In an interaction with Utkarsh Patel, Executive Director, Jyoti Resins and Adhesives Ltd
We expect reasonable operating leverage to play out for us with increasing volumes, asserts Utkarsh Patel, Executive Director, Jyoti Resins and Adhesives Ltd
For Q4FY22, the company's net profit came in at Rs 6.92 crore, up by 2.6 times from Rs 2.63 crore reported in Q4FY21? What factors are responsible for your outstanding financial performance?
"Rome wasn't built in a day", this holds true for us as well. A lot of sweat, hard work & effort have gone into reaching where we are today. Having started the Euro 7000 brand in 2006, what you are seeing today is the result of the efforts of the last 15 years and we still believe there are "miles to go before we rest". Several factors have been instrumental in contributing to this growth. Let me enumerate - our focussed strategy on the product category has led to the company reaching sizeable revenue vis-a-vis the largest competitor in the market, who is still 95 per cent of the market. No other brand after us has been able to penetrate and build size as we have done since incorporating the brand. This is primarily due to our continued focus on the category, which we still believe has significant room for growth. Further, focussing on servicing the end user namely carpenters, and giving the best quality at the best price has enabled Euro 7000 to become a sizeable player in the market. Currently, we operate only in 13 states, where we are seeing enough headroom for growth, led by deeper penetration and width of reach. In the tough times of COVID, we supported our dealers, which have, in turn, created significant brand loyalty towards the Euro 7000 brand. Higher volumes led by capacity expansion coupled with systematic pass-on of raw material prices have also helped us in the overall margin improvement. All these factors together have led us to deliver our best-ever year in terms of revenue, EBITDA, and net profit.
With inflation leading to a rise in input costs, what cost optimisation measures are you implementing to safeguard profit margins?
The company has taken price increases to mitigate the rise in raw material prices. This has allowed us to protect our margins. We last took a price increase of 4 per cent in May 2022 and another can be expected in Q2FY22 to help overcome the rising prices of raw materials. We expect reasonable operating leverage to play out for us with increasing volumes.
Could you elucidate on the products that you have launched during FY22 along with new product launches in the pipeline for FY23 & FY24?
We are focussed on the (white glue) wood adhesive business, under which, we keep launching new categories to meet the varied requirements of carpenters. For example in FY22, we launched three new products with properties including fast drying, waterproof, anti-termite, cold press, and hot press capabilities keeping in mind the requirements of the industry with changing industry demand dynamics. We will keep evolving our product lines for changing trends and improving the experience of our users as we continue to grow.
What is your earnings outlook for the upcoming quarters?
We don't look at quarter-to-quarter phenomena. However, we are looking at a 25 per cent compounded annual growth rate (CAGR) for the next three years on the basis of our performance in FY22. We are also aiming to reach an EBITDA margin threshold of over 18 per cent during the same period.