AVL - Aditya Vision Limited Share Price

Management's outlook for Aditya Vision Limited indicates a positive trajectory despite challenges. For FY26, the company reported an 18% year-over-year revenue growth, reaching INR 2,672 crores with a PAT growth of 11%, amounting to INR 117 crores. Management highlighted a particularly strong Q4, with a revenue increase of 28% to INR 625 crores and a PAT growth of 36% to INR 22 crores.

Key forward-looking points include:

1. Store Expansion: The company added 102 stores over the past three years and aims to continue this momentum, targeting annual additions. They plan to deepen their presence in Uttar Pradesh and Chhattisgarh while expanding into Madhya Pradesh.

2. Inventory Management: Inventory stood at approximately INR 840 crores due to strategic decisions made to anticipate supply-side uncertainties. Management signaled a strong summer ahead and emphasized they are well-stocked to meet demand.

3. Transition to All-Weather Business: Historically reliant on seasonal performance in Q1 and H1, management noted a transition to a more balanced model with second-half performance becoming as crucial as the first-half sales, enabled by strategic inventory stocking.

4. Margins and Profitability: FY26 saw EBITDA margins at 8.5%, with a target to maintain margins in the range of 8% to 10%. Management expressed confidence in maintaining operating expenses control as more mature stores begin to drive revenue.

5. Geographical Penetration: The company reports a strong foundation in Bihar (75% of revenue), with plans to replicate their successful model in newer states, positively impacting overall company growth.

Overall, the management has set an ambitious yet strategic growth trajectory, focusing on both expanding their footprint and deepening market penetration while maintaining profitability amidst changing market conditions.

1. Question: My first question is on inventory for room ACs that we are carrying. Do you think that the inventory that we'll be carrying will be significantly higher than what general competitors would be carrying?

   Answer: Thank you for the question. I can't comment on competitors' inventories, but we believe we're adequately stocked as part of our strategy. We've built up inventory to meet our needs based on historical figures, which keeps us competitive.

2. Question: Given that this year is unusual with multiple price hikes, do you think this scenario helps us in terms of margins, or is it similar across retailers?

   Answer: Even with price hikes, our profit isn't solely dependent on them since our model involves carrying inventory to remain competitive. Smaller dealers may get impacted, but we focus on how the market reacts and then make decisions accordingly.

3. Question: Given that almost 50% of our stores are under 3 years old, do you think this could improve company-level profitability?

   Answer: Yes, as more stores mature, our operational expenses will come under better control. Newer stores will become fewer as a percentage, meaning a greater share of revenues will come from mature stores, aiding profitability.

4. Question: I want to double-check on gross margins down 100 bps due to product mix changes. Can you explain?

   Answer: The gross margin decline is primarily due to underperformance in seasonal products like air conditioners, compounded by a higher sales volume of lower-margin items, such as mobiles, due to price hikes affecting our overall margins.

5. Question: Can you help me normalize one-off advertisement spend in UP?

   Answer: Our advertisement spend increased due to onboarding a brand ambassador and expanding into new territories, which naturally raises all costs as sales grow. Higher volumes mean elevated expenses across the board, including promotional activities.

6. Question: Can you explain how mature store margins compare to newer stores?

   Answer: Mature stores generally break even 9-12 months post-opening, but it's tricky to quantify margins as they depend on many variable factors like market competition and store location.

7. Question: When can we expect our margins to return to approximately 9%?

   Answer: I can't provide specific guidance on that. However, we aim for margins between 8% to 10%. While we strive to improve margins, it's about balancing growth and maintaining sales levels, which can impact profit margins.

8. Question: What are your plans regarding AI integration in operations for demand generation?

   Answer: We're always open to exploring AI and other technologies, but we proceed carefully, evaluating the costs versus benefits before making any decisions on implementing such solutions.

9. Question: Is there any unsold inventory that we can return to OEMs, and how does that policy typically work?

   Answer: We do not return inventory to manufacturers. Instead, they assist us in liquidating unsold stock. They are under pressure to ensure quick sales of inventory, enabling us to restock efficiently.

10. Question: What is your outlook on rental inflation, especially in light of the IT sector's performance?

Answer: Currently, there's no impact on real estate markets in Bihar, UP, or Jharkhand due to IT sector issues. The situation remains stable, and we will continue to monitor it moving forward.