Uday Jewellery Industries LtdQ3 FY23Consumer Durables

Uday Jewellery Industries Ltd

Q3 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 1

Margin

Category 2

Fundraise

Yes

Order

Yes

Capex

Yes

4 of 5 growth signals are positive — a strong management growth story.

Full analysis

Revenue guidance

Category 1

→The company aims for a 5x increase in manufacturing capacity from current 20 kg/month to around 125 kg/month within 2-3 years.
→This capacity expansion targets a revenue top line potentially increasing from around ₹150-180 crore annually to ₹400-500 crore in the next 1.5 to 3 years.
→Growth drivers include penetrating new markets, acquiring new clients, and expanding within existing client relationships, including big organized players like Malabar and Kalyan.
→International business currently contributes 10-15% of turnover, with a target to grow exports to around 20% in 2 years, focusing on markets like US, Middle East, Australia, South Africa.
→Margin improvement is expected as turnover increases, possibly reaching double-digit EBITDA margins (~10-11%).
→Focus on organized jewelry manufacturers, which constitute a smaller share currently, represents a significant growth opportunity.
→The new manufacturing facility and skilled labor retention are critical enablers for achieving these targets.

Margin guidance

Category 2

→The company aims for a 5x capacity increase over the next 2-3 years, targeting a significant rise in turnover from the current ₹150-180 crore to about ₹400-500 crore annually.
→Margins are expected to improve with scale, potentially reaching double-digit levels (around 10-11%) as operating leverage kicks in.
→Return on Equity (ROE) and Return on Capital Employed (ROCE) targets are around 16-20% over the next 2 years.
→Operating cash flow is currently negative due to investment in growth, particularly inventory, but is expected to turn positive once revenues stabilize at a higher level.
→Export revenues, currently 10-15%, are expected to grow to about 20% in 2 years due to expansion into new international markets.
→EBITDA margin targeted between 7-8% with continued revenue growth planned to ₹300 crore by FY25.

Get access to all 5 sections — revenue, margin, fundraise, orderbook, and capex — for Uday Jewellery Industries Ltd and 1,400+ other companies.

Fundraise plans

Yes

- The company currently has some surplus funds and plans to initially use those for growth and working capital. - For future funding needs, especially related to the large capacity expansion (5x increase), the company indicated it will approach the markets as required. - They are open to raising funds through a mix of debt and preferential equity as per requirements. - The working capital requirement will be the major chunk of funding needed going forward due to the costly materials involved. - No definite timeline or amount was specified for fundraising, but the company is prepared to raise funds from both debt and equity options to support growth. (Source: Pages 12 and 17)

Order book

Yes

→As of December 21, 2023, there are ongoing orders aligning with the marriage season in the second half of the year, traditionally a high-demand period.
→The company experiences a surge in top-line revenue during the second half due to numerous marriages.
→Orders are being actively processed, reflecting good traction in Q3 and Q4.
→There are long-term relationships with seasoned buyers across regions, ensuring steady order inflow without significant delays.
→Credit terms vary between 45 to 90 days depending on seasonal ups and downs but no major payment issues or stuck funds reported.
→The company is expanding capacity significantly from 20 kg to 125 kg monthly to cater to increasing demand and order volume.
→Focus is on organized buyers, including large regional and pan-India chain stores, indicating potential for substantial bulk orders.

Capex plans

Yes

→The company has undertaken a major capacity expansion from 20 kg to 125 kg monthly production in Uday Jewellery, aiming for a 5x increase over 2-3 years.
→Investment in new manufacturing setup requires mainly working capital due to the costly inventory (gold, diamonds, gemstones), with limited need for additional machinery.
→The working capital requirement will be a major part of future fund needs to support increased turnover.
→The company is open to raising funds via a mix of debt and preferential equity to finance growth and working capital needs.
→New facilities have been set up, including capacity increase at Narbada for high-end diamond jewellery, aiming to reduce production lead time and improve rotations.
→Future plans include promoting forward integration, including potential entry into retailing and brand promotion.
→Overall capital expenditure is moderate but supported by investments to increase capacity and market penetration.

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