BAJAJCONNSEQ4 FY2022May 13, 2022

Bajaj Consumer Care Limited

10,510words
100turns
10analyst exchanges
3executives
Management on call
Karan Bhuwania
ICICI SECURITIES
Jaideep Nandi
MANAGING DIRECTOR - BAJAJ CONSUMER CARE LIMITED
Dilip Kumar Maloo
CHIEF FINANCIAL
Key numbers — 40 extracted
6.5%
mains subdued. The hair oil industry was not spared with the overall hair oil market declining by 6.5% against the same period last year. The Hindi speaking markets where we have a larger presence con
Rs.216.1 Crore
d relatively better also experienced a slowdown in Q4. The Company reported a sales turnover of Rs.216.1 Crores for the quarter, which was lower by 10.7% on a high base of 43% growth last year. The CAGR for t
10.7%
Q4. The Company reported a sales turnover of Rs.216.1 Crores for the quarter, which was lower by 10.7% on a high base of 43% growth last year. The CAGR for two years for the quarter was positive 13.2%
43%
a sales turnover of Rs.216.1 Crores for the quarter, which was lower by 10.7% on a high base of 43% growth last year. The CAGR for two years for the quarter was positive 13.2%. The volume decline f
13.2%
10.7% on a high base of 43% growth last year. The CAGR for two years for the quarter was positive 13.2%. The volume decline for the quarter was 9.8%. On a sequential quarter basis the sales were lower
9.8%
The CAGR for two years for the quarter was positive 13.2%. The volume decline for the quarter was 9.8%. On a sequential quarter basis the sales were lower by 4% over Q3 of FY2022. For the full year FY
4%
volume decline for the quarter was 9.8%. On a sequential quarter basis the sales were lower by 4% over Q3 of FY2022. For the full year FY2022 the sales was at Rs.865.5 Crores, a decline of 3.6% w
Rs.865.5 Crore
ter basis the sales were lower by 4% over Q3 of FY2022. For the full year FY2022 the sales was at Rs.865.5 Crores, a decline of 3.6% while the volume decline was a little over 1%. The hair oil sales value was
3.6%
by 4% over Q3 of FY2022. For the full year FY2022 the sales was at Rs.865.5 Crores, a decline of 3.6% while the volume decline was a little over 1%. The hair oil sales value was lower by 0.8% on a fu
1%
22 the sales was at Rs.865.5 Crores, a decline of 3.6% while the volume decline was a little over 1%. The hair oil sales value was lower by 0.8% on a full year basis while we had a volume growth of
0.8%
line of 3.6% while the volume decline was a little over 1%. The hair oil sales value was lower by 0.8% on a full year basis while we had a volume growth of 1.3% in overall hair oil for the full year.
1.3%
. The hair oil sales value was lower by 0.8% on a full year basis while we had a volume growth of 1.3% in overall hair oil for the full year. With the high dependency on LLP and RMO both of which ar
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Guidance — 20 items
Jaideep Nandi
opening
“The CAGR for two years for the quarter was positive 13.2%.”
Percy Panthaki
qa
“Going ahead what percentage of your ad spends will be in non ADHO in your view let us say for FY2023 as a whole?”
Jaideep Nandi
qa
“No, we have stated that we will be increasing our ad spends anyway by 2% to 2.5% at least 200 to 250 basis points in this year at least.”
Percy Panthaki
qa
“Sorry to elaborate this point but last sub question on this, as far as ADHO is concerned why do we spend so much when basically the entire hair oil industry has no demand right now even if I look at let us say a Marico or a Dabur for the quarter on a three-year CAGR basis the sort of sales is flat so it is clearly an industry issue where the consumer is just not prioritizing this category so at this point of time what is the need to advertise ADHO so aggressively?”
Jaideep Nandi
qa
“We have some specific numbers that we would want to target as far as ADHO is concerned we would like to remain there.”
Percy Panthaki
qa
“Understood but in the short term any sort of idea how bad it can get like we are at 17 can it go only to 15 or it can go closer to 10 also and secondly in the slightly longer run let us say towards the end of FY2023 what kind of margin do you target at that point of time?”
