STOVEKRAFT - STOVE KRAFT LIMITED Share Price

In the earnings call held on August 5, 2025, management provided an optimistic outlook for Stove Kraft Limited's future performance. They reported a robust Q1 FY '26, with revenue at Rs. 340.1 crore, an 8.2% year-on-year increase. The company anticipates continued momentum, especially with seasonal festivities on the horizon, indicating a potential for stronger growth in Q2 and Q3.

Management highlighted key growth drivers including a focus on the quick commerce channel, which is gaining traction, along with strong performances across E-commerce, retail, and export segments. The revenue channel mix for Q1 was: 32% from E-commerce, 26% from General Trade (GT), 12% from modern trade, 20% from OEM exports, and 7% from own retail. They expect exports to grow at a rate of approximately 50% year-on-year, up from Rs. 160 crore in the previous year.

The introduction of kitchen chimneys"”and the company's production capabilities in new product categories like cast iron cookware"”were underscored as significant growth areas, with expectations for chimneys to become a major contributor in upcoming quarters. The company reported cast iron cookware revenue hitting Rs. 177 million in Q1.

Management is focused on improving gross margin from the current 38% to a target of 40% in the next couple of years, attributing optimism to improved manufacturing efficiency and a favorable product mix shift. Additionally, they expect EBITDA margins to reach at least 11%, and potentially higher, driven in part by enhanced operational leverage and margin improvements on new product introductions.

Overall, management's outlook is characterized by a commitment to achieving higher revenue growth, continued improvement in margins, and capturing market opportunities in both domestic and export markets.

Question 1: "Do we intend to increase our growth guidance and how is the market looking for you say pre-festive for Q2 and Q3?"

Answer:
Yes, the 1st Quarter and last quarter are generally softer for us. The second and third quarters, with numerous festivals, are key for revenue. We see improved growth starting this quarter and hope to deliver higher growth overall.

Question 2: "What kind of gross margin improvement is there moving from PTFE coated cookware to ceramic or tri-ply or cast iron?"

Answer:
Definitely positive. Cast iron offers better margins since we have an integrated manufacturing base and automation, allowing us to command higher market prices. This gives us confidence in improving gross margins across the board.

Question 3: "What does the depreciation rationalization due to changed estimates mean, and will this continue for the whole year?"

Answer:
We revised lease terms from nine to three years based on IndAS 116, as we can vacate stores with three months' notice. Yes, this depreciation level will continue throughout the year.

Question 4: "What has been the performance of our retail stores opened in the last three years, and have they caused any cannibalization?"

Answer:
Our stores broadly enhance revenue by showcasing the product range. Mature store performance has led to almost double the combined revenue from both retail and general trade. Thus, rather than cannibalizing, they create new demand.

Question 5: "How do we manage the new 25% tariff on U.S. exports and what is the customer's commitment?"

Answer:
All FOB exports entail customers covering tariffs. One of our largest clients expressed commitment to increase imports from India by threefold, reflecting stability in our supply chain amidst tariff changes.

Question 6: "What is our guidance for export growth compared to the previous quarters?"

Answer:
We expect export growth to exceed previous guidance of 20%-25%. Last year, we reached approximately Rs. 160 crores and aim for 50% growth this year.

Question 7: "What are the reasons for lack of volume growth in small appliances despite market advancements?"

Answer:
Low-value appliances are underperforming, affecting overall volume metrics. However, we continue to grow in high-value appliances, driven more by product mix and innovation rather than pricing hikes.

Question 8: "What is the estimated rental cost for this quarter, and what do we expect for the full year?"

Answer:
We recorded total rent of Rs. 7 crores this quarter, and we anticipate annual costs to be between Rs. 28 crores and Rs. 29 crores.

Question 9: "What are the latest developments in our capacity utilization and import reduction from China?"

Answer:
Current capacity utilization allows for 1.5x revenue growth. We've successfully decreased reliance on Chinese imports from 40%-45% to around 30%.

Question 10: "What is our CAPEX guidance for the current financial year?"

Answer:
We project approximately Rs. 50 crores in CAPEX for the current fiscal year. Most significant investments have been completed, with only maintenance CAPEX anticipated moving forward.