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SKY Gold and Diamonds Limited — Q1 FY25 earnings call

Call held 12 Aug 2024

Management summary

Sky Gold Limited reported a strong Q1 FY25, driven by increased capacity utilization, export growth, and strategic acquisitions. Revenue and PAT nearly doubled year-on-year, reflecting robust demand in the organized jewellery sector and the positive impact of duty cuts. The company is expanding its product offerings into 18-carat and diamond jewellery, and integrating recent acquisitions to broaden its market reach and achieve ambitious revenue targets of INR 6,300 crores by FY27.

Highlights

Revenue for Q1 FY25 stood at INR 723 crores, registering a growth of 92% year-on-year and 40% quarter-by-quarter.
PAT for Q1 FY25 was INR 21 crores, showing a growth of almost 96% year-on-year.
EBITDA for Q1 FY25 was INR 37.3 crores, a 100% growth year-on-year, with an EBITDA margin of 5.2%.
Volume turnover in Q1 FY25 was 349 kgs per month, up 74.5% from 200 kgs per month a year ago.
Exports contributed 11% to total revenue in Q1 FY25, up from 6% in FY24.
The company targets INR 6,300 crores in consolidated revenue by FY27, with INR 3,300-3,400 crores targeted for FY25.
PAT margin is expected to be maintained at 3%-3.5% till March FY25.
Capacity utilization is currently at 45% (excluding acquisitions) and is targeted to reach 100% by FY27.

Key financials

01 Revenue ₹723 Cr +92%YoY
02 PAT ₹21 Cr +96%YoY
03 EBITDA ₹37.3 Cr +100%YoY
04 EBITDA Margin 5.2%
05 Gross Margin 6.4%
06 Volume Turnover 349 kgs/month +74.5%YoY

What they filed

Q1 FY27: revenue up 78.0%, net profit up 138.6% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	769	998	1,058	1,131	1,484 +93%	1,768 +77%	1,912 +81%	2,013 +78%
Expenses	730	941	995	1,060	1,385	1,645	1,771	1,856
EBITDA	39	57	63	71	100 +156%	122 +114%	141 +124%	157 +121%
Margin	5%	6%	6%	6%	7%	7%	7%	8%
Other income	20	7	5	4	8	7	17	8
Interest	10	12	14	13	18	21	27	25
Depreciation	2	3	4	4	2	3	4	5
Profit before tax	46	49	50	59	88 +91%	106 +116%	126 +152%	135 +129%
Tax rate	20%	26%	24%	26%	24%	24%	28%	22%
Net profit	37	37	38	44	67 +81%	81 +119%	91 +139%	105 +139%
EPS	2.69	2.49	2.60	2.93	4.33	5.20	5.44	6.67

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Revenue

Consolidated Revenue Revenue · FY27 · High confidence INR 6,300 crores

We feel we have just started to get materialized with a lot more potential leverage yet to contribute as we grow and achieve our goal of INR6,300 crores by 2027.

— Mangesh Chauhan, Managing Director & CFO
Parent Company Revenue Revenue · FY27 · High confidence INR 5,000 crores

For Sky Gold we have already given INR5,000 crores revenue to 2027 March and for the subsidiary is INR1,300 crores. So consolidated will be INR6,300 crores.

— Mangesh Chauhan, Managing Director & CFO
Subsidiary Companies Revenue Revenue · FY27 · High confidence INR 1,300 crores

— Mangesh Chauhan, Managing Director & CFO
Consolidated Revenue Revenue · FY25 · High confidence INR 3,300-3,400 crores

So, INR3,300 crores, INR3,400 crores revenue growth we have targeted this year.

— Mangesh Chauhan, Managing Director & CFO
Subsidiary Revenue Revenue · FY25 · High confidence INR 600-700 crores

And this year we can make it INR600 crores to INR700 crores from both the entities.

— Mangesh Chauhan, Managing Director & CFO

Profitability

PAT Margin Profitability · till March (FY25) · High confidence 3%-3.5%

About the PAT margins, I think it will be approximately 3% to 3.5% till March because we are going to gold metal loan. So, we don't want to, we'll not like to increase the PAT margin. We'll sustain that margin till March. We'll reach 3.5%.

— Mangesh Chauhan, Managing Director & CFO
Subsidiary PAT Margin Profitability · FY25 · High confidence 2.5%-3%

Previously 2% → 2.5%-3%

Already the last year the subsidiary we were at 2% PAT margin. Now this year we are expecting that margin from them also to 2.5% to 3% in this year.

— Mangesh Chauhan, Managing Director & CFO

Volume

Monthly Production Volume Volume · FY25 (annually) · High confidence 350-360 kgs per month

This year, we are targeting to keep up to 350-360 kgs per month we will produce in this year.

— Mangesh Chauhan, Managing Director & CFO

Debt

GML Utilization Debt · September quarter · High confidence 30%-35%

In the September quarter, we'll be using 30% to 35% limit, about INR100 crores GML in September quarter.

— Mangesh Chauhan, Managing Director & CFO
GML Utilization Debt · December quarter · High confidence 100%

And December quarter, 100% we will be using GML. So, till December quarter, we will be at 100% GML.

— Mangesh Chauhan, Managing Director & CFO

Capacity

Subsidiary Capacity Capacity · in two years · High confidence INR 1,200-1,300 crores

So, we have both have capacity to go up to INR1,200 crores and INR1,300 crores in two years.