Jaideep Nandi
qa
“In future maybe in the next quarter or so we will see how the demand conditions remain.”
Jaideep Nandi
qa
“As of now we have about close to 3 lakh retail outlets and a little less than that and that is what we are trying to ramp up further going forward as well as to retail activation and loyalty programs which pushes that retail part of it as far as distribution is concerned.”
Shirish Pardeshi
qa
“The sub question on this that we are also trying to end up with the premium end and we have launched even almond drop at the premium range do you think the premiumization strategy because I am just relating to the numbers what you mentioned, the category decline is much sharper in the urban market so how one should look at in the medium term whether these all efforts will yield the fruits faster or you will take the spread may be another four to five quarters?”
Jaideep Nandi
qa
“See it is a question of what you want to target strategically as an organization.”
Risks & concerns — 13 flagged
The Hindi speaking markets where we have a larger presence continued to decline faster while the markets of Maharashtra, West Bengal and south which fared relatively better also experienced a slowdown in Q4.
— Jaideep Nandi
The volume decline for the quarter was 9.8%.
— Jaideep Nandi
For the full year FY2022 the sales was at Rs.865.5 Crores, a decline of 3.6% while the volume decline was a little over 1%.
— Jaideep Nandi
LLP and packing materials have been volatile and inflationary due to surge in crude prices on account of Ukrainian crisis.
— Jaideep Nandi
As we have been witnessing for the past few quarter’s consumer downtrading continued for the quarter especially in premium hair oils, there has been a decline in hair oils across categories including coconut and amla in Q4 2022 while the premium categories have witnessed a sharper decline.
— Jaideep Nandi
With slowdown in rural markets as witnessed in Q4 as well as the key wholesale markets in the north, east, and central parts of the country continue to see reduced business volume.
— Jaideep Nandi
Our Company had a double digit decline in wholesale; a single digit decline in rural while retail continued to grow in the quarter as well.
— Jaideep Nandi
Next question is on margins given that we probably have not seen the full impact of the cost inflation post the Ukraine war, etc., and also given the fact that you want to increase ad spends by 200 to 250 basis points at what level do you see the EBITDA margins bottoming out for you?
— Percy Panthaki
I would not like to get into quarter-by-quarter because it is pretty volatile at this stage so it is very difficult to comment as to quarter-by-quarter how the EBITDA margins will pan bajaj c□NsUMER CARE out.
— Jaideep Nandi
The sub question on this that we are also trying to end up with the premium end and we have launched even almond drop at the premium range do you think the premiumization strategy because I am just relating to the numbers what you mentioned, the category decline is much sharper in the urban market so how one should look at in the medium term whether these all efforts will yield the fruits faster or you will take the spread may be another four to five quarters?
— Shirish Pardeshi
So overall the decline was about 6.5% in the premium hair oils category.
— Jaideep Nandi
On the other side of it as well we do not see the category just vanishing off in a very quick space either so there might be a little bit of a decline that has happened but when the overall economy and sentiments go up we have seen the hair oil market has also been pretty resilient and it does come back.
— Jaideep Nandi
I do not think the impact of it is major but clearly this is something that we need to address and we are looking into it as to how to minimize the impact of the negativity of this thing or maybe put it on a positive twist itself so this is something that we are working on, an area clearly identified by Bajaj.
— Jaideep Nandi
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Q&A — 10 exchanges
Q
Just wanted to know out of the total ad spend this quarter of about Rs.40 Crores how much of this is on the new launches, how much of it is let us say excluding ADHO?
Jaideep Nandi
At this stage it is roughly about just about little less than 10% on non-ADHO, but that should be picking up. Last quarter we wanted to go little stronger on ADHO itself because in Q3 our ad spends were much lower so last quarter was mainly on ADHO. Going ahead what percentage of your ad spends will be in non ADHO in your view let us say for FY2023 as a whole? So we are looking at about 25% spend as far as non-ADHO portfolio is concerned. Of this 25% universe how much of it do you think would be digital? I think it might go up to 30% based on what traction we see as far as so just to give you
Q
Good morning. Thanks for the opportunity. I have got three questions. The first question is in continuation with the previous participant you said you have taken about 7% price increase so if you can quantify what is the current weighted inflation we have and against that 7% so basically I am trying to arrive what is the gap?
