Event Participants
Executives
3 K. S. Venkatachalapathy, S. K. Sharath Ram, SKM Shree Shivkumar
Analysts
7 Gopal, Hiten Boricha, Mehrwan Kotwal, Pramukh Chhabra, Rajesh, Sam, Saurabh Dole
Financials & KPIs
Note: Management did not present a financial statement; figures below are drawn from Q&A only.
| Metric | Reported | Commentary |
|---|---|---|
| Realization (egg powder) | ~₹770/tonne | Up from ₹722/tonne in Q4 FY26, driven primarily by rupee depreciation rather than market pricing |
| Capacity utilization | ~100% | Running at full capacity; no headroom for incremental export volumes in FY27 |
| Russia export volumes | ~150 tonnes/month | Stable; war-related disruption resolved; adding a second distributor in H2 FY27 |
| Branded egg turnover (SKM Universal) | ₹40-50 crores (FY27E) | Acquisition complete; revenues contributing this year, margin scaling from FY28 |
| Easy sheds (enriched colony) | 4 of 20 lakh-bird target completed | Remaining sheds complete by Nov-Dec 2028; minimum 5% production cost reduction |
Geographic & Segment Commentary
International egg powder market: Global pricing is set by major suppliers — the EU (dominant in egg white), the US, South America, Ukraine, and China (dominant in egg yolk/whole egg). International prices are stable with modest improvement in egg white expected in 2-3 quarters, though processor inventory remains an overhang. India is a price-taker, and short-term supply disruptions in Europe (e.g., summer heat) do not create strategic opportunities — only sustained 6-8 month supply shocks (e.g., bird flu) would.
Japan: The planned branch office approval has been delayed by 1-2 months due to a technical resubmission; direct contracts with customers are secured through September, with the branch operational in H2 FY27. One new (previously reluctant, opportunistic) customer has been onboarded.
Russia: Exports running at ~150 tonnes/month; logistics issues from the Iran war required air-shipping six containers back from Dubai (returned last month) — the product is within shelf life and will be deployed in July-August sales. Direct sales continue via one distributor; a second distributor is being inducted, with management visiting Russia in October-November to finalise.
Domestic branded eggs (SKMEGG): SKM Universal (formerly BrandEgg) acquisition is complete, contributing ₹40-50 crores annualised turnover. Margins are structurally lower than egg powder, but the segment offers superior scalability; strategy team is evaluating five major competitors and plans to roll out in five Indian locations with a full business plan by end-March FY27.
Company-Specific & Strategic Commentary
Backward integration & easy sheds: ₹400-crore capex programme for enhanced in-house egg production; easy sheds deliver minimum 5% production cost reduction (better productivity, consistent output, improved feed efficiency). The biogas plant is fully integrated — poultry litter is fermented, gas consumed in boilers, and solid/liquid by-products are being test-marketed as organic fertiliser with commercial launch in September. Management does not evaluate this on standalone ROCE; it is a necessary sustainability investment for scalable egg production.
Capacity expansion: A new egg powder capacity expansion plan will be tabled for board approval by October 2026, with ~1 year implementation timeline — production coming only from FY28-29. This is the key driver for restoring volume growth beyond current full-capacity operations.
Profitability outlook: Bottom line is now driven by feed costs (soya up substantially) and international market prices, not shell egg prices, given higher in-house poultry production. Rupee depreciation is partially offsetting raw material inflation, and management expects to "live with" elevated feed costs for another 3-6 months.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Realization | >₹700/tonne; range ~₹720-750 | Product-mix dependent; international prices stable, minor egg white improvement in 2-3 quarters; rupee depreciation supportive |
| Feed costs | Elevated for 3-6 months | Soya price increase is the main margin pressure; cannot be passed on in B2B export contracts |
| Egg powder capacity | Board approval by Oct 2026; ~1 year implementation | Expansion is green-lined by management; production from FY28-29 |
| Branded egg business plan | Ready by end-March FY27 | Five-location rollout, SKMEGG brand; ₹40-50 crore turnover expected this fiscal; margin scaling from FY28 |
| Easy sheds | Fully complete by Nov-Dec 2028 | 4 of 20-lakh-bird capacity done; minimum 5% production cost advantage |
| Strategic goals | 2030 and 2035 targets | Growth path defined; domestic-export revenue balance targeted over ~10 years |
Risks & Constraints
| Risk | Context |
|---|---|
| Feed cost inflation | Substantial soya price increase is suppressing margins; no contractual pass-through mechanism in B2B export pricing (driven by competition), and the pressure is expected to persist 3-6 months |
| Capacity constraint | Running at 100% utilization; no volume growth possible until new powder capacity comes online (FY28-29), leaving near-term growth purely price/exchange-rate dependent |
| International price overhang | Processor inventories remain high globally; management sees "no very big change" in average realizations, capping earnings upside |
| Logistics disruptions | Iran-war-related route issues forced 6-7 containers to be air-freighted back from Dubai, reducing Q1 export volume; product is being reused within July-August |
Q&A Highlights
Egg Powder Price Determination
- Question: How are international egg powder prices determined — is the US dictating them? (Pramukh Chhabra)
