EMAMILTDNSEQ4 FY2022May 13, 2022

Emami Limited

8,565words

133turns

10analyst exchanges

6executives

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Management on call

Percy Panthaki

IIFL SECURITIES LIMITED

Mohan Goenka

VICE CHAIRMAN & WHOLE

Vivek Dhir

CHIEF EXECUTIVE OFFICER,

Vinod Rao

PRESIDENT SALES – EMAMI LIMITED

Gulraj Bhatia

PRESIDENT HEALTHCARE– EMAMI LIMITED

Rajesh Sharma

PRESIDENT FINANCE & INVESTOR RELATIONS

Key numbers — 40 extracted

770 Crore

e have been able to post a resilient performance during the quarter with consolidated revenues at 770 Crores growing by 5% in Q4 which translates into a two year CAGR of 20%. Our India business grew by 4%

st a resilient performance during the quarter with consolidated revenues at 770 Crores growing by 5% in Q4 which translates into a two year CAGR of 20%. Our India business grew by 4% over previous

20%

consolidated revenues at 770 Crores growing by 5% in Q4 which translates into a two year CAGR of 20%. Our India business grew by 4% over previous year that is a two-year CAGR of 22% with flat volume

ores growing by 5% in Q4 which translates into a two year CAGR of 20%. Our India business grew by 4% over previous year that is a two-year CAGR of 22% with flat volume growth over previous year. O

22%

two year CAGR of 20%. Our India business grew by 4% over previous year that is a two-year CAGR of 22% with flat volume growth over previous year. Our major brands like pain management grew by 9%, hea

of 22% with flat volume growth over previous year. Our major brands like pain management grew by 9%, healthcare range grew by 4%, male grooming range grew by 4% and 7 oils in one grew by 8% during

grew by 9%, healthcare range grew by 4%, male grooming range grew by 4% and 7 oils in one grew by 8% during the quarter. While Navaratna posted flat growth during the quarter, it grew by 13% on a tw

13%

grew by 8% during the quarter. While Navaratna posted flat growth during the quarter, it grew by 13% on a two-year and by 4% on three year CAGR basis. Kesh King however, declined by 7% over previous

, it grew by 13% on a two-year and by 4% on three year CAGR basis. Kesh King however, declined by 7% over previous year but grew by 16% on a two-year CAGR basis and Boroplus declined by 18% during t

16%

y 4% on three year CAGR basis. Kesh King however, declined by 7% over previous year but grew by 16% on a two-year CAGR basis and Boroplus declined by 18% during the quarter. In this quarter, Modern

18%

clined by 7% over previous year but grew by 16% on a two-year CAGR basis and Boroplus declined by 18% during the quarter. In this quarter, Modern trade grew by 9%; E-com continued its robust run grow

90%

g the quarter. In this quarter, Modern trade grew by 9%; E-com continued its robust run growth by 90% over previous year. In Q4 2022, the salience of e-com channel has increased to 7.1% of domestic

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Guidance — 20 items

Mohan Goenka

opening

“Despite the challenging macro environment, we have been able to post a resilient performance during the quarter with consolidated revenues at 770 Crores growing by 5% in Q4 which translates into a two year CAGR of 20%.”

Mohan Goenka

opening

“Our India business grew by 4% over previous year that is a two-year CAGR of 22% with flat volume growth over previous year.”

Mohan Goenka

opening

“While Navaratna posted flat growth during the quarter, it grew by 13% on a two-year and by 4% on three year CAGR basis.”

Mohan Goenka

opening

“Kesh King however, declined by 7% over previous year but grew by 16% on a two-year CAGR basis and Boroplus declined by 18% during the quarter.”

Mohan Goenka

opening

“Our distribution initiatives continued to progress with additional 8,000 rural towns being added in this quarter for project Khoj taking the total tally to 40,000 rural towns.”

Mohan Goenka

opening

“I am happy to share that we have posted a three year profit before tax CAGR of 20% in FY2022 which is one of the highest in the industry since the COVID period despite the ongoing challenges.”

Avinsh Roy

“My first question is on the gross margin pressure in Q1, do you see significant pressure in Q1 given we have seen wide spread inflation, in Q3 call, you had said in Q4 you do not expect significant pressure which you have delivered only 30 bips gross margins compression which is quite decent performance but in Q1 how do you see because always lag is there in terms of impact?”

Shirish Pardeshi

“Sir, I have got three questions, when I looked at your presentation, Kesh King a range declined 7% and on two-year CAGR has grown 16%, what has exactly happened in this product because last time when we had a call you said that Kesh King is now running good momentum, so maybe you can give some quality to comments?”

Mohan Goenka

“Kesh King, Shirish you are right, so we are very bullish on the Kesh King range and I think we have delivered good set of numbers, if you see on two-year CAGR, we have grown at 16% and this for the whole year, we have grown at 11%, so we were sitting on a very high base on Q4 I think our growth was almost 40% or something, so on that we have declined but I do not see any challenges as far as Kesh King range is concerned.”

