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Stove Kraft IPO  Fundamental Analysis

Business Profile

Stove Kraft is engaged in the manufacture and retail of a wide and diverse suite of kitchen solutions under the brands' Pigeon and Gilma and proposes to commence manufacturing of kitchen solutions under the Black decker brand. The products include cookware, cooking appliances, and household utilities, and a wide range of products such as chimneys, hobs, and cooktops under the Gilmabrand, which is targeted at the semi-premium segment. Stove Kraft has a network of 45,475 retail outlets, 651 distributors, and nine C&F agents across the country, as of September 30, 2020.

During the six month periods ended H1FY21 and for FY20, FY19, and FY18, Pigeonbranded products contributed 76.90%, 86.20%, 81.24%, and 86.89% to the overall sales respectively and were amongst the leading brands in the market for certain products such as free-standing hobs, cooktops, non-stick cookware, LPG gas stoves, and induction cooktops.

The company entered the premium segment in 2016 by licensing agreement with Stanley Black & Decker, Inc. which enables exclusive to exclusively retail, and provide post-sales services in relation to, a wide range of products such as blenders and juicers, breakfast appliances, small cooking appliances, and small domestic appliances (as defined under the Brand Licensing Agreement) in India under the Black& Decker brand, up to December 31, 2027. Stove Kraft is yet to commence manufacturing under the Black & Decker brand. The company’s manufacturing facilities are located at Bengaluru (Karnataka) and Baddi (Himachal Pradesh).

Stove Kraft Financial Review

In H1FY21, Stove Kraft’s revenues increased to Rs 329.51 crore and PAT significantly rose to Rs 30.08 crore for the corresponding 6 months. The company reported that the increase was due to an increase in export sales, e-commerce sales, and LED sales during 6 months period. Total revenue for FY20 increased 4.72% to Rs 672.91 crore from Rs 642.60 crore. PAT posted for FY20 was Rs 2.91 crore as against Rs 0.09 crore in FY19.

The company’s margins have remained between 2%-5% during the last three fiscals. Net Margins have remained below 1% during the last three fiscals. Cash generated from operations has increased significantly to Rs 50 crore in H1FY21.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title H1FY21 FY2020 FY2019 FY2018
Total Revenue 329.51 672.91 642.6 534.59
Revenue from Operations 328.84 669.86 640.94 528.95
PAT 30.08 2.91 0.09 (11.72)
EBITDA 45.75 36.84 31.48 3.42
Total Assets 498.5 471.29 425.73 393.64
Cash and Bank 10.07 19.42 31.48 3.42
Cash generated from Operations 50.00 11.68 13.11 11.31
Operation Margin(%) 13.91% 5.50% 4.91% 2.95%
Net margin(%) 9.13% 0.43% 0.01% (2.19%)

Valuation and Peers

The peers of the company are TTK Prestige, Hawkins Cookers, and Butterfly Gandhimati Appliances as per the RHP. Their respective P/E was 44.93, 42.25, and 284.29 for fiscal 2020.

The company is aggressively priced considering the negative NAV of Rs 24.35.  The company has experienced negative net worth and EPS in the past.

Outlook and Conclusion

Stove Kraft operates in a very competitive environment, the kitchen appliances market has both organized and unorganized players. The financial performance of the company is not consistent. The sales have increased considerably even during the Covid scenario which appears unreasonable. The company has posted extraordinary profits in the six months ended 30th Sept 2021; whether the company would be able to maintain such profits is a big concern. Hence, it would be in the interest of investors to avoid this IPO.

Reviewer recommends Avoid to the issue.

Review By CA Priyanka Choudhary on 20th Jan 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.



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