IPO Note - Stove Kraft Ltd By ICICI Direct
Incorporated in 1999, Stove Kraft was converted to a Public company in 2018. The company is an established player in kitchen solutions segment and an emerging player in home solutions market. The company provides a diverse suite of kitchen solutions under Pigeon and Gilma brands and has also forayed into LED based lighting products. The Company proposes to commence manufacturing of kitchen solutions under the BLACK & DECKER brand with a range of value, semi-premium and premium kitchen solutions
Diversified kitchen and home appliances product portfolio
Since its inception the company has grown from a single brand small LPG stove manufacturing company to become one of India’s leading manufacturers of kitchen appliances. Its brand portfolio consists of Pigeon and Gilma which are its own brands. The company also has a Licensing agreement to manufacture and market premium small domestic appliances under the brand ‘Black and Decker’. In 2019, the company also forayed into the manufacture of LED based lighting products and is planning to expand its presence in the segment.
Increasing manufacturing capacity with backward integration
The company has an integrated facility at Bengaluru comprising of 12 manufacturing units to manufacture pressure cookers, non-stick cookware, hard anodized cookware, mixer grinders, induction cooktops, LPG stove, glass cooktops, IR thermometer and handy vegetable chopper. Further, The Company has also commenced manufacturing LED products in its Bengaluru Facility. The company has recently expanded its production capacity from 19.5 million units per annum to 38.4 million units per annum. Stovekraft’s manufacturing facilities are backward integrated with ability to in-house manufacture components required for its products. Increased level of backward integration has enabled the company to reduce dependence on third party suppliers and OEM’s for its requirements of components.
Key risk & concerns
* Inability to maintain and promote the brand portfolio can impact future revenue growth
* Around 20% of revenues are generated from traded products
Priced at Mcap/sales of 1.9x (post issue) FY20 on upper band
Stovekraft reported revenue CAGR of 13% over FY18-20. The company had a low operating margin profile over FY18-FY20 with EBITDA margin in range of 2-5%. In H1FY21, the company reported improved performance with EBITDA margin of 13.7% and net profit of | 28 crore on account of significant reduction in operating expenses. Sustainability of improved profitability performance remains a critical factor. At | 385, the stock is available at 1.9x FY20 Market cap/sales.
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