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Hindustan foods (Dixon of FMCG 
) concall was today at 2:30 pm
"Question: Will this exceptional growth be maintained for next 2 years"
"Promoter: Inshallah yess.
"
" Decentralization in manufacturing is becoming a thing"
Here are the key takeaways
) concall was today at 2:30 pm"Question: Will this exceptional growth be maintained for next 2 years"
"Promoter: Inshallah yess.
"" Decentralization in manufacturing is becoming a thing"
Here are the key takeaways
Business overview
- Due to continuous expansion the company was able to post the Highest turnover and profitability numbers in the history of hindustan foods
- Key Raw materials saw unrealistic increase in prices but business necessitates passing on the cost.
- Due to continuous expansion the company was able to post the Highest turnover and profitability numbers in the history of hindustan foods
- Key Raw materials saw unrealistic increase in prices but business necessitates passing on the cost.
- Margin erosion was there but it is temporary in nature.
- Gross block of Rs. 350 crores
- Company is working on an upcoming project in UP where company will be investing 125 crores in a new food category.
- Gross block of Rs. 350 crores
- Company is working on an upcoming project in UP where company will be investing 125 crores in a new food category.
- Brownfield expansion in Hyderabad.
- Recently upgraded the credit rating and interest has been decreased by 40 to 50 bps
- Recently upgraded the credit rating and interest has been decreased by 40 to 50 bps
Capex
- Company is fully funded and through internal accruals the upcoming projects will be funded.
- Asset turnover would 3 to 4 times
- Debt to equity for such projects is 75:25 abd ROE models remains the same
- Company is fully funded and through internal accruals the upcoming projects will be funded.
- Asset turnover would 3 to 4 times
- Debt to equity for such projects is 75:25 abd ROE models remains the same
Manufacturing
- Company is diversified among across the product categories and geography.
- Company manufactures in 11 locations and manufacture from pesticides to baby food
- Company is focusing that it needs to reduce the client dependence
- Company is diversified among across the product categories and geography.
- Company manufactures in 11 locations and manufacture from pesticides to baby food
- Company is focusing that it needs to reduce the client dependence
- Top 5 customer accounts for 70% of business.
- Next couple of years the company has enough runway to grow as they are.
- Post that after achieving the size of 5k crores the company will start contract research after 2 years.
- Next couple of years the company has enough runway to grow as they are.
- Post that after achieving the size of 5k crores the company will start contract research after 2 years.
Acquisition
- A company jas acquired a division from HUL which made them enter into Shoe business.
- Company is actively looking for acquisition which add value to the equity shareholders.
- A company jas acquired a division from HUL which made them enter into Shoe business.
- Company is actively looking for acquisition which add value to the equity shareholders.
Growth
- Due to substantial Capex there are good chances of growth
- Company is agnostic as far as product categories are concerned coz the business model is same irrespective of product category.
- Comoany is looking to diversify amongst customer and geography
- Due to substantial Capex there are good chances of growth
- Company is agnostic as far as product categories are concerned coz the business model is same irrespective of product category.
- Comoany is looking to diversify amongst customer and geography
Balance sheet
- Current debt equity ratio is 0.91
- 200 crores of debt
- Capacity utlization:
For dedicated manufacturing cap utlization is a good indicator
- Gestation period of a project is 9 months then the manufacturing will be as per contract term. (5-7 years)
- Current debt equity ratio is 0.91
- 200 crores of debt
- Capacity utlization:
For dedicated manufacturing cap utlization is a good indicator
- Gestation period of a project is 9 months then the manufacturing will be as per contract term. (5-7 years)
Margins
- Dedicated manufacturing is accounting for 80% of the business. ....margin profile is better in case of shared facility and private labeling compared to Dedi. Manu.
- Coz co. doesn't take any risk in terms of operating leverage & inventory obsolescence in Dedi. manu.
- Dedicated manufacturing is accounting for 80% of the business. ....margin profile is better in case of shared facility and private labeling compared to Dedi. Manu.
- Coz co. doesn't take any risk in terms of operating leverage & inventory obsolescence in Dedi. manu.
- Margins would remain intact even when raw material prices go up or down.
- Recent margin decrease is due to some time kag which would be recovered in next few quarters.
- Recent margin decrease is due to some time kag which would be recovered in next few quarters.
- Decentralization of manufacturing in FMCG is becoming a thing because of GST and due to the fact that the distribution network which is leading to the demand of more factory esp in the times of covid.
Order book
- 2k crores by FY 22 so that's the number company yes aiming for.
- Most FMCG are the clients of the company
- 2k crores by FY 22 so that's the number company yes aiming for.
- Most FMCG are the clients of the company
