Linc Q4 FY25 earnings call

Linc achieved a record-setting FY25 with revenue of INR 543.48 crores, representing a robust 7% year-over-year growth, and PAT of INR 38.04 crores, an 11.2% increase. This performance was underpinned by a strategic focus on premiumization, evidenced by the Pentonic brand's revenue share expanding from 34.3% to 35.6% and an average realization per pen increasing by 10% to INR 6.21. The company's operating EBITDA for the full year came in at INR 64.40 crores with an EBITDA margin of 11.8%, an improvement of 74 basis points over FY24.

The company is actively diversifying its product portfolio beyond pens into high-growth adjacent categories such as markers, highlighters, and pencils. This strategy aims to increase the total addressable market from INR 6,640 crores to INR 38,500 crores. New product launches, including premium gel pens and various art materials, are planned, with initial outsourcing for manufacturing while Linc retains design and mold ownership, expecting margins in line with existing levels of 11-12%.

Linc has secured Board approval for a new e-commerce joint venture with a 65:35 shareholding (Linc majority) and small initial capital. This JV is designed to enhance focus and expertise in the e-commerce and quick commerce channels, which management views as the future for their price segment. This move is seen as a channel acquisition to drive growth in these evolving retail landscapes, particularly for products with higher ticket values like Deli.

Export sales have remained stagnant at approximately INR 100 crores for the past 1-2 years, primarily due to geopolitical headwinds^🌐 in markets like Sudan and Myanmar. Despite these challenges, Linc maintained revenue and is now focusing on more stable markets and countries. While export growth was around 7% last FY, management aims to grow exports slightly faster than the domestic market, with specific guidance expected next quarter, and export margins are definitely higher than the company average.

The company is undertaking restructuring exercises expected to improve gross margins going forward^⏳, addressing the current lag despite increasing realizations. Management anticipates a 100 basis point increase in EBITDA margin for every 10% increase in top-line growth, driven by operating leverage. The Kolkata modernization facility is progressing rapidly, targeting completion by Q2/Q3 FY26, which will further enhance operational efficiency and support new product lines.

Linc's Board of Directors proposed a dividend of INR 1.5 per share for FY25, reflecting a payout ratio of 23.5% and reinforcing its commitment to shareholder value creation. The company ended FY25 with a net free cash position of INR 18.69 crores and generated INR 56.90 crores in cash flow from operations. This strong financial position underscores its prudence and resilient balance sheet, with all new projects expected to be ROCE accretive.