Consumer electrical and electronics company V-Guard Industries expects the EBITDA to grow by 24-25 percent in FY17, says Jacob Kuruvilla, CFO, V Guard.
Summer products like fans and voltage stabilisers helped EBITDA margins grow by 12.5 percentage points in the fourth quarter of FY16, says Jacob Kuruvilla, CFO, V-Guard Industries.
The consumer electrical and electronics company posted 16 percent revenue growth during the quarter.
Kuruvilla said going forward the margin might not be sustainable at the current levels and may fall to 10 percent in FY17.
The EBITDA for the company has improved by over 80 percent to Rs 63.4 crore, and Kuruvilla expects it to grow by 24-25 percent in FY17.
He expects overall revenue to increase by 12-15 percent in FY17.
In the previous year, the company gathered maximum growth from the Southern region at around 18 percent.
Below is the verbatim transcript of Jacob Kuruvilla's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Sonia: Your stock is up 13 percent right now, the market is very enthused about the guidance that you have given out for higher margins or 10 percent margins next year. Can you take us through what could lead to these higher margins?
A: One important thing is that profits from our non south markets are increasing. During the Q4 we found that there is good share of margin from our non south market. This is one point which gives us confidence to say that our EBITDA margins will improve going forward.
Latha: This margins growing by almost 5 percentage points. Is that sustainable?
A: May not be at that level. We did 12.5 percent margin in Q4. We may be able to sustain about 10 percent margin.
Latha: What about EBITDA, even that is superb. It\\'s an 80 percent year-on-year improvement in your EBITDA to 63.4 crore. What is the legitimate pace, expectable pace for FY17?
A: We may be attaining 10 percent EBITDA margin going forward and it\\'s a sustainable margin.
Latha: That is EBITDA margin. I am asking about EBITDA. How much will it can grow by?
A: It can grow by 20-25 percent.
Sonia: You were telling us about how your non south markets have become profitable now but what about the south operations, how have they looked and what kind of growth would you expect to see there?
A: This time we had a growth of about 18 percent from south but a sustainable growth because of higher base, something like 10-12 percent growth.
Latha: Can you give us a slightly longer term view given the kind of revenues and EBITDA that you are expecting, 24-25 percent. Should we expect more capex plans from you and therefore will FY18 plans improve considerably?
A: We are more like an asset like model. We do not have much of capex. Our capex is usually to the extent of Rs 25 crore to Rs 30 crore. We will continue to have only Rs 25-30 crore of capex every year. We are asset like model and most of our products are outsourced.
Latha: In that case what kind of revenue run rate are you expecting in FY17 and FY18 as well?
A: We expect 12-15 percent revenue growth going forward.
Sonia: Can you break that for us between segments. Where are you seeing the highest amount of growth come in and we keep talking about just one year or six months but can you give us a slightly larger picture over the next two-three years, what kind of big growth trigger are you looking at and how much could your sustainable growth be?
A: We feel that our growth will come from all the segments. We are into electronics, electrical and recently launched appliance segment. Therefore, we feel our growth will come from all these three segments.
Sonia: Your gross margins have also expanded quite a bit this time to 30 percent plus because of lower raw material prices and a better product mix but do you think that the raw material price benefit could sustain even in the quarters to come and will you better your gross margins from this 30 percent level?
A: We cannot say how the commodity prices will behave going forward but at least for some time the same level of commodity prices will retain. In that case we will be able to retain the margins we are having now.
Latha: Your biggest contributor is cables and that is where you look like you want to deemphasize - that's growing the least and the others like UPS, pumps and fans are growing at a scorching pace? So will that be the strategy, you will deemphasise cables and grow the others?
A: The reduction in cable has grown because of value reduction. The copper prices have gone down. In the case of cable we need to pass on the reduction in the commodity prices to the market. If we are taking that into consideration then there is a 10 percent value reduction. However, if we add that we are having a growth of 10-12 percent in cable also.
Latha: Where are the margins, the highest of all these products - cable versus finished products?
A: In cable we are able to sustain a margin of 8-9 percent and we are confident that we can sustain that kind of margin in cable going forward also.The Great Diwali Discount!
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First Published on May 5, 2016 10:04 am