Stovekraft bets on higher end of 15-25% growth; expects margin at 14-15%

Stovekraft reported a good set of Q1 numbers, with e-commerce sales contributing over 30 percent of revenue. The stock has doubled from its issue price listed in February itself at around Rs 385. Rajendra Gandhi, MD of the company, spoke to CNBC-TV18 about the earnings fine print and outlook for the business.

Gandhi said, “The first and the last quarter is relatively soft and the second and third quarters are the larger quarters for this segment of the business. First two months, we had kind of locked-down both in terms of the factories not being allowed to produce and also with limited resources, and the markets were also closed. But from June 10, gradually the large format stores and the retail stores started operating, and we could recognise revenues in this.”

On growth, he said, “We have been growing in the last few years and we are at the high end of the growth. We have been growing between 15 and 25 percent. But I can say that we are growing at a higher end.”

On margins, Gandhi said, “We are closer to 14-15 percent EBITDA because it is a function of revenue because beyond the breakeven point substantial portion of our gross margin moves to EBITDA. So as the revenue goes up, most of the costs are fixed in nature. As the revenue moves upwards, our EBITDA margins also grow. Currently, we are hovering at 14 to 15 percent.”

On the marketing and advertising spend, he said, “Last year was a little lower. Generally, we would want to invest between 3 to 4 percent of our revenue on marketing and advertising spend. As the revenue grows, it can only improve from here.”

“There is huge pressure on the input cost. Every quarter on quarter we are seeing this, last two quarters particularly, but as a cost-plus company we pass it on to the various channels. Of course, in the export business, it takes a little longer and in the last quarter, we had a higher contribution from exports because the general trade was not operational. Now we are able to pass on this cost impact to the customers,” he said.