Stove Kraft

Stove Kraft reported a challenging Q3 FY26 with consolidated revenue declining 6.4% YoY to INR 378.4 crores, primarily due to lower export sales. Profit after tax also saw a degrowth to INR 4.1 crores, impacted by a one-time^📎 expense of INR 4.65 crores. Despite this, the gross margin improved by 188 basis points to 39.4% in Q3, reflecting resilience in its business model.

The domestic business contributed 96% of the company's Q3 revenue, demonstrating strong underlying demand. The flagship Pigeon brand recorded a YTD CAGR growth of 9.3%. In Q3, the company achieved robust volume growth of approximately 38% in small appliances and 9% in pressure cookers, with all sales channels remaining active and gaining momentum.

Export sales faced significant headwinds in Q3 due to persistent uncertainty surrounding trade negotiations and tariffs between India and the United States, leading to a Q3 degrowth of INR 27 crores. The much-anticipated IKEA business ramp-up has been delayed by three months, with meaningful revenue contribution now expected from Q1 FY27 (April 2026 onwards) due to pending test protocols and approvals.

Through disciplined financial alignment, Stove Kraft achieved a meaningful improvement in operational efficiency, reducing working capital days to 43 (from 64 in FY25). This led to a significant reduction in working capital debt, which came down to INR 80.6 crores by the end of Q3. The company aims to bring its normal bank borrowing debt close to zero by the fiscal year-end.

Stove Kraft successfully launched Pigeon Insta-Mami, an idiyappam/snack maker, which has received high acceptance in southern states. New products like instant water heaters and un-cord dry irons are also being introduced. The company expanded its retail footprint by adding 17 new stores, bringing its network to 313 outlets across 21 states and 138 cities, strengthening its Pan-India presence.

Management indicated that while commodity markets are volatile, they protect margins through purchase mechanisms for a quarter and will pass on price increases to consumers. They expect gross and EBITDA margins to improve by at least 1% year-on-year, targeting a long-term gross margin of 41-42% within the next three years.

The decline in cooktop revenue contribution (from 25-30% in FY22 to 20% currently) was attributed to the company's strategic decision to exit a co-branded channel with oil companies, which previously accounted for 60-70% of its cooktop business. Stove Kraft is now rebuilding its cooktop business through other channels and leveraging its strong backward integrated facility for manufacturing.

The implementation of BIS for hobs has been deferred for another six months, but management expects a competitive advantage once it's in effect due to their superior manufacturing capabilities. For chimneys, while the company is establishing manufacturing facilities, it's a long journey to capture the full market potential of INR 5,000-7,000 crores, with full model manufacturing expected to take about a year.