Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chaman Lal Setia Exports Ltd (BOM:530307, Financial) reported a significant increase in revenue, reaching INR 732 crores for the first half of the fiscal year, with a target of INR 1,500 to INR 1,600 crores for the full year.
- The company has expanded its global reach, now exporting to over 90 countries, with a diversified customer base in each market.
- New packaging units are being set up, expected to be operational within the next few months, which will increase production capacity and potentially add INR 100 crores in revenue per quarter.
- The company maintains a strong cash flow position, with no current borrowing from banks, and plans to utilize internal funds before considering external financing.
- Chaman Lal Setia Exports Ltd is focusing on expanding its online sales and exploring partnerships with major e-commerce platforms to enhance its B2C presence.
Negative Points
- The rice industry faces volatility, with significant price fluctuations impacting profitability, as seen with a drop in rice prices by INR 15 to INR 20 per kg last year.
- There is a geographic concentration risk, with a significant portion of sales coming from markets like Malaysia and Israel, which could be affected by regional instability.
- Director's remuneration as a percentage of net profit is relatively high compared to competitors, raising concerns about the concentration of financial benefits among promoters.
- Logistics costs have been high due to the Red Sea crisis, impacting margins and profitability.
- The company faces challenges in the domestic market, with a current focus on international expansion, potentially missing opportunities for growth within India.
Q & A Highlights
Q: Can you give us an update on the new packaging unit? Has it been commercialized?
A: The three units are coming, with machinery already arrived and installation underway. They should start within the next 2-3 months, with the first unit operational in about a month. The total CapEx for these units is INR1.50 crores to INR2 crores per unit.
Q: What's your plan on focusing on domestic B2C and premiumization?
A: B2C is growing through online sales, with repeat orders increasing. We are exploring ways to enhance online sales, including a meeting with a consultant connected to major platforms like Amazon and Flipkart.
Q: Could you comment on the geographic concentration risk associated with significant sales from Malaysia and Israel?
A: For Israel, despite regional conflicts, business remains stable with timely payments. Malaysia serves as a transit hub, with rice distributed to other countries, mitigating concentration risk.
Q: How should we look at the growth in the last three years, and what do you envisage for the next three years?
A: Sales have been growing consistently, and we expect this trend to continue. We have more orders than we can currently process, indicating strong future growth potential.
Q: What are the logistics costs in Q1 and Q2, and how do they compare to last year?
A: Logistics costs have decreased significantly from $5,000 to $2,000 due to the resolution of the Red Sea crisis, which positively impacts profitability.
Q: Can you talk about the company's vision for the next 5 to 10 years?
A: Our vision is to expand our customer base globally with a focus on small, profitable customers. We aim to strengthen our international presence through participation in major food exhibitions.
Q: What is the revenue potential from the Gandhidham unit, and what is the timeline for commercialization?
A: The Gandhidham unit is expected to generate INR70 crores to INR75 crores annually. The new unit with larger capacity will further increase production, with commercialization expected soon.
Q: Is the company planning to get into Jasmine Rice, given its growing popularity?
A: Jasmine Rice is primarily a Thai product. While we are open to exploring opportunities if customer demand arises, our current focus remains on Basmati rice.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
