Ladies and gentlemen, good day and welcome to Fourth Quarter Fiscal Year 2022 Earnings Conference Call of Control Print, hosted by Asian Markets Securities Private Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projections, et cetera, whether expressed or implied.
Participants are requested to exercise caution while referring to such statements and remarks. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia, Asian Markets Securities Private Limited. Thank you, and over to you, Mr. Bhatelia.
Ladies and gentlemen, good afternoon, and welcome all to the Control Print Limited fourth quarter and fiscal year 2022 earnings conference call hosted by Asian Markets Securities Private Limited. From the management side, we have with us Mr. Shiva Kabra, Joint Managing Director, and Mr. Rahul Khettry , CFO. I shall now hand over the call to Mr. Rahul for his opening remarks, post which we shall begin the Q&A session. Over to you, Rahul. Thank you.
Thank you, Karan. Welcome, everyone, to the fourth quarter, financial year 2022 earnings conference call of Control Print. Apologize for the rescheduling of the previous call, which had to be postponed due to unforeseen circumstances. We appreciate your taking out time from your busy schedule to attend the call. Hope you and your loved ones are safe and healthy. Mr. Shiva Kabra, Joint Managing Director, joins me on this call. The detailed presentation has already been put up on the website as well as intimated to the stock exchanges.
Let me give a brief analysis of the financials for quarter four, financial year 2021 to 2022. The manufacturing activities in fourth quarter maintained a good momentum, and most of the industries increased their production to meet the high demand. The increased production was clearly visible in the higher requirement for consumables, which brought back the smile to the coding and marking industry.
The last couple of years have seen extraordinary situations when the strength of the company is tested, and we can assure you that Control Print is geared up for any challenge. We are financially stable and robust and will continue to perform in spite of the unforeseen challenges. This stability of Control Print has also been reaffirmed by credit rating agency CRISIL with an A rating after considering the short and medium term impact of the COVID pandemic. Our investors can maintain their belief on the company's management for an optimistic future.
This quarter's and annual performance delivered the best ever result for Control Print. There was all-round growth in revenue, in margins, and volume growth. These are encouraging signs, and the momentum should continue through the next financial year.
Revenue for the quarter and annual was highest ever at INR 75.56 crores for the quarter and INR 254.26 crores for the year. The year-on-year growth in revenue is 23.7%, and for twelve months growth is 24.8%. The reason for growth in revenue was due to good traction in consumables as the industrial production increased, though we believe it is still not at the optimum level and there is scope of improvement.
The production of some of the industries was lower due to raw material shortages, as there is still scope of growth in the overall production volumes. The gross margins were dented across industries due to increase in material prices of components, especially electronics, chemicals and solvents.
Our active install base crossed the 15,000 mark, which is steadily increasing to grow the business in the coming years. Profit before exceptional item increased 19.8% year-on-year and increased 26.3% for twelve months. Profit before tax increased by 19.7% year-on-year and 41.7% for twelve months. EBITDA increased 27.1% year-on-year and 24.5% for twelve months. We should continue to maintain EBITDA margins north of 24% on a long-term sustainable basis. PAT increased 21.6% year-on-year and 40.3% for twelve months. EPS increased to 25.25% from 18.00%, which is up 40.27%.
Working capital days improved by 31 days this financial year due to better inventory management and receivables recovery. The company maintains healthy margins with profit before exceptional items at 20.4% and EBITDA at 25.8%, with scope of improvement due to better product mix and higher revenue triggering economies of scale. Let me brief you on the performance of various divisions, products and business segments. Printers and consumables had a positive demand, and the increased install base will drive the business in the coming quarters.
The company is strengthening its market share in the building material segment and dairy and food sector witnessed continuous growth, strengthening and growth. The pharmaceutical segment witnessed increasing customer penetrations, wins in competitor accounts, and focus to scale up in this industry.
The LCP division witnessed 12-month growth of 17% as the production of the customers was increasing. The growth was mainly due to improved production of some of the industries where we have a strong hold, like dairy, healthcare, steel and metal, food, FMCG, pipes, cables and wire, distillery, agrochemicals. It was also encouraging to see growth in some of the upcoming sectors like pharma, paints, wood. Product verticals of TIJ, TTO, High Resolution continue to have a strong growth, and these products are well accepted by the market.
We have dedicated managers and team to drive these verticals with focus on dairy, beverages, biscuits, frozen food, ready-to-eat, pharma, packaging, plywood, lubricants, carton coating. These new products continue to grow every quarter, which builds confidence on the potential of these products in the coming years.
Laser business is growing steadily as product technology has been improved and a new team is driving the business. This has yielded good dividends, with a positive response from the customers and new opportunities expected in the coming quarters. Service revenue has shown good growth in value terms, which contributes towards profitability. Our strategy for separate verticals for key account and OEM business for focused approach is showing encouraging results and should yield good quantum of business.
LCP business reported good growth for the financial year, with revival in some cement accounts and Pan-India supplies in sugar industry. We are changing our focus to non-LCP business with some new applications, and the team is confident of generating business in the coming quarters. With new government directives regarding marking and coding in agrochemicals, healthcare, and plastic bags also, we expect some good contribution to our business growth.
Customers, especially large business organizations, are looking for coding and marking solutions so as to avoid counterfeiting of their products. We are offering complete solutions, including availability of our in-house software development team, to provide tailor-made solutions as per our customers' expectations. To intensify our reach to the customers, we have strengthened our inside sales team for telecalling the customers to generate good quality leads. This is helping the field sales force to improve their strike rate for order conversion.