- Answer: The EU, US, India, South America, Ukraine, and China are the major supply-side influencers. EU suppliers are price-setters for egg white; US, South American, and Chinese players for egg yolk and whole egg. South American players do not set prices. (SKM Shree Shivkumar)
Easy Shed Biogas Economics
- Question: How to evaluate the easy shed biogas investment from a ROCE and cost-savings perspective? (Pramukh Chhabra)
- Answer: This is not evaluated as a standalone project — it is a necessary sustainability investment to handle poultry litter at scale. Biogas feeds the boiler, and solid/liquid by-products are marketed as organic fertiliser (commercial launch from September, currently test marketing). Management confirmed minimum 5% production cost reduction from easy sheds overall (productivity, consistency, feed efficiency), with zero standalone ROCE assessment. (SKM Shree Shivkumar; Company Representative)
Branded Egg Business Rationale & Margins
- Question: Why enter branded eggs when margins are lower than egg powder? What is the current contribution and EBITDA? (Saurabh Dole)
- Answer: Egg powder's growth potential is limited; the domestic branded egg market offers far larger scale. The long-term strategic direction is to balance export and domestic revenue (SKMEGG brand) over roughly a decade. EBITDA margin for branded eggs is materially lower than egg products — no specific number given — but the company is pursuing consistent, sustainable gains rather than high-margin, limited-volume opportunities. (SKM Shree Shivkumar)
Feed Cost Pass-Through
- Question: Do contracts contain a feed-cost pass-through clause? How quickly can margins recover? (Saurabh Dole)
- Answer: No. This is B2B, cost-driven pricing; increases cannot be transferred to customers. International prices are determined by competition and market forces, not by the seller's costs. (SKM Shree Shivkumar)
Realization & Volume in Q1
- Question: Was the ~₹770/tonne realization (vs ₹722 last quarter) driven by holding back stock for better prices? Will this sustain? (Gopal)
- Answer: No stock was withheld — the dip was due to six containers returning from Dubai after Iran-war route disruptions, reducing export utilization. Volume will be recovered in July-August within shelf life. Realization is a blend of multiple products and markets; it will stay above ₹700, fluctuating between ~₹720-750 depending on product mix, not a strict up or down trend. (SKM Shree Shivkumar)
European Summer Impact as Opportunity
- Question: Will Europe's severe summer hit free-range poultry and create export opportunities? (Gopal)
- Answer: Short-term fluctuations in European supply do not confer strategic advantage. Only sustained 6-8 month supply disruptions (e.g., bird flu) create meaningful, consistent opportunities. Seasonal summer consumption dips are temporary and country-specific. (SKM Shree Shivkumar)
Japan Office & Russia Growth
- Question: Is the Japan office ready, and are Russian exports sustained despite the war? (Sam)
- Answer: Japan office approval has been postponed by 1-2 months due to a technical resubmission, but direct contracts are established through September and the branch will be in place for Q3-Q4. Russia is running at ~150 tonnes/month; the war is no longer impacting deliveries — six containers had to be air-freighted back from Dubai last month and will be reused in July-August. A second Russian distributor is being inducted, with a management visit planned for October-November. (SKM Shree Shivkumar)
Capacity Expansion Timeline
- Question: With full utilization, how should we think about growth over the next 3-4 quarters and beyond? (Rajesh)
- Answer: No volume increase possible in FY27; rest of year growth is price and exchange-rate dependent. A new powder capacity plan will be presented for board approval around October (FY27), with ~1 year implementation. Bottom line will be influenced by international prices (stable) and feed costs (elevated 3-6 months). (SKM Shree Shivkumar)
Capex Allocation & Brand Investment
- Question: What is the budget for the branded egg business, and is the ₹400 crore earmarked for capacity? (Hiten Boricha)
- Answer: The ₹400 crore is for enhancing in-house egg production capacity (easy sheds), not branding. The branded business investment plan will be finalised by end-March FY27, over and above the ₹400 crore. (SKM Shree Shivkumar)
SKM Universal Integration
- Question: Is the SKM Universal acquisition complete, and what will it contribute? (Sam)
- Answer: Transaction is complete; expected to add ₹40-50 crore in turnover this fiscal year, with material margin growth from FY28 once the March business plan is rolled out. (SKM Shree Shivkumar)
Key Takeaway
SKM Egg Products reported a quarter with realization rising to ₹770/tonne from ₹722 sequentially, driven primarily by rupee depreciation, while running at 100% capacity with no volume headroom. Management is executing a two-pronged growth strategy: expanding egg powder capacity (board approval by October, ~1 year implementation) and building a domestic branded egg business (SKMEGG) via the completed SKM Universal acquisition, targeting ₹40-50 crore turnover this year, five-location rollout, and a full business plan by end-March FY27. The ₹400 crore backward-integration capex — easy sheds (minimum 5% production cost savings) and biogas/fertiliser operations — is on track for completion by Nov-Dec 2028. Near-term profitability faces headwinds from elevated soya feed costs (3-6 months) with no B2B pass-through, offset partially by rupee depreciation; Russia (150 tonnes/month) and Japan (branch approval imminent) provide H2 volume support as the company works toward its 2030/2035 strategic goals balancing export and domestic revenue.