Creative Newtech LtdQ3 FY21Commercial Services & Supplies

Creative Newtech Ltd

Q3 FY21 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 2

Fundraise

Yes

Order

N/A

Capex

N/A

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 2

→Revenue expected between Rs.1,100 to Rs.1,300 crores in FY'23, driven significantly by Honeywell business and other licensing/own brand products.
→Honeywell segment expected to generate Rs.250 crores revenue in FY'23, growing from Rs.80-100 crores in FY'22.
→FMSG (Fast-moving specialty goods) business targeted to contribute 55%-60% of total business by FY'24-25, replacing low margin enterprise business.
→Enterprise business to decline as it is low margin and opportunistic.
→New high-margin products like Hyperice, Edelkrone, and licensed brands expected to increase profitability and revenue.
→Expansion planned into 29 APAC countries for Honeywell products, starting with Middle East and gradually moving to other regions.
→Online B2B platform Ckart to boost customer base and sales volumes without proportional increase in costs.
→Global audio category potential of Rs.1,000 crores in 5-6 years, Honeywell launching 60-65 new audio SKUs.

Margin guidance

Category 2

→Company expects revenue between Rs.1,100-1,300 crores in FY'23, driven by Honeywell and other businesses.
→EBITDA margin projected to improve from current ~3.59% to around 4.5%-5% in the coming years.
→Honeywell and own brand businesses anticipated to contribute 25-30% of turnover by FY'25 with higher gross margins (30-35% domestic, 45-50% international).
→EBITDA expected to improve gradually, with noticeable margin uplift from Q4 FY'22 onwards due to high-margin products like Hyperice, Insta, Zeiss, and Edelkrone.
→PAT margin targeted around 2%-2.25% for the current financial year, with EPS growth consistent with revenue and EBITDA growth.
→The company aims for Rs.100 crores EBITDA in FY'23 driven by volume and margin improvement.
→Long-term growth driven by expansion in FMSG business (projected to be 55-60% of sales by FY'24/25), high-margin product introductions, and international expansion.

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Fundraise plans

Yes

→In July 2021, Creative Newtech Limited raised Rs.11 crores through a preferential allotment of equity shares and warrants.
→The proceeds from this equity raise are intended to support growth in Honeywell business and scaling up overseas operations.
→Regarding debt, the company expects to require an additional Rs.10-12 crores of debt to manage working capital for business growth.
→The management stated there is no major intent for further dilution in equity for Honeywell business beyond past transactions.
→Overall, no new fundraising plans through debt or equity beyond the above-mentioned equity raise and moderate additional debt are indicated at this time.

Order book

The provided transcript from the Creative Newtech Limited Q2 & H1 FY'22 Earnings Conference Call does not explicitly mention details about the current or expected order book or pending orders. The discussion primarily focused on: - Financial performance, including revenue, EBITDA, and net profit. - Business segments growth, especially fast-moving categories like FMSG. - Brand partnerships and marketing strategies. - Supply chain challenges impacting product availability and sales. - Expansion plans in Honeywell business and online platform Ckart. - Investor queries about margin improvements and product launches. No specific quantitative information on order book or pending orders is disclosed in the available text.

Capex plans

→In July 2021, Creative Newtech Limited raised Rs.11 crores through preferential allotment of equity shares and warrants.
→The proceeds from this fundraise are intended to support growth in Honeywell business and to scale up overseas operations.
→The company is focusing on expanding its Honeywell business line and acquiring more international brands under license, maintaining an asset-light model.
→The launch and expansion of Ckart, an online B2B marketplace platform, are strategic investments aiming to increase customer base and improve working capital cycle and profitability.
→There is no explicit mention of heavy capital expenditure; the focus appears on brand licensing, platform development, and international expansion with strategic investments in partnerships.

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