The company has strong cash flow, and the trend is expected to continue. This year we have performed well in every quarter, which shows a sustainable growth trend, and the momentum is expected to continue for the next financial year with similar trend of growth trajectory. Fundamentally and inherently, the company remains strong, and we are focused on our plans and strategies as we are confident of the growth potential to deliver positive results. The floor is now open for questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first... [inaudible] [crosstalk] Please give me a moment. The first question is from the line of Mr. Koushik Mohan from Moat Financials. Please go ahead.
Hi. Am I audible?
Yes, Kaushik.
Hi. Hello, sir. I started covering Control Print from past one year, but I'm sorry if I might be wrong. In past five years, I'm seeing a line item called as exceptional item or extraordinary item in your balance sheet, sorry, in your P&L. Can you please explain me this?
You mean the exceptional item?
Yes, yes. Every time I see from past five to six years, I'm seeing these exceptional items in your P&L.
You'll see that in the last two years it is at a very negligible amount... [inaudible] [crosstalk] If I read even in the current quarter.
Mm-hmm.
It is only INR 26,000 . The previous quarter it is INR 11 ,000. Before that it is INR 97,000 .
I agree with that, sir. Why these entries altogether come in? Because as a percentage of whatever the revenue, I'm like I'm very new for your business to understand. I didn't understand what this line item is all meaning about, as well as in the notes to accounts. When I go to the notes to accounts also, I'm not understanding properly. Like, I see in your notes to accounts how it is like profit or sale of an investment or something like that.
If you see that in note number five, we have specifically explained the exceptional item. It includes INR 0.26 lakh for the quarter and INR 1 lakh for the
Full year towards changes in fair value profit loss from sale of units in mutual funds routed through PNL. This is a very negligible amount which we had put in mutual funds, and that is coming. This, there is an entry for the year of INR 315 lakhs, which was a sale of our Vasai property, which we had declared, I think, in the first or the second quarter. That was an asset sale, so it came as exceptional item. I don't think there is any other item which is of concern.
Okay. Sir, I just wanted to understand on the business dynamic. How is your company has been, like, according to my understanding, I feel that there is some growth values in the Control Print business. How, as a management, what is your guidance onto the future numbers? If not the numbers, at least the growth.
What is the guidance on growth?
Growth in sense, how is your business going?
Actually, I'm finding it actually very difficult to hear you clearly.
Am I audible now?
Yes, you are.
Am I audible now?
Yeah. Say it again. Yeah, please.
Yes. Hi. As per your business growth, what is your business growth drivers for coming years? Like, what are you concentrating more on?
I mean, we don't really provide that type of guidance in all honesty. You know, obviously, especially after this whole COVID incident, it's been difficult to answer.
Mm-hmm.
In the last few months, including the current period, we're really struggling with our normal supplies, especially the semiconductors. You know, our chips are in short supply again. We're really struggling for it, paying a lot more. It's difficult to say, but I think you know, obviously as the market grows, you know, we've always maintained that we'll grow at about double of GDP or industrial production. You know, the idea would be to grow consistently.
You know, and obviously to some extent, we depend on the overall consumption in the market, you know. There is a latent amount of things which are not being printed, and that's an additional boost for us. The volume growth is gonna come from, you know, the consumption growth. If you know that that's maintained, you know, we saw a good bounce back after this whole COVID shambles and all of that. If it maintains, then certainly we can do well, you know.
Okay. Thanks for the clarification... [crosstalk]
Our product portfolio is strong, so we are expecting.
Mm-hmm.
You know, if we think the market is growing at, like, 1x to 1.5x the GDP or industrial production, and we should be able to grow about twice of that.
Okay. Got the clarity. Thanks for that.
Yeah. I think if the GDP grows at, like, 7%.
Mm-hmm.
You know, industrial production, moreover, you know, manufacturing growth, then, you know, we should be able to do about 15%. That's an approximate thing you can take. You know, it's gonna depend on the overall economic growth, you know, because to that extent. If the economy grows at 7% to 8%, then we should do 14% to 15% is what I think.
Okay.
Yeah.
Okay. Mm-hmm.
Thank you. The next question is from the line of Madhuchanda Dey from MC PRO. Please go ahead.
Hi. I have couple of questions. The first is, you mentioned about an installed base of 15,000 now. Can we assume that, on an average, the consumption per customer will be INR 1 to 1.2 lakh, or is that a wrong assumption?
Roughly, that's the trend, assuming that the productions of the customers are normal. In a COVID year, it definitely was lower. In a normal year, your assumption is correct.
INR 1 to 1.2 lakhs per annum will be the consumables.
I mean, for the CIJ. Earlier we had only the CIJ printers.
Right.
Now, you know, we have the TIJ, TTO, so, you know, some printers are higher and some are lower in their consumption. But yes, the CIJ at INR 1.2 lakh per printer is definitely.
What about the new ones?
New ones are slightly lower, so they could be as much between INR 80,000 to 1 lakh or something. But... [crosstalk]
Okay.
Since they are more new in the market, our customers are also increasing their usage. We are hoping that this will also give us good revenues. As of now, they're slightly lower than CIJ.
Okay. Some housekeeping questions. Normally you share the breakup of the number of printers sold and the breakup between the new printers and the CIJ consumables, et cetera. Will it be possible to share it for the quarter and for the year?
