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    Mallcom (India)

    MALLCOM
    Capital Goods·31 Jan 2025
    Management Summary

    Mallcom (India) reported strong Q3 FY25 results with significant year-on-year growth in revenue, EBITDA, and net profit, driven by growth and cost optimization efforts. The company is progressing well on its greenfield expansion projects in Sanand and Chandipur, with commercial production expected soon. While new product launches and market expansion are underway, an analyst raised concerns about gross margin contraction, which management will investigate.

    Highlights

    5
    • Quarterly operating revenue grew 23% YoY to ₹118 crores.

    • EBITDA grew 31% YoY to ₹15 crores, with margins improving to 12.91%.

    • Net profit increased 32% YoY to ₹9 crores, achieving a PAT margin of 7.65%.

    • Greenfield expansion at Sanand for Protect Gloves is nearing commercial production, with ₹80 crores invested against a total of ₹90 crores.

    • New range of wider toe cap single density safety shoes (DOCKER and DOXLE) launched.

    Concerns

    3
    • Analyst noted a 400 bps contraction in gross margin (from 43.4% in 3Q FY24 to 39.4% in 3Q FY25), which management stated they need to check.

    • Management observed a potential slowdown in Europe export market, though not yet experienced.

    • India's current capacity and raw material ecosystem may not be ready to take a significant market share from China quickly.

    What Changed2

    vs Q4 FY25

    Guidance items7 → 3 (-4)Risks discussed4 → 5 (+1)
    Key financials

    Metrics

    10

    Periods

    2

    Q3 FY25

    5
    • Operating Revenue
      ₹118 Cr
      YoY+23%
    • EBITDA
      ₹15 Cr
      YoY+31%
    • EBITDA Margin
      12.9%
    • Net Profit
      ₹9 Cr
      YoY+32%
    • PAT Margin
      7.7%

    9M FY25

    5
    • Operating Revenue
      ₹349 Cr
      YoY+17%
    • EBITDA
      ₹45 Cr
      YoY+10%
    • EBITDA Margin
      13%
    • Net Profit
      ₹28 Cr
      YoY+13%
    • PAT Margin
      7.9%

    Order Book

    low confidence

    "The order book has looked healthy and still is healthy as far as the export markets are concerned."

    Source:
    Q&A

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Capex

    ₹90 crores

    Guidance & targets

    3
    CategoryTargetPriority
    Revenue
    Topline
    ₹1,000 crores
    High
    Revenue Growth
    Current Year Growth
    around 15%
    Medium
    Volume
    Additional Volume from Investments
    additional volume
    Medium

    Commercial Production of Protect Gloves (Sanand)

    next month
    CurrentTrial runs started
    TargetCommercial production

    Why it matters

    Key milestone for new capacity and revenue contribution from a significant greenfield expansion.

    The trial runs have also started expecting commercial production by next month.

    How to verify

    capital_allocation.capex.purposes[description='Greenfield expansion for Protect Gloves manufacturing at Sanand, Gujarat']

    Risks & concerns

    5
    RiskSeverity

    Gross Margin Contraction

    Analyst noted a 400 bps contraction in gross margin from 43.4% in 3Q FY24 to 39.4% in 3Q FY25, which management needs to verify.Analyst acknowledged

    medium

    Potential Slowdown in Europe Export Market

    Management noted that Europe might be slowing down, based on market sentiment, but they have not yet experienced it directly.Management acknowledged

    low

    India's Readiness for Large Export Orders (Capacity & Ecosystem)

    Despite China Plus One opportunities, India's current capacity and raw material ecosystem may not be ready to service very large orders quickly.Management acknowledged

    medium

    Competition from Cheaper Chinese Imports

    For nitrile gloves, the biggest competition comes from China, which offers cheaper products, though quality differs.Management acknowledged

    medium

    Unregulated Players and Lack of Clear Data in Domestic Market

    A lot of the domestic market is served by unregulated players, and data is unclear, especially where product standards are not mandatory.Management acknowledged

    low

    Q&A highlights

    8

    “No, we need to check that, ma'am, because that figures are not in front of us, so we need to check that because we don't see those figures, we need to check on that and we can revert to you separately then.”

    Analyst identified a significant 400 bps gross margin contraction, which management could not immediately explain, indicating a potential area of concern or miscalculation.

    asked by Aradhana Jain

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q3 FY25 Financial Performance

    Mallcom (India) delivered robust financial results for Q3 FY25, with operating revenue growing 23% year-on-year to ₹118 crores. EBITDA saw a 31% increase to ₹15 crores, achieving a margin of 12.91%. Net profit also rose significantly by 32% year-on-year to ₹9 crores, with a PAT margin of 7.65%, reflecting strong growth and cost optimization efforts. For the nine-month period, operating revenue grew 17% to ₹349 crores, with EBITDA at ₹45 crores (10% growth) and net profit at ₹28 crores (13% growth).

    02

    Greenfield Expansion Projects Nearing Completion

    The company's greenfield expansion at Sanand, Gujarat, for Protect Gloves manufacturing, is almost complete, with ₹80 crores invested against a total estimated investment of ₹90 crores. Trial runs have commenced, and commercial production is expected by next month. Additionally, the Chandipur project for Industrial Safety Shoes and a DIPP-approved Design Studio is nearing completion, with the factory building almost completed and plant installation in progress, with trial runs planned for March 2025.

    03

    Product Development and Market Strategy

    Mallcom continues its product development strategy, launching new products every three to four months across various categories, including a new range of wider toe cap single density safety shoes, DOCKER and DOXLE. The company focuses on both domestic and export markets, with an expectation that the domestic market will grow at a faster pace due to India's economic growth and market predictability. Efforts are also directed towards expanding market presence and share in existing markets.

    04

    Export Market Dynamics and China Plus One

    The export market performed better compared to last year, with a healthy order book and expansion into new territories, particularly North America. While the 'China Plus One' strategy has led to increased inquiries for Indian suppliers, management notes that India's current capacity and raw material ecosystem may not be fully ready to service very large orders quickly. The company is also vigilant about a potential slowdown in the European market, though it has not yet experienced it directly, and is monitoring geopolitical impacts like the US elections.

    05

    Ambitious Growth Targets and Margin Outlook

    Mallcom has set an ambitious target of achieving ₹1,000 crores in revenue by FY28, which necessitates significant growth acceleration from the current 9M FY25 revenue of ₹349 crores. For the current fiscal year, the company is targeting around 15% growth. While an analyst raised concerns about a 400 bps gross margin contraction, management indicated that they are investing in marketing and operational streamlining, expecting some margin improvement from increased scale and efficiency in the future.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.