Vivek Dhir

“I think we are seeing a good growth momentum from August onwards, so Russia-Ukraine situation was unexpected which led to a lower number despite that we could grow by 8% and next quarter onwards we should have double digit growth despite this situation which we are facing.”

Risks & concerns — 8 flagged

During the quarter, consumption, term remains subdued amid weak sentiment and steep inflation.

— Mohan Goenka

The geopolitical conflicts aggravated the raw material inflation scenario as crude oil prices spiked up and persistent inflation continue to hurt consumer wallets across rural and urban markets leading to a slowdown in sales.

— Mohan Goenka

If I look at profitability number this quarter, I believe we have posted decent set of numbers despite strong inflationary pressure and a high base of previous year.

— Mohan Goenka

My first question is on the gross margin pressure in Q1, do you see significant pressure in Q1 given we have seen wide spread inflation, in Q3 call, you had said in Q4 you do not expect significant pressure which you have delivered only 30 bips gross margins compression which is quite decent performance but in Q1 how do you see because always lag is there in terms of impact?

— Avinsh Roy

— Mohan Goenka

Mohan Goenka See it is very difficult Avinsh that to cut expenditure just like that because there were some new launches that we had done, on account of that we had to spend some amount of money also some amount of money goes into our Zandu Care so that is an ongoing cost which we have to entail anyways.

— Avinsh Roy

Okay, Mohan Ji just one last question, you said that 200 basis points margin decline after considering price increases, correct?

— Shirish Pardeshi

Mohan Ji, essentially is you because market share is decent and high for us so unless and until we as leaders do not try and expand the market growth could become difficult that is why the aggression obviously given what we have seen last two summers because of COVID, is that a fair?

— Prakash Kapadia

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Q&A — 10 exchanges

Thanks for the opportunity. My first question is on the gross margin pressure in Q1, do you see significant pressure in Q1 given we have seen wide spread inflation, in Q3 call, you had said in Q4 you do not expect significant pressure which you have delivered only 30 bips gross margins compression which is quite decent performance but in Q1 how do you see because always lag is there in terms of impact?

Mohan Goenka

Right, so Avinsh, you are right, so now that the material we had most of it is consumed in Q4, so we have to buy it at new prices what is prevalent in the markets now, what looks like as of now that there should be pressure of about 200 basis points in Q1. And that is without you taking price hike or that post your price hike if any you have already done? No, price hikes have all been factored in post the price hikes that would be the current of contraction. Sure and second question is on the rural demand, when do you see recovery because we are seeing NREGS job demand going down which is a go

Thanks for the opportunity. Sir, I have got three questions, when I looked at your presentation, Kesh King a range declined 7% and on two-year CAGR has grown 16%, what has exactly happened in this product because last time when we had a call you said that Kesh King is now running good momentum, so maybe you can give some quality to comments?

Mohan Goenka

Kesh King, Shirish you are right, so we are very bullish on the Kesh King range and I think we have delivered good set of numbers, if you see on two-year CAGR, we have grown at 16% and this for the whole year, we have grown at 11%, so we were sitting on a very high base on Q4 I think our growth was almost 40% or something, so on that we have declined but I do not see any challenges as far as Kesh King range is concerned. So, it is not a product issue or off take issue, it is more to do with the high base? Yes, the base was very high last year in this quarter. Okay. Similar question on Navratna

Companies have been witnessing market share gains in most of the product portfolios now given our power brand portfolio, we are slightly niche and slightly high market shares, so how is our market share trajectory happening because smaller companies face challenges in inflationary times or we are high in market share, so the difference is not too large in this kind of an environment for us, if you could give some light on that and you also mentioned about down pitting in rural market, so what could be the LUP contribution, has that seen a major change and also if you could comment on urban kin

Mohan Goenka

Prakash Ji, as far as market shares are concerned, you are right, we have increased our market share in almost all the portfolios in all the categories that we operate in, of course last two years were very, very challenging despite of that we have gained market share but now we would have to see how we can grow these markets and we have taken an aggressive stance because the markets are now in the sense opened though there is inflation, all of us know the story but still we are going aggressive as far as our advertising is concerned because after two years of null markets, we need to invest a

I have got a few questions but if it is constraining the folks in the queue please let me know then I will come back. So I will take one at a time Sir, the first Mohan Ji and Rajesh Ji, typically in the past Emami has worked with lot of consultants with the medium, long term top processes, if you could highlight few projects which are working on currently and what is your brief and where we are, so that is question number one?

Mohan Goenka

Manoj Ji right now, we do not have consultants working with us, by and large the projects that were there, we are continuing some of them but those projects are already completed, other than the distribution which is Project Khoj which is an ongoing project for the last one year that is continuing but other than that there are no external consultants on board. Understood Sir also one observation was when you have a very strong independent director which I have seen in the past actually plus I wanted to repeat my question actually, so it is only Project Khoj and there is nothing which is basica

Thank you for the opportunity. I have couple of questions. The first one is on the summer portfolio, so you mentioned April has done well so when you say that do you also include Dermicool and any integration issues or that you have faced in the initial few months given that this April and May are 90% of the portfolio?