Yeah, sure. I do share that all the time. In this quarter, our printers is about 18% to 19%. Consumables share of revenue would be 51% to 52%. The spares would be around 8% to 9%. Spares and service together, you can say about 22% to 23%. Balance is on the mark.
In terms of numbers, where were the numbers or number of printers sold and the breakup between the CIJ and the new age printers?
We generally give the total number of printers sold. This financial year was 3,000+ . Yeah, we crossed three thousand for the first time. We did about 3,025 in this financial year.
Okay.
In fourth quarter.
Of which new age one?
Sorry?
The new products, the CIJ, TTO.
This is combined, so we don't give the breakup. The combined is about 3,000+ , and in quarter four we've done about 900 odd printers.
Okay. Another question is on, you know, you mentioned about when you were mentioning pharma, you said that there were some market share gains also. Overall, if you look at the year gone by, fiscal year 2022, if you have done, say, a 24% kind of a top line, what would be approximately attributable to the market share gains? And where is your market share at this point in time?
The market share, you know, because the industry reports are not very easily available, we need to see, you know, the release of financials of our competitors, especially the larger ones, which are filing, then only we will be able to give more details on how the industry has grown. I think when we hear from our field staff and the momentum that Control Print is doing, growing at 20%+, we feel that we would have gained market share, but we'll have to wait for our competitors to file their results.
Okay. Because you mentioned, obviously there's a direct linkage with the manufacturing activity, but the top line growth could also be propelled by market share gains if that is a trend that you're witnessing, right?
Yeah, we are. We feel that there would be market share gain because we've opened up more industries. The product range has increased, and we are able to penetrate into competitor accounts. We would like to see a market share increase once the results of other companies are released.
Is there a pricing advantage of Control Print vis-à-vis the large, too, competition or the MNC competition?
We are competitive. We don't really undercut or try to gain market share through pricing. Yes, technology, service and being competitive is definitely one of our forte as well. I think Control Print has always maintained that, you know, service is our strength, and we reach out to our customers and try to give them the maximum uptime, and that's what is building the confidence in our customers. Of course, price has to be competitive, you know, in the Indian market, but that's not our only advantage.
Okay. The last question finally is, as you step into fiscal year 2023, what are the main worries?
To interrupt. I'll just repeat exactly what Rahul is saying. You know, I think overall our pricing is not cheaper than our competitors. You know, the idea is to be at the same level. Case to case, sometimes they are cheaper, sometimes we are cheaper. You know, the cost depends on deal to deal. Overall, on our average price level, the idea is to be at the same level as the competition, the leading competitors. You know, we offer better value because we think our technology and our product range is better.
Of course, we have the best service network and you know, good logistics in place for sure. You know, that's more what we are focusing on offering the customer, you know. Price-wise, we don't really, you know, undercut. Yeah.
That's right... [crosstalk]
Sorry about all that. Now you can just answer your question.
Yeah. I also had a question about as you step into fiscal year 2022, what are the main worries that you have?
What are the main?
Worries.
Worries.
Concerns, worries, challenges.
I mean, right now, of course, you know, key issue for sure is that we are having a massive amount of issues with the chips, supply of our chips and semiconductors. We are having a lot of production related issues. We had bought a lot of things from the spot market and at a much higher price in the last quarter and this quarter it's continuing. This is definitely affecting us. You know, it's slowing down the entire logistics chain for us and the manufacturing is being affected of the printers, which then you know. It has increased our lead times to supply the printers from ex-stock to definitely like a few weeks at least. It's
It doesn't look like this thing is easing up anytime soon for us. This is definitely an area of concern. Like, this is what I said is the main area of concern in the coming year. Otherwise I think we're okay. Yeah, this has to be resolved somehow.
Just one question. I'm just picking your brain on this. From a medium to long-term perspective, is there any technological disruption possible that could, you know, weaken the investment case for a company like yours?
I mean, I think obviously, you know, the biggest risk to me is that the statutory risk. You know, the government can always change laws, you know. Obviously, I'd say like 50% to 60% of the customers are printing because of the government regulations, you know, because you require the date code, the batch code and all this other stuff. You know, of course, if the government regulations change and, you know, they require the less ink or that thing.
We don't think that this will be changing, you know. At the end of the day, that's been a big driver, you know, going forward, increased traceability requirements and increase in the FMCG buckets. Yeah, technically it can happen.
Technology-wise, you know, I don't see any issue because I think that people always want to see this type of information on their packs. We cover all the major technology which are applied. Whether you want to, like you said, use a CIJ or a TTO or a laser or a thermal inkjet or a piezo, whatever, you know, you know, in the end you still have to buy it from Marwari's or something. Yeah.
Yeah.
It's a good thing. You know, whether you want a SUV or a passenger car or a utility vehicle, you know, the truck, the thing is you just need a car, you know, for transport, and we are there for that.
Okay. Thank you and all the best.
Thank you.
Thank you. Next question is from Deepan Shankar from Trustline PMS. Please go ahead.
Good evening, everyone, and thanks a lot for the opportunity and, congrats for good set of numbers. Rahulji, first want to understand this, contribution of the segment for full year printer consumables and other segments.
I just gave that in the previous.
No, it was for fourth quarter, right?
Yes. You want for the full year, you think?
Full year. Yeah, yeah.
Okay. It's quite similar, to be honest. I have the figures, but the percentage is quite similar for the full year as well as fourth quarter.
Okay.
I don't see any variation, major variation.
Okay. In terms of printer capacity utilization, what is the rate currently now?