Jaideep Nandi
Are you talking of the material cost impact that is there and the breakup of the material cost impact is that what you are asking? No, I am saying with the material basket RM/PM put together? So breakup of the material cost basket, so roughly if you ask me there has been a 6% gap that you see between let us say FY last year versus FY this year from the material cost going up from 36.7% to 42.7% so that 6% comes from roughly about LLP comes to about 3%, packing material is about 1%, RMO is about 1.5% and the mix is about 0.5% so this is very roughly the breakup. So if that is the status do you
Q
Good morning everyone and thanks a lot for the opportunity. So firstly wanted to understand this premium hair oil category for industry how was the performance for Q4?
Jaideep Nandi
So overall the decline was about 6.5% in the premium hair oils category. Secondly so for the last two to three years we have been seeing that wholesale segment for us has been declining at more than double digit so when are we seeing that being arrested for us or are we having a higher proportion of wholesale terms as compared to industry so even if the industry turns favorably so are we in a better position to improve our volumes in terms of wholesale? To answer your question our component being higher yes traditionally we have had a higher component as far as wholesale is concerned roughly a
Q
Good morning Sir. Thanks for giving me the opportunity. Sir my question is we have around 10% market share in overall India so now since our portfolio has increased and now you are covering around 83% of the overall hair oil industry where do you see your market share going up to, do you have any specific targets, I do not want from the next two years perspective but over the next four to five years where do you see your market share improving?
Jaideep Nandi
So that is a good question in fact that is the purpose where we wanted to be now that at least we are playing in all the hair oil categories or the entire categories. We will have to also tone down and tone up our expectation based on various other parameters as well in terms of what kind of spends we would like to do, what kind of EBITDA margins we are making, etc., so as we scale up our brands that we are wanting to invest in we might do a little bit of jugglery in terms of the distributed brands, the brands that we are pushing through distribution so ideally our objective would be to scale
Q
Thanks for taking my call. So the first question is Natyv the new launch that you will have it comes spell checks on Amazon and it provides wrong results either Nitiv or Native so since this is a B2B brand direct to consumer is management kind of aware of addressing this actively and my second is on the PAT side so would it be safe in assuming that the company’s new launches and the related investments are kind of having impact on PAT and would put the pressure because of the new launches that have come on PAT continue for the next one to two years and if so is it safe to assume that 140 to 14
Jaideep Nandi
It is four questions as I see it and I will answer the first question first so Natyv Soul is how we wanted distinctly the brand to be Natyv and we are well aware that in a search Nativ, etc., will come in and that is where two things are happening one is we are actually buying the Natyv and pushing the search to Natyv as you would see when the search happens and bajaj c□NsUMER CARE the other thing is as we build up the brand Natyv, Natyv itself will become popular which we are also seeing as a part of attraction, so this is how Natyv is also. This was something that was thought through and thi
Q
Hi Jaideep thanks for the opportunity. I have two questions one question when I look at last two-and-a-half to three years I think there was clear cut people were downtrading to Amla and low-cost value add segment. Now the assessment says that even Amla is also declining and coconut has just managed to flat, just wanted to understand in your lens and your assessment what exactly are the problems the hair oil industry is facing, is it that the status of hair oil is still discretionary and people are not spending on it because when I see last five quarters now I think fairly people have started
Jaideep Nandi
If you look at Amla and coconut it is basically also because of the quarter impact that was there. Last year quarter was a very high quarter for most of these products so Amla and coconut is more of a temporary phase I do not think there is too much of a thing to be read into the growth of Amla and coconut for the quarter. It is also a bit of a base correction, so I bajaj c□NsUMER CARE do not think that is something that is going to change over a long period. Now hair oil as a category we are aware is not one of the highest growing categories or will not be high growing category. On the other
Q
Sir my question relates to more of you introduced lot of products last year and the current year you want to take them aggressively so what I was thinking like whether you have introduced not too many products in this year means whether you will be able to service all these products in the coming year or some of these products may remain unfocussed over a period of time?