— Mangesh Chauhan, Managing Director & CFO
Capacity Utilization Capacity · FY27 · High confidence 100%

Yes, 2027 we have already told we will be at 100% utilization.

— Mangesh Chauhan, Managing Director & CFO

Product Mix

Diamond Jewellery Sales as % of Turnover Product Mix · in four quarters · Medium confidence 10%-15%

But in four quarters, diamond jewellery sales will come to 10% to 15% of our turnover.

— Mangesh Chauhan, Managing Director & CFO

Exports

Export Contribution to Revenue Exports · FY25 · High confidence 9%-10%

So, we will sustain this growth up to 9%-10%. This quarter is 11%, but 10% is sustainable for this year.

— Mangesh Chauhan, Managing Director & CFO

New Market Entry

US Market Entry New Market Entry · in two quarters · Medium confidence Entry planned

We are planning for in two quarters to export to the US also.

— Mangesh Chauhan, Managing Director & CFO

Cost Efficiency

Finance Cost Reduction Cost Efficiency · ongoing · High confidence 0.5% of sales

But GML will help us to reduce 0.5% of the sales, which 0.5% PAT will improve because of the GML.

— Mangesh Chauhan, Managing Director & CFO

Risks & concerns

Areas of evasion (3)

Specific competitive details on client share beyond Malabar
Exact details on fundraising route
Specifics of ordering cycle beyond 30-45 days

Q&A highlights

2 direct

Impact of duty cut on inventory and margins Direct

Nothing, because our inventory is totally hedged in the MCX. So, we don't have any impact of any rise or fall also on the inventory.

Addresses a key industry-wide concern regarding commodity price volatility and highlights the company's risk management strategy.

Asked by Vikrant Kashyap

Scalability and margins of acquired subsidiaries Direct

So, we have both have capacity to go up to INR1,200 crores and INR1,300 crores in two years... Already the last year the subsidiary we were at 2% PAT margin. Now this year we are expecting that margin from them also to 2.5% to 3% in this year.

Provides specific financial targets and growth potential for the recently acquired entities, crucial for understanding future consolidated performance and margin improvement.

Asked by Digesh Mehta

Ability to onboard Tanishq as a client Partial

Already, we have many talks with Tanishq. They have visited our facility. And our facility is up to mark to their requirements... But it's a matter of time when they open the doors for the vendors and they have a process when to onboard a vendor for the casting value.

Tanishq is a major player, and onboarding them would be a significant win, but management indicates it's a lengthy process and not yet confirmed, suggesting a potential future growth driver with an uncertain timeline.

Asked by Vikrant Kashyap

2 min read 6 chapters

Detailed narrative

Strong Q1 FY25 Performance Driven by Volume and Exports

Sky Gold Limited reported robust Q1 FY25 results, with revenue surging to INR 723 crores, marking a 92% year-on-year and 40% quarter-on-quarter growth. PAT also saw a significant increase, reaching INR 21 crores, nearly doubling from INR 10.7 crores in Q1 FY24. This strong performance was supported by a 74.5% increase in volume turnover, reaching 349 kgs per month, and a higher export contribution of 11% to total revenue, up from 6% in FY24.

Strategic Expansion into 18-Carat and Diamond Jewellery

The company is strategically expanding its product portfolio beyond 22-carat gold jewellery into 18-carat and diamond jewellery segments. While 22-carat currently dominates, management aims for diamond jewellery sales to constitute 10%-15% of total turnover within the next four quarters. This diversification is expected to enhance gross margins and cater to evolving market demands, with initial diamond jewellery sales of INR 5 crores in Q1 FY25.

Impact of Acquisitions and Capacity Expansion

Recent acquisitions of Star Mangalsutra Pvt Ltd. and Sparkling Chains Pvt. Ltd. are expected to significantly boost Sky Gold's total addressable market and contribute to future growth. These subsidiaries are projected to achieve INR 600-700 crores in revenue this year and have a combined capacity to reach INR 1,200-1,300 crores within two years. The parent company's new 80,000 sq ft facility has increased capacity utilization to 45% (excluding acquisitions), with a target of 100% utilization by FY27.

Ambitious Revenue and Margin Guidance

Sky Gold has set an ambitious consolidated revenue target of INR 6,300 crores by FY27, comprising INR 5,000 crores from the parent company and INR 1,300 crores from subsidiaries. For the current fiscal year (FY25), the company targets consolidated revenue of INR 3,300-3,400 crores. PAT margins are expected to be maintained at 3%-3.5% through FY25, supported by increased utilization of Gold Metal Loans (GML), which is projected to reduce finance costs by 0.5% of sales.

Leveraging Organized Market Shift and Export Growth

The company is capitalizing on the robust growth of the organized jewellery market, which is expanding at 18%-19% CAGR and is expected to reach 40%-43% of the total market. Sky Gold's focus on corporate partnerships, which currently account for 65% of its business, positions it well to gain market share. Export contribution is targeted to remain strong at 9%-10% for FY25, with plans to enter the US market within two quarters, building on existing presence in Dubai, Singapore, and Malaysia.

Effective Risk Management and Operational Efficiency

Management confirmed that the recent government duty cut on gold imports had no negative impact on inventory, as all inventory is fully hedged in the MCX. This proactive risk management, combined with continuous introduction of 2,000 new designs monthly and automation, contributes to operational leverage. The company also stated that it faces no constraints regarding working capital or manpower for its planned growth.

This is an AI-generated summary of a publicly available earnings call transcript.

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