CIJ printers, right now we are at about 80% to 85%.
Okay.
Like Shiva mentioned that, you know, chips is the main concern right now. If we can get all the parts availability, we can ramp up the production even more, because it's more of an assembly plant and we don't see that as a major bottleneck. Going forward, even if more printers are required in any particular year, we can surely ramp up our shift production.
Okay. In terms of non-CIJ contribution, so what is that for full year?
Non-CIJ is definitely increasing. Earlier it was in single digits. Now it is definitely crossed. I mean, I'm talking about the new products that is CIJ, TTO and High Resolution. But if completely non-CIJ you're talking about, then it will be about 30% to 35%, in that range.
Okay. This newer one, TTO.
Sorry?
Okay, that I will check later. Just wanted to check, how is our segment penetration improving in this food and beverages segment where these MNCs had a really good hold, right? Are we able to penetrate now better in this food and beverages segment?
To some extent. In one or two segments like dairy and stuff we've been focusing more on and pharmaceutical, not across the board. I'll say like, you know, in the last two years we've struggled a lot because of COVID. It's not been easy to meet customers, you know. People have been focusing more on the existing things. We have gained a good amount of business from specific customers who have had larger requirements.
Yeah, I mean, we've got a definitely improving mix coming from the FMCG segment as a whole, you know, in food, beverage, pharma, and even packaged goods. It's improved. I think in that, what I would say, like two, three segments are where we've got a good gain. I think food and. Now we are going more into solution providing going forward, so we'll see, you know, how that pans out for us.
Okay. Now, economy being back in action and more production is happening. Do we expect consumables contribution increasing over next two to three years?
I mean, I think that, like I said, our overall growth, you know, we are targeting about 2x manufacturing growth or you can take it as industrial production or GDP or as, you know, like, you know, substitutes for that. Obviously if the, you know, in the end the consumption all depends upon the production. I cannot predict, you know.
Obviously, if people are adding more lines and more capacity or they're selling more then, you know, they will print more. You know, it's like a dependent thing, you know? There's nothing we can control because, you know that once I give the printer to someone then it depends on how much he's producing.
Okay, sure. Thanks a lot and all the best.
Yeah. Absolutely. Thank you.
Thank you. Next question is from Saket Kapoor from Kapoor & Company. Please go ahead.
Yeah. Namaskar, sir, and thank you for the opportunity.
Namaskar, sir.
Sir, as could be seen that we have posted the highest revenue on a quarterly basis and also on a yearly basis. We are now through third into the first quarter. Was it a seasonality effect for the March quarter, or the momentum still continues, since the base has now increased and it is now the consumables that will be driving our profitability going forward.
I think even in first quarter, of course April sometimes a subdued month because people have probably overworked in March. I think overall first quarter should be fine, Saket. It should not be a concern, but first quarter has always been good for us, historically, and we see that the momentum of fourth quarter is also going to continue in first quarter.
Right. Sir, on the consumable part, what should be our utilization level?
What should be our utilization level?
Yes.
It is increasing. The volume growth is there in consumables. We are 50% to 55% where we are right now. We were earlier less than 50%, now we've crossed 50%.
Okay. Sir.
Enough capacity for future.
I didn't get you, sir.
Enough capacity for the next few years.
Yes. Thank you. Right. Sir, about the mask division, sir, what would be now going forward the business plan ahead for the mask division currently, sir? I think we have claimed the depreciation part, completely depreciated the asset for this year and what's the roadmap ahead, sir?
Masks, you know, obviously is dependent sometimes, you know, the wave comes and all that. We hope that there is no more wave because, you know, coding and marking is more important to us than the mask division, and that is not something that we would focus on. Depreciation, yes, by the end of the year, most of the machinery should get depreciated. Masks will not be the driving force in this financial year, for sure.
Though we on a long-term basis we already have the FDA approval, and once things are more normal globally, we will see if we can look for some good export opportunity for mask. As of now, the focus will remain on the coding and marking.
Okay. Sir, it is operating at optimum level, where the type of turnover, the percentage it makes will remain the same for this year also?
No, I think it'll definitely coding and marking will be high. Mask will not be at the same level as last year.
Correct, sir. Sir, about the introduction of this new printer, I think two of them were introduced also, and we were also planning for a new model of Internet of Things pertaining to that. Where are we in the midst of that launch?
To be honest, this was supposed to be launched towards the end of the last financial year. Like Mr. Shiva mentioned, globally, the challenges of chip and semiconductor is affecting us also and our partners in Germany. The suppliers who have confirmed orders are, you know, defaulting and delaying the supplies. We have already geared up. We've purchased most of the components for the new launch of the printer. The training has been given to our factory in Nalagarh, and we're just hoping that we will be able to source, you know, the boards quickly. Once that is done, we should be able to launch.
You know, next month or the month after that, hopefully we will be giving some announcements on the launch of the printer.
Sir, it will be catering to any specific industry? I mean, which for which industry will the printers be aligned?
This will be our new CIJ printer. You know, the technology is changing, so the old printer will get replaced by this new printer. Industry will be the same, but you know, the customers will get higher-end printer with more applications and more things like, it's like Industry 4.0 or IoT, you know, whatever you can talk. Those features are there in this printer.
Price point is?
The industries will remain the same, applications will be same, but they will get more features in their printer.
Price point also, sir, it will be significantly higher than what the selling price are? I mean, what would be the estimated
We decide that we launch the printer, then we will take a call on.
