce support.
Conclusion • Management expressed readiness to address further inquiries and highlighted a positive outlook for growth and profitability.
SP Apparels Limited Q1 FY2024 Earnings Conference Call Summary
Date and Communication • Date of Call: August 16, 2023 • Transcript Released: August 22, 2023 • Participants: Chairman P. Sundararajan, CFO V. Balaji, and senior management
Key Financial Highlights • Recommended Dividend: Rs. 3 per share • Garment Division Revenue: Rs. 213 crores (down from Rs. 223 crores in Q1 FY2023) • Adjusted EBITDA: Rs. 35 crores with a margin of 16.3% • Gross Debt: Rs. 191 crores • Liquidity Position: Strong
Challenges and Optimism • Challenges: Raw material price pressures and flat retail sector performance • Future Outlook: Optimism for revenue growth and margin improvement in H2 FY2024
Strategic Initiatives • New Manufacturing Subsidiary in Sri Lanka: • Exploring existing factories to enhance capacity • Operations expected by late Q4 FY2024 or early Q1 FY2025 • Initial focus on jersey products, with plans for woven garments
• Capacity Utilization: • Target of 90% by year-end • Increase in labor to 4,500-4,800 workers
• Asset-Light Model in Sri Lanka: • Focus on leasing factories rather than expansion
Retail Operations and Market Trends • Crocodile Brand Performance: Strong, but kids' wear segment facing challenges • Retail Growth Funding: No significant additional capital needed; bank support secured • Demand Trends: Consolidation among retailers; focus on maximizing existing capacities
Geographic Strategy • Preference for Sri Lanka: Cultural compatibility and labor availability over Bangladesh • Revenue Contributions: • 44% from Europe • 8% from the US • Remainder from the UK
Revenue Guidance • Growth Expectation: 15-20% for FY2024 and FY2025, with potential additional 5% from offshore production • Impact of Free Trade Agreement (FTA): Uncertainty regarding effects on EBITDA margins and guidance
Conclusion • Final Remarks: Sundararajan invited further questions and thanked participants for their time.
S.P. Apparels Limited Q4 FY '23 Conference Call Summary
Industry Trends • Positive shifts in the apparel industry from China to India due to geopolitical factors. • Ongoing discussions for free trade agreements (FTAs) with the UK and Canada.
Financial Performance • Garment division revenue grew 6% year-on-year to INR 232 crores. • Adjusted EBITDA margin at 17.8%. • Current order book at INR 365 crores; capacity utilization expected to rise. • Spinning division recovering; fabric processing division performing well despite rising costs.
UK Operations • UK operations faced disruptions but revenues stabilized at GBP 1.4 million for the quarter.
Retail Ventures • Reported INR 25 crores in revenue but incurred an EBITDA loss due to new brand overheads. • Projected EBITDA breakeven for the retail division next year, driven by Crocodile brand performance.
Overall Financials • Adjusted revenue for the quarter at INR 272 crores, up from INR 258 crores year-on-year. • EBITDA decreased to INR 40.48 crores from INR 45 crores. • FY '23 highest revenue recorded at INR 1,098 crores; adjusted EBITDA at INR 173 crores. • Workforce reduced to 12,500 employees after closing four small factories.
Future Outlook • Forecasted 14-15% growth in the garment division for FY '23-'24. • Annual capital expenditure of INR 50-60 crores for new garment factories. • Potential 4-5% competitiveness gain from upcoming FTAs.
Production Capacity • Current utilization at 70%, with potential to reach 22 million pieces per quarter. • Strong demand for baby garments; solid orders for the upcoming summer season.
Concerns Addressed • Wage inflation in Bangladesh not expected to impact India significantly. • No slowdown in demand for niche segments in European markets. • Currency fluctuations unlikely to affect future gains as most orders are booked.
Conclusion • Management expresses confidence in ambitious plans for the next five years, with a solid order book extending until August.
S.P. Apparels Limited Q3 FY23 Conference Call Summary
Financial Performance • Garment Division: • Flat revenue of ₹219 crores • Adjusted EBITDA of ₹40 crores • Impacted by retailer inventory issues • Total Revenue: ₹258 crores for the quarter • Profit After Tax (PAT): ₹13.2 crores • Net Debt: ₹84 crores • Liquidity: Strong, following a ₹35 crores buyback
Future Outlook • Order Book: ₹364 crores • Capacity Utilization: Current at 74%, expected to increase • Growth Guidance: • FY23: 25-30% • FY24: 15-20%
Division Challenges • Spinning Division: • High cotton prices affecting margins • Prices have stabilized • UK Subsidiary: Experienced supply chain disruptions • Retail Division: • Revenue of ₹31 crores • EBITDA loss due to new brand overheads
Management Insights • Currency Fluctuations: • Impact of ₹8.9 crores due to changes in UK Prime Minister • Inventory Management: • Confusion among retailers post-COVID • Larger manufacturers favored over smaller ones • Production Volumes: • Delays in CAPEX for new garment facility • Construction expected to start in April
Market Trends • Kids' Segment: Steady demand; plans to expand into adult wear • Market Share Growth: Expected to rise from 7-10% to around 20% by next year • Retail Expansion: Targeting ₹120 crores in revenue next year with an 8% EBITDA margin
Capacity and Margins • Spinning Capacity: • 27,000 spindles for captive use • Expected EBITDA margin of 18% • Yarn Price Impact: • Margins influenced by cotton-to-yarn price spread
Currency Exposure • Pound Exposure: 45% • Impact on Results: Recent currency changes affected quarterly results
Conclusion • Management remains optimistic about maintaining margins and growth despite market challenges, with a focus on efficiency and higher-margin segments.