Mohan Goenka

This excludes Dermicool whatever I am saying is on our existing portfolio and this integration has not happened because it presently they are only selling from their own network. Number should add on our balance sheet but the arrangement is that they will distribute this year; it will come to us from next year. Got it but any challenges that you are seeing in this arrangements which impacts revenues for this year or it should not be an issue? No, I do not think there would be an issue if you would have taken it then there would had been much larger issues because it was peak season and those c

You mentioned that price increases that you have taken about 4.5%, I just wanted to understand if I look at the listed FMCG players and we are hearing the conference call etc., looking at the numbers, so this is one of the lowest price increases across FMCG player at 4.5%, so do you think there is levy to take more price increases especially in light of the fact that there is a cost push inflation and there is a pressure on your margin and if you do take it, you would not be out of bounce compared to the industry average?

Mohan Goenka

Percy, it all depends on the category that you operate in, I think we have been aggressive, you also have to recognize that our 23%-24% portfolio comes from LUPs where we do not take any price increase, so on an overall basis on the packs that we have taken price increase goes in the range of about 7% to 8%, so this is the max honestly, at this point of time we can pass on. Sir, on LUP you do not do a grammage rationalization? We have already done that in the past Percy, there is not much scope honestly on grammage reduction. Okay, so given that input costs are sort of have picked up in the la

Good evening Sir, thanks for giving this opportunity, my question is on new launches FY2022 we have seen that it was familiar expect for some of the launches in the Health Care category on Unit listing product, so FY2021 how do we look up from one of the new launches and which of the categories you would be targeting if there are any launches which you are planning?

Mohan Goenka

Kaustubh, last year yes there were couple of new launches that we did almost contribution from new launches were in the range of about 3% so which included some of the Health Care portfolios also, Gulraj is also here who looks after our Health Care portfolio, he is the CEO of the Health Care Business, so Gulraj if you can throw some light what we are doing on Zandu Care and what growths you see in the mid-term and long-term? From a Health Care perspective, as you have rightly said there have been few launches which we have done and many of those have done well such as the Health Juice range of

Rajesh Ji I have a question for you, we have realized this MAT credit of 288 Crores, now this is what we have accumulated over last past five years?

Rajesh Sharma

230 Crores out of 288 Crores is of earlier years almost 55 Crores is for current year. And we have to realize complete? Yes, we have accounted for this MAT credit this year considering that our tax benefits in some of the units is for next four years now and it looks like that we would be able to utilize the MAT Credit going ahead and hence looking at the current situation, we have accounted for that. If I understand correctly, the past till date we have recognized and this year we will further accumulate the MAT credit? Right from FY2023 onwards, right. And earlier you did mention about Kesh

Thank you for the opportunity, just one question on the inventory days, so this year as well we can see that the inventory days have kind of increased and it has been the case for the last four years to five years, so if we can get some comments on the reason for that?

Rajesh Sharma

Vishal, it is primarily on account of summer inventory stock and also the inventory for Dermicool which we acquired at the end of March. Okay and for the last five years, is there anything specific that we can highlight in terms of the increase in inventory days? No it has nothing to do with any specific reason otherwise, it is only because of the increasing business of some of these brands and also couple of brands we have acquired like Crème 21 also over the period and some of the new launches have also come into our fold, Healthcare is there, so lot of new launches, the increased inventory

We thank all the participants for joining us for our earnings call for Q4 and thank you IIFL, thank you Percy for earning call for us. Thank you.

Management

Speaking time

Mohan Goenka

Shirish Pardeshi

Rajesh Sharma

Moderator

Manoj Menon

Prakash Kapadia

Percy Panthaki

Kunal Shah

Kaustubh Pawaskar

Avinsh Roy

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Opening remarks

Percy Panthaki

Good evening, everyone and welcome to the Emami’s Q4 conference call. I have with us from the management, Mr. Mohan Goenka – Vice Chairman and Whole Time Director; Mr. Rajesh Sharma – President Finance and IR; Mr. Vivek Dhir – CEO, International Business; Mr. Vinod Rao – President, Sales and Mr. Gulraj Bhatia, President, Healthcare. Without further ado, I would like to handover to Mr. Goenka for his initial remarks. Over to you Sir!

Mohan Goenka

Thank you Percy and a very good evening, friends. I welcome you all to this conference call on Emami results for Q4 and year ended March 31, 2022. During the quarter, consumption, term remains subdued amid weak sentiment and steep inflation. The geopolitical conflicts aggravated the raw material inflation scenario as crude oil prices spiked up and persistent inflation continue to hurt consumer wallets across rural and urban markets leading to a slowdown in sales. Despite the challenging macro environment, we have been able to post a resilient performance during the quarter with consolidated revenues at 770 Crores growing by 5% in Q4 which translates into a two year CAGR of 20%. Our India business grew by 4% over previous year that is a two-year CAGR of 22% with flat volume growth over previous year. Our major brands like pain management grew by 9%, healthcare range grew by 4%, male grooming range grew by 4% and 7 oils in one grew by 8% during the quarter. While Navaratna posted flat gr

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