Okay.
Price, price strategies.
Sir, two P&L items, sir. This quarter we have booked other income of INR 1.57 crore and as employee benefit expenses have gone up, quarter-on-quarter also, year-on-year. Is it the employee benefit contribute to the KMP contribution, I mean, contribution towards KMP, the profit percentage or anything else?
The other income is basically the dividend income which we receive on our investment portfolio. That is reflected in other income. Employee cost benefit, you know that we need to keep our employees and their incentives also because, you know, sales are increasing, so incentives are being distributed more. As well as, you know, we need to have a bench strength for our future business. Yes, this will at this level, I think, it will continue.
Okay. We can look at an quarterly run rate of INR 15 crore now?
Around that, but if you see as a percentage, it is coming down. What we were two years back around 20% to 21%, now we are down to about 19.5%. With increase of sales, I think we'll be able to absorb these employee benefits better. It's required because, you know, it's a we have a 750+ sales team now. We have to retain the employee, and they are important for our business.
The last two points, sir. On the first thing, the Innovative acquisition which we have done. How are things going right there? And on the Sri Lankan write-off partners, these three.
Innovative is, you know, it's a new company, so they've really grown in the last year after Control Print came in. We had our recent board meeting, and we're quite optimistic. This financial year also we'll see it grow to 3x. We're quite confident because that business is. It will continue to grow for the next few years is what I believe it. That's why we invested in Innovative. Though it is not significant to our balance sheet size right now, but maybe a couple of years down the line, it will be a good contributor. We're quite confident of Innovative. Sri Lanka, you know that the country, the economy, the political scenario, everything is under such a turmoil.
There is, to be honest, no visibility going forward how they're going to come out of this situation. Considering that, the board has decided that we should try to wind up the operations and see what regulatory requirements are there in that country. That process we will be taking up in the next couple of months.
What has been our investment in the... [crosstalk]
Like I said, we need to ascertain all the details regarding how much is the inventory there, how much is the receivable. We also have; to be honest, last few months, we have certain funds which are lying in our current account in Sri Lankan rupees.
Even though I've personally visited the bank a couple of months back, the bankers are not able to transfer it to India in US dollars because, you know, their biggest challenge is the foreign currency is not available. We have to ascertain everything and then see how to wind it up. As of now, it's only last week that the board has given the go-ahead. Give us some time to work out the details.
Yes, sir. That is very correct, sir. Just wanted to understand what percentage of business have you done for last year then from the Sri Lankan? Is it any substantial or?
No, I don't think so. It's not been substantial, which will affect the Indian balance sheet.
Correct, sir. Thank you for the answer, sir.
Yeah.
All the best to the team, sir. I hope this momentum, sir, continues. For plant, a plant visit also, sir, if things could be coordinated, the investors would.
We'll let you know that part.
Yeah.
Thank you for your good wishes.
Thank you, sir.
Thank you. Next question is from Devanshu Sampat from Yes Securities. Please go ahead.
Yeah. Hello, sir. Good afternoon. Bunch of questions. Your printer sales in fiscal year 2022, they are just up about 2%, right, on a year-over-year basis?
Printer sales volume term?
Yes. Is that correct? INR 3,025 this year versus INR 2,952 last year.
Well, I actually have it for the quarter. It was about 8%, to be honest.
You mentioned we sold.
If you take only the new printers, like we have new and direct make, the new printers have grown about 7%, to be honest. That's the figure I have worked out. That is encouraging because, you know, the customers are still buying the new printers.
Okay, sir.
As of now, to be honest, the situation is on our side that we are not able to. We have a backlog, like Mr. Shiva Kabra mentioned, that the chips are in shortage. So this would have definitely been higher. We could have done a couple, maybe a few more printers and the percentage would have been higher.
This would essentially be an industry-wide issue, right? Would you have lost market share over here, or would you have gained or how do... [crosstalk]
No, it's. We've not had, like, anything major as of now. Of course, there is shortage across our competitors also. There, we've not canceled any order or lost anything. It's just that there is the backlog. Earlier, we were supplying the printers faster once we received the order. Now there is a slight backlog. But it's not led to cancellation.
Yeah. Right now, I think the impact is more on the cost because, you know, for the last few months we've been paying a lot more money for our parts because we have to source it from the spot market to continue production. The situation has honestly only been getting worse. The types of backlogs that are there right now from the orders which we ordered even, like, even long ago are unacceptable. Yeah, we are managing by paying a price, but you know, it's obviously not fast.
How do you define installed base? Last six years sales?
How do we?
How do you define installed base? Like 15,000 printers that you were saying we have installed base. How do you define that?
We take it more on the active printers. You know, customers who are buying consumables or doing some service where they are, we are in touch with them over the year. That's what we call active install.
Okay. Okay.
Of course.
And, uh... [crosstalk]
Total over the years is much more than 15,000. Like we always mention, that you do lose some customers, some printers go out of operation. More or less, we feel that about 15,000 printers would be active with our customers.
Okay. Can you give a sense on what the number, what your printer numbers could have been if you would have been able to sell? I mean, if there was no shortage of semiconductors?
It is not a major backlog, but we could have added another maybe 7,500 printers in the March figures.
Okay.
Again, just to clarify, the shortage is mostly on the CIJ printers. It's not like all our printers are in shortage. It's the CIJ where there is a, you know, that is our main focus all the time. All the other range of printers we are still able to supply. There is no great shortage.
