D.P. Abhushan Ltd

Q1 FY22 Earnings Call Analysis

Consumer Durables

Full Stock Analysis
capex: Yesrevenue: Category 2margin: Category 3orderbook: No informationfundraise: Yes
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fundraise

Any current/future new fundraising through debt or equity?

- The company has already arranged Rs. 40 Crores in the current fiscal year and started expansion at Banswara and plans for Ratlam. - They have utilized maximum available bank funds at 7% interest; thus, currently not receiving much more funds. - Company will plan expansion funding through internally raised funds and schemes they run. - Regarding Qualified Institutional Buyer (QIB) funding, the company is exploring good opportunities but has no concrete plan to raise funds or dilute stake as of now. - If a beneficial QIB opportunity arises aligned with expansion plans, the company will consider it. - No current plan for stock split or immediate equity fundraising; open to future options if favorable.
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capex

Any current/future capex/capital investment/strategic investment?

- The company plans to expand its existing Ratlam store by more than five times (from approx. 2,200 sq. ft. to around 11,000 sq. ft.) by the end of the current year, addressing space and customer amenities issues. - New stores are slated to open primarily in Tier 2 and Tier 3 cities, including Neemuch (M.P.), Godward (Gujarat), Dahod (Gujarat), and possibly big cities like Raipur and Jabalpur pending survey results. - The company targets opening 2 new showrooms yearly with potential Rs. 200 crore topline each, gradually increasing utilization. - Expansion funding relies on a mix of bank finance (currently maximized), internal cash flows, and funds raised via company-run schemes; no aggressive debt raising planned as yet. - No immediate plan for stock splits or dilution; the company is open to Qualified Institutional Buyer (QIB) fund raising if favorable opportunities arise. - Emphasis remains on increasing turnover rather than margins to boost profit.
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revenue

Future growth expectations in sales/revenue/volumes?

- The company expects same store sales growth of around 22% in upcoming years based on past performance and future growth projections. - Plans to open 2 new showrooms annually, each with potential topline of Rs. 200 crore, achieving 50% utilization in the first year and 100% utilization onwards. - Expansion focus is on Tier 2 and Tier 3 cities, including entry into Chhattisgarh and Gujarat, and further penetration in Madhya Pradesh and Rajasthan. - Targets a turnover of Rs. 3000+ crore by FY 2025, up from Rs. 1730 crore currently. - Volume growth is emphasized alongside value growth, not just driven by gold price but also by increased gold, diamond, and silver jewelry sales. - Growth pillars include quality, expansion, sustainability, and high customer satisfaction, supported by their natural hedging policy and regional focus reducing operating costs.
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margin

Future growth expectations in earnings/operating earnings/profits/EPS?

- Company targets topline growth from Rs. 1,730 Crores (FY 2022) to Rs. 3,000+ Crores by FY 2025. - Plans to increase store count from 8 to 13+ stores by FY 2025, focusing on Tier 2 & Tier 3 cities in Central India including MP, CG, Gujarat, Rajasthan. - Operating profit already approx. Rs. 75 Crores, with focus on increasing turnover rather than margins. - Profit After Tax (PAT) grew from Rs. 4.5 Crores (2017) to Rs. 40 Crores (2022), demonstrating 8x growth in 5 years. - Target is to expand existing flagship store in Ratlam (from 2,200 sq.ft. to ~11,000 sq.ft.) by end of current year to boost sales capacity. - Strong asset turnover and inventory management lead to higher return on assets compared to peers. - Company continues to seek good opportunities for raising funds (QIB etc.) to fuel expansion when suitable. - EPS improved from Rs. 4.32 (2018) to Rs. 18.41 (2022), indicating consistent profit growth.
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orderbook

Current/ Expected Orderbook/ Pending Orders?

The transcript from D. P. Abhushan Limited's investor meet does not explicitly mention the current or expected order book or pending orders. Key points relevant to operations and expansion include: - The company is focusing on expanding store operations, with plans to increase from 8 stores to 13+ stores by FY 2025. - Expansion targets include Tier 2 & Tier 3 cities such as Neemuch (MP), Godward (Gujarat), Dahod (Gujarat), Raipur, and Jabalpur. - The company has strong cash flows but is cautious about expansion funding, utilizing bank finance (~7% interest) and internal accruals. - Sales for recent quarters have seen a decline (~26% YoY and ~34% sequentially), and volume data will be provided upon request via compliance officer. - New store capex is roughly Rs. 25 Crores per small city store with planned space expansions, notably increasing Ratlam store size fivefold. No specific order book or pending orders are disclosed in the transcript.