Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bajaj Consumer Care Ltd (BOM:533229, Financial) reported a consolidated volume growth of 1.1% in Q2 FY25, indicating some resilience in demand.
- The company's retail loyalty program for top urban retailers delivered strong results, achieving a 27% growth in Q2 FY25.
- E-commerce sales registered a robust growth of 32% year-on-year, contributing to about 13% of the company's top line.
- The international business showed strong performance with a 36% year-on-year growth, particularly in Bangladesh and Africa.
- Bajaj 100% pure coconut oil continues to deliver strong double-digit growth, nearing double-digit market shares in traditional stronghold states.
Negative Points
- Consolidated sales for Q2 FY25 declined by 0.4% year-on-year, with a stand-alone sales decline of 1.4%.
- Gross margins declined due to adverse product mix and higher raw material costs, particularly copra prices.
- The General Trade business registered a mid-single-digit decline in Q2 year-on-year, with sluggish demand in urban areas.
- The EBITDA margin stood at 15.5%, reflecting pressure on profitability.
- Despite investments in new products and channels, overall revenue growth remains stagnant, with concerns about the effectiveness of these investments.
Q & A Highlights
Q: What benefits will geotagging and fencing bring to urban areas, and how does it compare with larger hair oil companies?
A: Geotagging and fencing will level the playing field with most larger FMCG companies. Geotagging ensures accurate shop locations, improving efficiency by eliminating phantom outlets. Fencing ensures orders are taken only at the shop location, enhancing accuracy and efficiency. This initiative will help in both cost savings and revenue growth by ensuring effective coverage of outlets.
Q: How is Bajaj Consumer Care managing the sharp inflation in copra prices, and what is the impact on the coconut oil business?
A: Bajaj has managed to maintain competitive pricing through strategic forward purchases and strong supply chain management. The company has passed on a 6% price increase to customers and plans further adjustments. Despite the market leader's size advantage, Bajaj has been able to maintain competitive purchase pricing and is seeing repeat purchases, indicating customer acceptance.
Q: Given the stagnant top line and reduced bottom line over the past five years, how does Bajaj Consumer Care plan to achieve growth?
A: The company has been investing in new product development, modern trade, and e-commerce, which are now contributing significantly to revenue. While ADHO remains a core product, the focus is on diversifying the portfolio and expanding internationally. The company believes these investments will yield sustainable growth as market conditions improve.
Q: How is Bajaj Consumer Care leveraging e-commerce and quick commerce to drive growth?
A: The company is focusing on improving product assortment and availability across e-commerce and quick commerce platforms. While e-commerce has shown robust growth, quick commerce is identified as a key area for improvement. Bajaj aims to significantly increase its presence and sales in this channel, which currently offers better margins than traditional e-commerce.
Q: What is the outlook for EBITDA margins, and how does the company plan to manage costs?
A: The current EBITDA margin is around 15.5%, with a target range of 16-18%. The company is investing in strategic projects that may temporarily impact margins but expects these to drive long-term growth. Cost management initiatives, including optimizing sales and distribution, are in place to support margin improvement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