In your cash flow statement there's a profit on sale of fixed assets of INR 3 crores. Can you let me know what that is concerned with?
This, in first quarter we had mentioned it, our Vasai property in Maharashtra, that is the one which we sold.
Okay. Yeah. Okay. Got it... [crosstalk]
Because we are just there now. We were not doing anything concrete there, so we liquidated that.
Congrats to the team for, you know, bringing the inventory level below 100, which has been, you know, a long request and I think a pressing point for the company as well. You also been mentioning that, you know, there will come a point when after which inventory levels we won't need a higher level of inventory. Would it be fair to say that the INR 65 to 70 crore range is a good number to work with as inventory levels in absolute terms going ahead?
I think so. These are sustainable inventory. I would have said that this can come down a little more. Considering the current situation where we are transiting from one printer to the other and there is shortages, like I mentioned, we bought the parts for the new printer, but we just don't have the board. Inventory has gone up by INR a few crores, which, you know, if we had the board, maybe that would have been sold out. Considering, I think definitely 70% should not cross 70%. 65% to 70% is a good range. Once the new printer is launched and things are more stable, this can be worked on.
If you will take it as percentage of sales or number of days of sales, with sales increasing, this should continuously come down. We've always mentioned that, you know, we had to maintain critical spares, which don't need to be added all the time. That is giving us dividends now, where you can see... [crosstalk]
If once these problems are resolved, you're saying another INR 5 to 10 crore inventory we can still release some, right? Basically over a two-year, three-year period.
Yes, I think so. Again, it depends on what sales is at that level.
Sure.
I think now it is at a much more optimum level than it was a few years ago.
Okay, sir, and what's your any planned CapEx for the year?
Just like maintenance things, you know, I think.
Okay. Sir, just, you know, we've been, I have raised this question a bunch of times in the past. In one of the calls also the Mr. Kabra also had assured that, you know, whenever there's no cash requirement, we'll definitely pay it out. The payout ratio of where the dividend has increased on a, in absolute terms, where the payout ratio has come down to about 37% from about 40% to 45% levels in the last two years.
Of course, the cash is piling up. Can you know, what is the management or the board view on this in terms of the reason for a lower payout or, and managing the cash? Or cash allocation basically, if you can just give a sense on that.
Yeah. I think right now it's just a matter of having more firepower available in case, you know, there are options available for inorganic growth is what I'd say. Or maybe a potentially larger investment opportunity.
As you said, you know, we are doing well and we're focused on our core business and we're looking more at getting into more solution-driven, you know, integrated solutions is what we were looking at providing around our coding and marking base and maybe also looking at certain opportunities in closely allied businesses. I think that was the main reason. Of course, if we don't find that right type of opportunity, then, you know, we will reward the shareholders in coming times. I mean, either way we'll reward the shareholder.
Either we expand the business or expand the right opportunity, you know, which is the right type of risk reward profile or of course, either we'll return the money in terms of, you know, a buyback or a dividend or some sort of form. Yeah.
Is there a outer limit in terms of time limit that we should essentially wait for till you can decide on this or announce something to do with this?
I don't think there's anything specific level there. It has been discussed in the past, but I do think that maybe if there's nothing that happens in this financial year, in the current financial year, then I'm sure we'll do something towards the back end of this year or the next financial year. We're generating cash and of course we're paying dividends and so we'll see what's there.
If, like I said, if we don't see anything concrete, then you know, we will definitely you know, like I said, reward or, you know, look at not holding too much cash beyond what's needed. I can't give you the exact specific numbers. You know, that's something that we'll discuss with the board, and we'll get back to you.
I do say that, you know, we do have an AGM scheduled most likely in July. You know, you know, that's certainly a time where any person can also raise this question with the entire board. Of course, our first quarter results and our board meeting and like that will be the time to, you know, check with the board for that.
Sure. Okay. Thank you, and that's it on my side. Thank you. All the best.
Thank you.
Thank you. The next question is from Shalabh Agarwal from Snowball Capital. Please go ahead.
Good evening, sir.
Good evening.
It was interesting to see some of the marquee names in the FMCG space in the presentation. Wanted to check how easy or difficult it is to, you know, make inroads into these companies because traditionally these companies have been served by more incumbent vendors. I'm talking about, say, Unilever or ITC or Marico or, you know, some of these names that figured in your presentation.
I don't think that the issue for us has not been that. I think we've been in a lot of consumer goods companies, you know, like Unilever, Marico, you know, Emami, whatever. We've actually been supplying a lot of consumer goods, you know, personal care and home care companies. We've traditionally been more weak in the food and beverage space, you know, rather than these two sectors.
Of course, in pharmaceuticals, I'd say we are, you know, much less. I think the issue is that, maybe, of course it's gonna require dedicated focus to, you know, to win, you know, more market share from these companies. There is more effort that has to be made.
There's no doubt, it's definitely more work to get a, you know, competitor customer than to sell more to your existing customer or even for as compared to a new customer who's not been using anyone. There's no doubt about that. I mean, we've got our strengths and, you know, we are focused on, you know, expanding those to our, you know, existing competitor customers also, and, you know, hopefully they see some value in that.
I think, like I said, it's not like, you know, our market share gains are not very dynamic in that type of situation. We don't want to go from, you know, 18% to 40% of the market or 30% or something. It's a few, 2%, 3% a year.