Jaideep Nandi
Absolutely right question so the way it will work is and that is why if you look at little closely at the portfolio that we are launching. Let us look at the hair oils itself, hair oils we are now looking at about five products, there is almond drops hair oil which obviously will be continuously supported and we are looking at renewed focus on almond drops itself. There is Bajaj Coco Onion which the advertisements have started which is again brand led investments where we continue to invest in the brand itself that I said is a high gross margin product we will continue to invest on it and ther
Q
Hi thanks for allowing me to ask question. My first question is basically with respect to LLP is there any thought process that marketing team has thought about to handle the negative feedback that it gets in the digital media spectrum?
Jaideep Nandi
I think as far as the negative feedback is concerned as we are aware one of the most popular baby oils is actually 100% LLP as all of us aware, so we are looking at how we want to also market that. LLP as such does not have a negative connotation in terms of at least the product being as far as applicable to the beneficial value of the product as far as hair is concerned, in fact it has a very, very positive impact both on hair and skin and that is how that most popular brand as far as baby oils which is 100% pure LLP works. Now obviously there is a marketing side to it, we are looking to how
Q
Sir just one question on the reach so what is our current retail reach?
Jaideep Nandi
So our urban retail reach is about 2.6 lakh retail outlets across the country. This is the urban retail reach as we define which is basically what the distributors sell to our urban retailers. If you look at the overall reach we have about 8.5 lakh which is supplied through both the distributors, through the sub stockist and through the VAN sub stockist as well that is about 8.5. How much it has gone up in the last two years like whether you have done any significant addition or it is like you are focusing on improving your scale in whatever reach you have? So if you look at again it has been
Q
Thank you. While you understand that the last quarter was a pretty tough quarter as far as business is concerned. We have taken this correction in January so the numbers for the quarter was a little lower than what it would have normally been, but this one time correction has clearly seen positive results for us so we are hoping that this quarter which has started well would end well also for us and as rightly called out we will continue to invest as far as our brands are concerned and hence as a result for the next two quarters we feel that the EBITDA will remain muted, but if we are able to
Management
Speaking time
Jaideep Nandi
40
Moderator
12
Shirish Pardeshi
11
Percy Panthaki
8
Kaustubh Pawaskar
8
Anup Ramachandra
7
Deepan Shankar
5
Question
3
Sunil Jain
3
Vidhi Shah
2
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Opening remarks
Karan Bhuwania
Good morning everyone. It is our pleasure at ICICI Securities to host Q4 FY2022 results conference call for Bajaj Consumer Care Limited. The management is represented by Mr. Jaideep Nandi, Managing Director, Mr. Dilip Kumar Maloo, Chief Financial Officer and Mr. Richard D’Souza, General Manager, Finance. I now hand over the call to Mr. Jaideep Nandi for his opening remarks post which we can have the Q&A session. Thank you.
Jaideep Nandi
Thank you Karan for hosting this call and good morning from India. Along with me, Mr. Maloo and Richard, we have some of our senior colleagues from the management committee with me. Let me take you through the performance of the company for Q4 and FY2022 before we open the house for questions. The unprecedented inflation in the economy due to steep rise in material prices continued to impact disposable income as well as consumer spending adversely. While we are slowly seeing some recovery in demand, the last quarter of FY2022 remains subdued. The hair oil industry was not spared with the overall hair oil market declining by 6.5% against the same period last year. The Hindi speaking markets where we have a larger presence continued to decline faster while the markets of Maharashtra, West Bengal and south which fared relatively better also experienced a slowdown in Q4. The Company reported a sales turnover of Rs.216.1 Crores for the quarter, which was lower by 10.7% on a high base of 43%
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