SJS Enterprises: Q1FY25 Earnings Call Highlights

Growth driven by acquisitions, new product launches, & focus on high-growth segments. Innovation, global expansion, and inorganic growth positions it for success in the coming years

Sep 30, 2024

Strong Q1 FY2025 Performance: SJS Enterprises reported strong Q1 FY2025 results with a consolidated revenue growth of 60.9% YoY, reaching Rs. 1,886.2 million. This growth was primarily driven by the successful integration of Walter Pack India and robust performance in the passenger vehicle, consumer, and export businesses. Consolidated EBITDA margin improved to 26.6%, up 33 bps QoQ and 51 bps YoY. The company generated strong cash flows of Rs. 397.2 million during the quarter.

Main Themes:

Focus on Growth: SJS aims to outperform industry growth by 1.5x, leveraging its diverse product portfolio, global footprint, and inorganic growth strategies. The company remains bullish on exports and plans to increase its share of consolidated revenue to 15% in the next 3 years.
Strategic Acquisitions: Acquisitions of Walter Pack and Exotech have successfully diversified SJS's portfolio, expanding its presence in four-wheelers, consumer durables, and exports. The company is actively seeking new acquisition targets for synergistic growth.
New Technologies & Products: SJS is investing in new technologies and products like cover glass and IME technologies, anticipating future demand for these products.
Capacity Expansion: SJS is expanding capacity at its Exotech facility and planning a new plant for cover glass production to meet future demand.

Key Highlights:

Revenue: Consolidated revenue reached Rs. 1,886.2 million, representing a 60.9% YoY growth.
EBITDA Margin: Consolidated EBITDA margin stood at 26.6%, a 33 bps increase QoQ and 51 bps YoY.
PAT: Consolidated PAT reached Rs. 282.4 million, a 56.6% YoY growth, with a PAT margin of 15.0%.
Cash Flow: The company generated a strong free cash flow of Rs. 397.2 million, resulting in a net cash position of Rs. 233.7 million.
New Client Acquisition: SJS added Dixon Technologies as a new client, opening up opportunities in the consumer durables and telecom segments.
Two-Wheeler Segment: Despite a slight dip in two-wheeler segment growth in Q1, SJS remains confident in its long-term prospects, citing product mix and new model launches as key drivers.
Passenger Vehicle Segment: Passenger vehicle business grew significantly, driven by new product launches, premiumization trends, and the Walter Pack acquisition.
Export Revenue: Export revenue grew by 13% YoY to Rs. 142 million, currently constituting 7.5% of total consolidated sales.

Quotes:

"For the 19th consecutive quarter, SJS has delivered a better-than-industry growth, primarily driven by Walter Pack acquisition, premiumization trends and innovation." - K.A. Joseph, Managing Director and Co-Founder
"Our strategy to diversify across various product categories and multiple industry segments, coupled with a broad customer base has effectively helped us derisk this business and reduce dependence on any specific segment." - Sanjay Thapar, CEO & Executive Director
"We are confident that we will continue to outperform the industry growth by over 1.5x leveraging our presence in multiple industry segments, our global footprint, extensive product portfolio, very strong customer relationships and inorganic growth strategies." - Sanjay Thapar, CEO & Executive Director
"In the short and the medium term, we see a very strong demand for our products, so capacity expansion at Exotech is on the anvil." - Sanjay Thapar, CEO & Executive Director

Future Outlook:

SJS aims to be a leading global aesthetics supplier, focusing on expanding its global footprint, especially in the four-wheeler and consumer durables segments.
The company is committed to investing in new technologies and products, with cover glass being a key focus area.
SJS is actively seeking inorganic growth opportunities to further strengthen its market position and diversify its offerings.

Overall:

SJS Enterprises delivered a strong Q1 FY2025 performance, driven by strategic acquisitions, new product launches, and a focus on high-growth segments. The company's commitment to innovation, global expansion, and inorganic growth positions it for continued success in the coming years.

SJS Enterprises Limited Q1 FY2025 Earnings Call FAQ

Q1: What products will SJS Enterprises supply to Dixon Technologies, their new client?

SJS will supply aesthetic parts for consumer durables and telecom products. Initial supplies for the telecom segment have commenced, with consumer durables supplies expected to begin soon. The specific products include logos, overlays, and other aesthetic components.

Q2: Why did SJS Enterprises' consolidated EBITDA margin decline by 125 basis points quarter-on-quarter despite revenue growth?

The slight margin decline is attributed to the initial ramp-up of new products and technologies at Walter Pack and Exotech. These new ventures involve trials and development costs that temporarily impact margins. However, SJS remains committed to maintaining a consolidated EBITDA margin of 25% in the long term.

Q3: How does SJS Enterprises plan to achieve its target of 1.5x industry growth in FY2025, especially given the slower-than-industry growth in the two-wheeler segment during Q1?

SJS expects to achieve 1.5x industry growth on a blended basis, driven by robust growth in the passenger vehicle segment, new product launches, and expansion in export markets. While the two-wheeler segment experienced some seasonality in Q1, SJS anticipates achieving organic growth in line with the industry for the full year.

Q4: What is the current status of SJS Enterprises' cover glass business, and what is the expected revenue potential?

SJS is making progress with its cover glass business, having received ISO certification and engaged with potential customers. The company expects to secure its first purchase order within the current quarter and commence phased supplies. While the revenue potential is difficult to quantify at this stage, SJS anticipates a significant impact from FY2026 onwards.

Q5: What are SJS Enterprises' primary focus areas for growth in the short and medium term?

Key priorities include capacity expansion at Exotech and Walter Pack, launching the cover glass business, and securing large global contracts with OEMs.

Q6: How does SJS Enterprises envision its business mix evolving over the next three years?

SJS aims to reduce dependence on any specific segment and expects a balanced portfolio. The target is to achieve approximately 25% revenue from consumer goods, 30% from two-wheelers, and the remainder from four-wheelers. Exports are projected to contribute around 15% of consolidated revenue within the next three years.

Q7: What is SJS Enterprises' strategy regarding inorganic growth?

Inorganic growth remains an integral part of the company's strategy. While currently focused on debt reduction after the Walter Pack acquisition, SJS plans to explore acquisitions again in the next year, prioritizing strategic fit, synergistic opportunities, and attractive valuations.

However, the company is debt-averse and prioritizes strategic fit and value creation when considering acquisitions. SJS Enterprises plans to leverage its strong cash generation to pursue acquisitions in the coming year, targeting companies that complement its existing businesses and offer synergistic growth opportunities.

Q8: What products does SJS Enterprises supply to Foxconn?

SJS supplies specialised technologies and components for Foxconn's TV displays, similar to the cover glass technology intended for two-wheeler EVs.

Source: Link to Earning Call Transcripts

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