#Linc plans to increase its existing capacity from 10 lacs pen per day to 15 lacs pen in FY’25

 1 Video: https://youtu.be/FoBEG7qapgk?si=wWypQ7vdbQjzwWpQ

2 Video: https://youtu.be/wH3kmw8tBW0?si=qtlX1Z5q7fsxDNoE

Linc: Boring Earnings Transcript but helps me very well in understanding businesses

• Advertising to sales is about 3% 
• Slightly better gross margins than the domestic market. So, let's say if on some product it is making 40% margin in the domestic, on the export front it would be additional 4%-5%. So, yes, so that is a kind of trend
• Some challenge that Linc face in the traditional channel across the country that the retailer has so many products. Of course, it is the job of people in the field to ensure that the dispenser is displayed properly  
  
• 3% of revenues coming from e-commerce  
  
• India is a very unstructured market, so our sales team they have to keep a good relationship with all the retailers and at the same time we have to keep our brand visible in various media  
• Purpose of the acquisition of Gelx India-Kenya:  In Africa, there are some countries which are large markets actually but there is a tariff barrier to import from India in those countries .  So, if we have a unit in Africa, in the East Africa, we will be able to export to those markets and without any duty. So, we will be able to expand our footprint in Africa by having this unit in Kenya. So, that was the purpose
• A brand in South Korea, which is called Morris, and Linc is tying up with them to produce co-branded pens in India, which means, Morris and Linc, co-branded to produce in India for local market as well as for export market. And these products are writing instrument products only, but these products are patented by Morris (advanced technology and Linc would be the ideal partner )
• Expect to achieve an annual operating EBITDA margin of about 15% by FY25. With modular expansion plan and judicious use of debt, also expect ROI to be above 21%
• Spent over ₹ 41 Cr on brands over last 5 years • Step up brand spend going forward ~ 3% of revenue     
• India’s exclusive importer and distributor of Asia’s largest stationery giant; Deli and worldfamous pen brand Uniball; Mitsubishi Pencil Co., Japan   
• Rapidly expanding distribution network Added over 1.7 lac touch points over the last 4 years
• Q1 2024
• Total Income: • Total income of ₹11,322 Lacs for Q1 FY 24, registering a growth of 14.1% YoY
• PAT: • ₹739 Lacs against Q1 FY 23 PAT of ₹438 Lacs, up 68.6%. 
• PAT Margin was at 6.5% 
• Net Debt stood at (₹1560) lacs as against (₹760) lacs in FY 23
• EBITDA Margin 13.0% Vs 9.5%  
• ROE stood at 16.3%
• FY 2023
• Strong Balance Sheet with zero debt and free cash in hand; strong top & bottom line growth
• Operating Income:  486 Vs  354
• Sharp increase in Free Cash Flow in FY23
• Net Debt / Operating EBITDA reduced significantly from peak of 2.44 in FY 19 to (0.12) in FY23
• ROE :  23.37% Vs  5.86% 
• Net Debt/Equity :  (0.04) Vs  0.02
• Linc exports at ₹ 101cr is over 20% of it's revenue     
• Operating EBITDA Margin:  12.6% Vs  6.1%  
• Volume of Pens Sold:  76 Cr Vs 61 Cr ( + 24.4% )
• PAT :  37 Vs 8    
• Future Plans
• On the back of strong demand for the company's product, better product mix and improve margins the company's confident to achieve a top line of rupees 750 crore by FY25, with a CAGR of around 25%. - During this period, the share of Pentonic revenue is expected to grow to 40%. 
• "The company has embarked upon a modular expansion plan in Gujarat next to its existing facility. While the basic infrastructure has been created to double its capacity to 20 lakh pens per day, equipment machinery will be added in modular fashion in sync with the demand needs." 
• "The total cost of the project is expected to be around 50 crore. Infrastructure for the work will be completed in FY24 at a cost of rupees 17 crore through internal accrual. - The first phase of the equipment to increase the capacity to 50 lakhs pens per day will be completed in FY25 at the cost of 18 crores which was originally envisaged for FY 24." 
• "The second phase will be taken up subsequently at an estimated cost of rupees 15 crores. Demand growth for FY25 will be met through existing capacity and stepped up outsourcing, which has already been tied." 
• Capex commitment funded largely through internal cash generation
• Linc plans to increase its existing capacity at Gujarat from 10 lacs pen per day to 15 lacs pen per day in FY’25 & to 20 lacs pen per day subsequently
• Revenue potential of the new facility at full capacity will be ~ ₹150 cr (  Total Project cost ~ ₹50cr)
• Capacity expansion being phased to align with demand and company’s capital allocation strategy   
• Pentonic pen 
• "Highest margin is in the Pentonic brand because it is own manufactured brand and then the second highest margin is in Uni-Ball and legacy products and then the third highest would be in the Deli brand which is kind of import of finished products"
• "Pentonic being one of the top of the mind brand and stationery retailer cannot do without a Pentonic in a shop. So, most retailers would like to stock the products or the brands which are popular and demanded by the consumers"
• Pentonic pen volume increased by over 53% ;  Positioned at ₹ 10 + segment, Pentonic’s GPM is ~ 42%
• Launched Pentonic G-RT, the Rs 40 gel pen, and  it has received excellent initial response and hence Co. now plans to do a full-fledged launch in the coming months
• Was able to increase the share of Pentonic in total revenue to over 36% as against ~ 30% in FY23 through special drive that it undertook during the Quarter