Whalesbook
Q4 Performance Drivers
Stovekraft Limited (SKL) reported a strong fourth quarter, with revenues up 32% year-on-year. This broad-based growth, excluding gas cooktops, was achieved despite ongoing gas supply limitations. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 26% year-on-year. However, Earnings Before Interest and Taxes Margin (EBITDAM) dipped slightly by 30 basis points sequentially to 9.2%, mainly due to an 80 basis points reduction in gross margins. Improved operating leverage helped offset this impact.
IKEA Partnership and Export Outlook
For FY27, Stovekraft forecasts 15% revenue growth, significantly boosted by small appliances and increased supplies to IKEA. This IKEA partnership is set to start in Q1 FY27, with management projecting annual revenue potential of ₹2-2.5 billion. Export supplies are also expected to normalize. Price increases are slated for June 2026 following earlier negotiations, after a 10% hike was already absorbed to manage rising commodity costs.
Revenue Growth and Margin Targets
Stovekraft aims to reach ₹25-30 billion in revenue within two to three years. This expansion is planned without significant new capital spending, as the current capex cycle is largely complete. For FY27, the company targets an EBITDAM of 11%, expecting operating leverage to improve margins as revenue grows. Long-term gross margins are projected to stay stable, with potential for about 1% annual growth as volumes increase.
Emkay Global Financial's Investment Thesis
Emkay Global Financial has updated its valuation to March 2028 estimates and maintained its BUY recommendation. The target price was raised about 8% to ₹700 from ₹650, based on an 11x FY28E Enterprise Value to EBITDA multiple. Emkay clarified that a recent 10% change in EPS estimates stems from an accounting policy shift for lease liabilities and does not affect its valuation.