You know, 1% to 3% a year is a good, you know, number in terms of market share gain. 1%, 2% or so I'd say. That's the type of situation that's there because, you know, once someone has a printer, it's got a life of seven to 10 years, and during that time, you know, unless there's some real major issues, people are not really looking at replacement of that equipment.
Some of these majors would be having both consumer business as well as, you know, they would have presence in the food business where probably we are not, we have a lower presence. Being present in their consumer division, does that give us a leeway or, you know, does that help us to, you know, take our foot inside the food division business, which might be a different factory at a different location?
No, I think Unilever is the only big one that I know that has a consumer... [crosstalk]
Yeah. ITC also.
In the food also, that's not a thing. We are printing on those things. But that's one customer. I'm talking about from an overall basis. Most companies are like food companies and most companies who are, you know, beverage companies are beverage companies, and then most companies who are, you know, FMCG or personal care companies are personal care companies.
Like I said, in personal care, we're actually doing fine traditionally, but we've not been as successful in food and beverage and pharmaceutical. We are working on increasing our market share, and we have got some penetration, but like I said, it's from a low base, so it take time to build up. You know, we have to. We're not looking at it as a one-year thing. We're looking at this over a two, three or like a three to five-year horizon.
Sure. In replying to one of the earlier questions, you had said that we may be launching the upgraded version of, you know, the CIJ within the next phase. When we launch an upgraded printer, how does it work? The customers, do they buy or we have to buy back their earlier printers? How does that work?
Yeah. Normally when we launch a new printer, generally it has some advantages or some improvements over the existing printers.
Correct.
There might be some differences also in terms of like a different ink bottle, for example, or ink system. It might not work exactly with the old printers. It might be a different ink series. You know, then each customer will decide whether he wants to continue with the, you know, older printer generation or the new printer generation. The tendency is normally people purchase this when they have, you know, new requirements.
At the point when they have new requirements, that's when they tend to, you know, purchase the new printer and, slowly sort of migrate over a few years from the current generation to the new generation. You know, people are not gonna like I've launched a new printer, and I'll say, like, I have, like, 18 printers, and I'm gonna replace them all with the new printer.
That's not the way it works, you know? They will go for a phased replacement. They have a requirement for two, three new lines. They will buy the printer. They will evaluate it slowly as they feel that the older printers are, you know, the older generation of printers are aging. You know, they might slowly phase them out in place of the newer printers. It's not like a wholesale replacement for sure.
Sure. When the older printers are replaced, so these printers, do we buy them back or, they are like scrapped or how does that go?
Largely they're scrapped. You know, what happens in most companies, they, you know, they're assets.
Right.
You know, we are not really that interested in taking our old printers and doing, you know, all sorts of R&D on it because a lot of the hydraulics and the, you know, this thing is difficult to recycle. You'll have to make, like, an entire new set of parts for that, you know... [crosstalk]
We don't really buy back anything.
Yeah. The tendency is more like you buy new equipment, you have the old equipment, you do it. Yeah, sometimes if you want to offer a little bit of a discount, we do it in the form of a buyback or something. You know, the basic focus is more on, you know, you want a new printer, you buy the new printer and, you know, what you do with the old printer is your issue. Little bit more pressure on that now because of, you know, recyclability and all that. We are working more with our customers and offering them solutions for how to recycle, you know, their electronic waste and that.
Sure.
Other stuff. We are doing that also as a plastic.
Sure.
Yeah. We are working on that part actively. Yes, that's the solution.
Thank you. Thank you, sir, and all the very best.
Thanks.
Thank you. Ladies and gentlemen, due to time constraint, please limit to two questions per participant. Next question is from Rupen Masalia from RN Associates. Please go ahead.
Yeah, thanks for the opportunity and congrats on a decent set of numbers. Sir, I just, you know, want your view on total market opportunities. I guess currently it is around INR 1,400 to 1,500 crore. Is there a scope to venture into some adjacent categories like, say, for tracking and testing technology or maybe some other verticals or maybe through some inorganic route? Just want to know your view on this.
Yes, I think we are definitely working down the solutions path, and we've got some concrete plans in place. We already offer track and trace solutions. Right now, it's mainly used by the pharmaceutical industries. We feel there's opportunities also outside of the pharmaceutical industry in coming times. Yeah, we are already offering that. What we want to do is make that more of a solution platform. We've also got a few other solution platforms that we are working on.
On top of that, of course, we need to, you know, like, again, like I said, in traceability and of course, counterfeiting, anti-counterfeiting, and, you know, these are big issues for companies, branding and stuff like that. We're working on specific solutions based for the customer.
As far as inorganic opportunities go, I think like, you know, and organic opportunities, we are looking at that. There are a lot of adjacencies where we are because we are right in the cross between the printing industry, the digital printing industry and the packaging industry. You know, there are many different areas where we can go at. We are trying to understand, you know, whether what are the things we can do. We are actually, you know, definitely gonna get more deeper into the printing parts of things.
We're also looking at getting more into the integrated solutions part where our printer is one of the key technologies used for delivering specific solutions to customers like anti-counterfeiting, like you know track traceability and track and trace inventory control, logistics management and stuff like that.
So we are you know it's a bit of a journey also that we have to take to get to that levels because it's a we've got to change our mentality from a product box selling company to a solutions-based approach without losing the core focus and you know the strengths we are having in the current market. It's you know it's gonna be a transition you know.
Okay. Sir, in the medium term, that is, say, overt next three to five years, where do you see the overall opportunity size? Like, you know, let us presume that you venture out successfully in few of the adjacencies. Over next three to five years, do you see this size from INR 1,500 crore to maybe 1.5x or maybe 2x of current opportunity?
