Prataap Snacks LtdQ1 FY23Food Products

Prataap Snacks Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 1

Fundraise

N/A

Order

N/A

Capex

Yes

2 of 3 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→Targeting a 15%+ sales growth rate for the upcoming period, supported by distribution expansion and range selling activities (Page 6).
→Optimism about sustained strong revenue growth driven by continued emphasis on distribution expansion (Page 5).
→Assumption of 14%-14.5% growth to meet minimum PLI scheme thresholds, translating to about 10% CAGR from FY20 base (Page 17).
→Expansion of distribution reach by nearly 1.6 lakh outlets in the last financial year, aiding volume growth (Page 3).
→Expecting consumer demand to be supported by increasing economic activities and easing inflation trends (Page 5).
→Avadh subsidiary's top-line growth was in line with Prataap’s standalone growth, contributing to overall volume increase (Page 9).

Margin guidance

Category 1

→The company targets a strong revenue growth, aiming for 15%+ growth rate supported by distribution expansion and range selling.
→EBITDA margin is expected to improve to around 9% by the end of FY2024 on a quarterly run-rate basis (excluding PLI incentives).
→With PLI incentives included, the company targets double-digit EBITDA margins.
→Post reaching a sustainable 8-9% EBITDA margin, reinvestment in advertising and promotion (A&P) is planned to drive further growth.
→Operating leverage benefits are expected due to prior investments in sales force and distribution.
→Full-year EBITDA margin target is to gradually approach or surpass 10% over the longer term.
→The company remains optimistic about margin expansion despite inflation and input cost pressures, backed by cost optimization and compressed distribution structure.
→PAT and earnings growth are expected to mirror improvements in operational efficiency and margin expansion.

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Fundraise plans

→No explicit mention of any current or future fundraising through debt or equity during the call.
→The company reported a significant reduction in borrowings from Rs. 30 crores in March 2022 to Rs. 3 crores in March 2023.
→They maintain a net debt-free status, indicating a strong balance sheet.
→CAPEX plans of Rs. 100-105 crore over the next two years will be funded internally without mention of new debt or equity issuance.
→Management emphasized strong balance sheet readiness to support growth plans, suggesting no immediate requirement for external fundraising.

Order book

The transcript does not provide explicit details about the current or expected order book or pending orders for Prataap Snacks Limited. However, relevant points related to business outlook and demand are: - The company reported strong sales growth of 19% in FY23 with the highest ever sales of Rs. 16.42 billion. - Average distribution reach expanded by approximately 160,000 outlets. - Targeting 15%+ growth rate, with optimism driven by distribution expansion and range selling. - Demand was slow in April post-COVID but is starting to pick up. - The company believes it can manage inflationary pressures and competitive intensity. - Production capacity utilization is currently at 55-60%, with capacity to optimally utilize up to 80-85%, indicating room for demand absorption. - No direct mention of order backlog or pending orders was made during the call. Hence, no specific order book figures were discussed.

Capex plans

Yes

→The company plans to invest around Rs. 100 crore to Rs. 105 crore in overall CAPEX over the next two years.
→This includes investments required under the Production Linked Incentive (PLI) scheme.
→A new manufacturing plant is being set up in Jammu, which will add to the overall production capacity.
→Current production capacity utilization is about 55-60%, with room to optimize up to 80-85% before requiring significant expansions.
→The company is also focusing on cost reduction programs, including factory overhead automation, to improve operating leverage.

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