Resilient Kokuyo Camlin: Impressive Profit Growth Amid Q2
Company Overview:
Kokuyo Camlin, a renowned company specializing in the production and marketing of stationery and art products, has a robust background. The company, now majority-owned by the Japanese stationery giant Kokuyo with a 74.4% stake, boasts an extensive product portfolio, including writing instruments, notebooks, marker pens, inks, fine-art colors, and various other stationery products.
Robust Manufacturing Facilities
Operating three manufacturing sites in Patalganga, Tarapur, and Jammu, the company’s Patalganga facility leads in production volume with over 324 SKUs annually. Tarapur follows with 800 SKUs, and the Jammu plant contributes 393 SKUs. Kokuyo Camlin caters not only to the local market but also exports its products to other countries.
Camlin Leads Stationery Market with 54% Paper, 34% Non-Paper Share
The stationery market is composed of two main categories: paper and non-paper stationery products. Camlin dominates the stationery market with a 54% market share in paper and 34% in non-paper. The paper industry, valued at ₹21,000 Crores, witnesses an 8% growth, with Camlin contributing ₹11,500 Crores. In the ₹17,500 Crores non-paper industry, Camlin holds a share of ₹6,100 Crores, in a market growing at 7.6%. Overall, the industry has shown significant growth.
Top-Line Momentum Sustained YoY while Dip QoQ in Q2FY24
In Q2FY24, the company reported a revenue of 194.8 Cr, marking a 2.6% YoY growth but a 17.3% QoQ decline. Despite moderate growth in top line, the management maintained raw material expenses, resulting in a 6.4% YoY boost in gross profit to 77.4 Cr, but down 12.2% QoQ.
Despite top line challenge, PAT up147% YoY on Lower Finance Cost & Tax Rate
Despite moderate top-line growth, Profit After Tax (PAT) soared by an impressive 147% YoY to 9.5 Cr, though it experienced a 48.3% QoQ downturn. This remarkable bottom-line growth was driven by decreased interest expenses, which fell 43.3% YoY and 58.8% QoQ to 0.47 Cr, and a lowered tax rate, dropping to 24% compared to 60% in Q2FY23.
Valuation and Key Ratios:
Presently, Kokuyo Camlin trades at a multiple of 40.3x EPS (TTM) 4 Rs at a market price of 161 Rs, with the industry PE standing at 26.2x. The company is trading at 5.64x its book value of 28.6 Rs per share. In the EV/EBITDA multiple, it ranks third among its top peers with a multiple of 21.7x, while the industry median is at 15.3x. The trailing twelve-month Return on Equity (ROE) and Return on Capital Employed (ROCE) stand at 9.26% and 12%, respectively. The interest coverage ratio in Q2FY24 stands at 27.4x, indicating the company’s solvency.
Q2FY24 Results Updates: Standalone
➡️In Q2FY24, revenue grew by 2.6% YoY but experienced a 17.4% QoQ decline to 194.8 Cr. Despite the moderate revenue growth, gross profit increased by 6.4% (down 12.2% QoQ) to 77.4 Cr, driven by prudent management of raw material costs.
➡️Gross margin showed improvement, rising 233 basis points (bps) QoQ and 140 bps YoY to 39.7% in Q2FY24 compared to 37.4% in the previous quarter.
➡️EBITDA increased by 18% YoY (down 28.6% QoQ) to 17.3 Cr, attributed to low raw material costs and operating leverage. The EBITDA margin, up 115 bps YoY but down 140 bps QoQ, stood at 8.9% in Q2FY24.
➡️Operating profit (EBIT) witnessed a YoY growth of 23.4% (down 35.6% QoQ) to 12.9 Cr, with the EBIT margin up 111 bps YoY but down 188 bps, standing at 6.6% in Q2FY24.
➡️PAT surged impressively by 147% YoY (down 48.3% QoQ) to 9.5 Cr, driven by lower interest costs (down 43.3% YoY), increased other income, and a reduced tax rate.
➡️Earnings Per Share (EPS) for the quarter stood at 0.95 Rs compared to 1.84 Rs in the previous quarter.
Conclusion:
Kokuyo Camlin, a leading stationery and art products company, faces QoQ revenue decline but sustains YoY growth. Despite top-line challenges, prudent cost management boosts gross profit and results in an impressive 147% YoY increase in PAT. The company trades at a PE of 40.3x, showing a premium compared to the industry. Key highlights include improved gross margin
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