Yes. I think right now what I would say is that the market would grow at about 1x to 1.5x manufacturing growth. You know, if say GDP is about 7%, you can expect the market to grow at 8%, you know, 6% to 7% GDP growth, the market might be growing at 8% to 10% and, you know, we should do hopefully faster than the market. That's for the coding and marking business.
As far as, you know, the other things go, like I said, we are getting into, we have started doing some track and trace solutions for customers. Obviously, these are big markets, big solutions, but for us, you know, still a new area because we've not traditionally been providing the entire solution.
Traditionally, we've tied up with other people, and we've just been providing our printers as part of the solution that they are giving. Of course, the market opportunity is much bigger because we start looking at software opportunities, start looking at, you know, automation integration opportunities. We also are looking at inventory control, branding, counter feiting. You know, those are like things that directly impact the business in a large way. Obviously, the budgetary amounts of those businesses are much larger.
You know let's go on that front, and then, you know, when we are delivering something concrete and, you know, making a strong business case for customers in certain areas, you know, then I'd like to answer that question at that time. Otherwise, it's just speculating on my part. Definitely, strong interest from our side to move into those areas. Like you said, if we successfully move in, the market is big. Let us prove that we are successful, you know. Let us focus on that right now.
Okay. Thanks for the detailed reply, and all the very best for future.
Thank you.
Thank you.
Thank you. Next question is from Anurag Patil from Roha Asset Managers. Please go ahead.
Thank you for the opportunity. Sir, last four quarters, your gross margin have been kind of, declining. Can you elaborate what is the sustainable number there and what is the current raw material pricing scenario?
Definitely, like I mentioned, the gross margins are under strain, and that you would know that is across industries. It's not only about coding and marking. Commodity prices of everything, including electronics, chemicals, solvents, have definitely gone up. We have passed on some of the price increase to our customers, but it's a slow process. We have to first pay our suppliers and always a challenge to get it from customers.
The process is on. Hopefully in this financial year, if the price increases are more stable, and we are able to get from our customers, you will see the gross margins improve. There is. In a stable period, definitely another 2% to 3% is something we can definitely pull back. But as of now, the situation is not stable.
Okay.
Semiconductor market, like Mr. Shiva mentioned, is all we have to continuously buy on spot market to keep the production running, so that is something which is not in control.
Okay, sir. Fair enough. Sir, we have acquired one company a couple of quarters ago. That time you have mentioned it's more of a lower end kind of printers that company manufactures. Can you just tell what was the revenue contribution from that company this year? And if it increases, can it be accretive to gross margins because it's a lower end product?
Like I mentioned to one of the earlier questions, right now it is not significant. It's a new company, less than a year that Control Print has invested. It has definitely, we are happy with the progress that they are making approaching the customers. Many of our printers are also now installed. Like I said that we are also struggling to supply the printers, and the business only comes in when we get consumables on the printers which are installed. Similar to, you know, what we are talking about now in Control Print. As the install base increases, the consumable starts driving the business. That is at a very nascent stage.
Maybe we'll have to give it at least two to three years before it starts you know showing on the current Control Print balance sheet. We feel that this year and the next year they have good growth potential and we're confident that the business will grow.
Okay, sir. That's it from my side. Thank you very much.
Thank you.
Thank you. Next question is from Karan Bhatelia from Asian Markets Securities Private Limited. Please go ahead, sir.
Thank you and congratulations for a good, very good set of numbers.
Thank you.
Just wanted to have some clarity on this. We have this technological arrangement with KBA-Metronic. When is it expiring and when are we up for a renegotiation?
I think it's valid till 2023. 26 December 2023. It's definitely I think that till 26 December 2023. Post that, we do have a clause that we can extend it by another five years just by mutual consent.
Okay. Before this.
We have been doing well as partners. We've been there for more than a decade in partnership, and I don't feel there should be an issue in, you know, extending the contract. You know, we have to see it closer to that date.
Right. Given the fact that the selling price of Indian printers is slightly less compared to the global peers, so going ahead, can we expect, you know, even better order uptake from KBA-Metronic for the global markets?
We have geographical restrictions in our contract. Our focus will be India and the Asian market. They will take care of...
Ladies and gentlemen, the management line is. Please give me a moment. Yep. Ladies and gentlemen, we have Mr. Shiva Kabra still connected. The line of Mr. Karan has been disconnected. Please give me a moment. Let me just quickly reconnect.
Hello.
Ladies and gentlemen, Mr. Karan Batelia is reconnected. Mr. Karan Batelia, please go ahead.
Yes, I'm done with my questions. Any follow-ups, you can see on the screen. Or Control Print, any closing comments that you want to make?
Mr. Batelia, the management line is disconnected. Let me just quickly connect the management.
Sure.
Please be on hold. Please give me a moment. Ladies and gentlemen, the management line is reconnected. Please go ahead, Mr. Kabra.
Yeah, we can start the question again.
Yeah, Rahul, I'm done with my queries. Any closing comments that you want to make?
Okay. No, just thank you, everybody, for, you know, joining the call, and hope everybody is safe and healthy. The pandemic definitely is not coming back soon, hopefully in India at least. We look forward to a good, prosperous year for globally, if I can say, and Control Print for sure.
Thank you, everyone.
Thank you, Karan. Thank you, Chorus Call, for arranging the call.
Thank you. On behalf of Asian Markets Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.