Detailed Narrative
Q3 FY25 Performance and Volume Growth Drivers
Jyoti Resins reported a strong Q3 FY25 with 18% year-on-year volume growth and 16.5% adjusted revenue growth. The company achieved INR 71 crores in revenue for the quarter, with an implied EBITDA margin of approximately 29.5%. This growth was driven by strong efforts in ground-level work with carpenters and dealers, product portfolio showcases, and improved penetration in existing and new markets. Despite a flat Q2 due to monsoon and lower demand in building materials, the company is optimistic about Q4.
Gross Margin and Realization Strategy
The company maintained a year-to-date gross margin of around 70%, with a sustainable long-term target of 65%. While there was a 1.5% realization drop in Q3, this was attributed to a shift in product mix towards OEM sales and strategic discounts offered to gain volume in new territories. Management emphasized that softer raw material prices and increased volumes contributed to better spreads and operating leverage, offsetting the impact of discounts.
Capacity Expansion and Funding Plans
Jyoti Resins is undertaking significant capacity expansion. It plans to add 1,500 tonnes per month at its existing plant over the next 1.5 years, requiring an investment of INR 5-10 crores to double current capacity. Additionally, a greenfield expansion for a new facility on the outskirts of Ahmedabad is planned, with a potential to reach 3,500 tonnes per month, requiring INR 40-45 crores over the next three years. All these expansions are planned to be funded entirely through internal accruals.
Network and Brand Building Investments
The company has aggressively expanded its branch network, increasing from 32 to 42 branches in nine months, with a focus on new states like UP and Delhi. These branches serve as depots for inventory and support sales agents. Jyoti Resins is also investing in marketing and brand building, including carpenter and dealer meets, and onboarding key personnel like CMOs and Marketing Managers, to strengthen its brand and broaden its customer base across India.
Long-term Vision and Financial Targets
Jyoti Resins aims to achieve INR 500 crores in revenue by 2027, targeting a 20% volume growth for the next 3-5 years. The company expects to land at a 29% EBITDA margin for FY25, with a long-term guidance of 25%. It also targets achieving at least 30% market share in the white glue segment and increasing OEM revenue contribution to an average of 10% year-wise from the current 6%. The company expects to maintain its high ROE/ROCE, currently around 40%.
NSE Listing and Shareholder Engagement
To enhance visibility and attract institutional investors, Jyoti Resins plans to fulfill NSE listing criteria by March 2025 and aims for listing next year. The company also acknowledged investor feedback regarding its payout ratio, currently at 15% of profit, and stated that it would positively consider increasing it in the future, demonstrating a commitment to shareholder value.