Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jyothy Labs Ltd (BOM:532926, Financial) reported an 8% revenue growth in value terms and 10.8% in volume terms for Q1 FY25.
- EBITDA margin improved to 18% from 17.1% in the same period last year.
- Net profit grew by 5.7%, despite a one-off gain in the previous year's quarter.
- The company has a debt-free balance sheet and a healthy cash position, empowering future growth.
- All segments, including Fabric Care, Dishwash, Household Insecticides, and Personal Care, reported positive growth.
Negative Points
- The gap between value and volume growth is due to increased grammages and select SKU price cuts.
- Household Insecticides segment sales increased by only 2%, impacted by extreme summer conditions in core markets.
- The dividend payout ratio has decreased from 60% to 35%, raising concerns about capital allocation.
- There is intense competition in the detergent and Fabric Care portfolio, requiring significant investment in distribution and marketing.
- The company is not planning any price increases in the near term, which may impact margins if raw material prices rise.
Q & A Highlights
Q: Can you provide insights on the margin profile and performance of the newly launched Morelight liquid detergent?
A: We launched Morelight liquid detergent at an affordable price to entice consumers. While we can't share specific margin details, the intent is to attract more consumers to the liquid detergent category.
Q: What are the plans to revive growth in the personal care segment, and how are the new Margo variants performing?
A: Double-digit growth in personal care is satisfactory. The new Margo variants are performing well on average, contributing to the segment's overall growth.
Q: How are you thinking about capital allocation given the reduction in dividend payout?
A: We are conserving cash for future opportunities. The dividend payout reduction is part of a strategic decision to maintain flexibility for potential investments.
Q: Is the growth uniform across geographies, or are certain states driving it?
A: Growth is uniform across geographies, driven by distribution expansion and increased A&P spend. Both strong and previously weaker markets are contributing to the growth.
Q: What is driving the improvement in gross margins despite price cuts?
A: Gross margin improvement is due to product mix, scale benefits, and operational efficiencies. Price cuts were primarily in Dishwash and Fabric Care segments.
Q: Can the 18% EBITDA margin achieved this quarter be sustained?
A: While we achieved 18% EBITDA margin this quarter, we aim to maintain a range of 16-17% annually. This allows us to invest in brand expansion and distribution.
Q: How is the liquid detergent market evolving, and what is the impact of the new five-liter pack launch?
A: The liquid detergent market is growing, especially in the South and modern trade channels. The new five-liter pack is aimed at making liquid detergents more accessible and affordable.
Q: What is the impact of high rains on the household insecticides (HI) segment?
A: Extreme weather conditions, including high rains, can impact the HI segment by reducing mosquito populations. However, we remain confident in our product offerings and market strategy.
Q: How do you see the EBIT margin for the personal care category evolving?
A: Personal care margins are influenced by palm oil prices and A&P spend. Despite volatility, we aim to grow the Margo franchise and maintain healthy margins.
Q: What is the contribution of new product launches to overall growth?
A: New product launches have seen repeat purchases, indicating their success. While specific numbers aren't disclosed, these launches contribute positively to overall growth.
Q: How are rural and urban markets performing, and what is the outlook?
A: Both rural and urban markets are performing well. Rural demand is picking up, and we are confident in capturing this growth through our expanded distribution network.
Q: What is the share of modern trade and e-commerce in your overall sales?
A: Modern trade and e-commerce contribute around 15% of our top line, up from 10% a few years ago. This growth is driven by specific SKUs and increased A&P spend.
Q: What is the outlook for personal care's contribution to overall revenue?
A: We aim to increase personal care's contribution from 12% to 15% through both organic and inorganic growth opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
