Key takeaways of the call

Overall Economic conditions remained sluggish. Government initiatives yet to have an impact on consumer demand. lnspite of festive season Rural Demand situation continued to be under stress. E-commerce channel witnessed a strong growth. Similarly large formats also showed a good trend. Corporate gifting was subdued due to the slowdown.

Proliferation of brands has increased especially at the bottom end. Export markets continue to be sluggish.

Besides Rural Stress, other geographical segments witnessed mixed signals -some growing, some tepid & some depressed. Slowdown in Rural Demand impacted the key thrust area of the company.Rebuilding of rural channels of the company is underway.

Broad basing the Large Format channel continues. This has started paying dividends. For next year the new accounts in large format will start contributing. Now the company has presence in all formats in significant way. Progressive recovery in rural channel and modern format stores on account of broad-basing exercise.

Corporate gifting was at its lowest in this festive season adversely impacting cookware and induction cooktop sales. Usually corporate gifting demand is a big chunk of business during festival season.  

Cookware grew in H1FY20 but Q320 was subdued and that is largely due to subdued corporate gifting. Moreover the cookware is also witnessing churn with stainless steel is preferred over non-stick. In case of non-stick the replacement has to be done once in three years but it is not the case with stainless steel with good usage. Currently the product offering of the company is predominantly non-stick and with shift in consumer preference the company also want to have more products in stainless steel.

Introduced 36 new SKUs during the quarter. The entirely new range of Svachh Pressure Cookers has received wide acceptance. Started recovering ground as compared to first-half.

Launch of the new Svachh cookers met with a good response. However, the transition to the new product line has meant some destocking of the old by the trade.

In cooker the value growth was impacted by sales mix and price points. This is largely due to churn of some high value models as the company has initially launched only Aluminium models under Svaach platform. This will get corrected going forward with launch of stainless steel model under Svaach platform.

To ensure clearing of inventory of earlier models of cookers, primary sale of new models kept under control. The trade will start restocking of newer models by end of current month as they usually carry two month of stocks and one month having passed they will liquidate the balance older models and start restocking newer models.

Upper level single digit growth in sales is expected for Q4FY20 as the trade will start restocking in a big way.

Standalone sales was down by 1.08% to Rs 546.07 crore (from Rs 552.03 crore in Q3FY19) hit largely by lower domestic Sales, which was down by around 1.43% to Rs 534.65 crore (from Rs 542.42 crore). Contrastingly export sales grew by around 19% to Rs 11.41 crore (from Rs 9.60 crore). Comparable base of Q3 of PY Is very high as the growth in that quarter was steep at around 23%. EBITDA margins was around 16.25% down from 16.65% in corresponding previous period. Thus the EBITDA was down by 3.44% to Rs 88.73 crore (down from Rs 91.89 crore). Contraction in EBITDA margin was largely due to cost associated with launch of new Svachh range of products. While PBT was down by 6.84% to Rs 79.05 crore hit largely by higher depreciation. But the PAT grew by 7.16% to Rs 60.91 crore.

For nine-month ended Dec 2019, the sales grew by 1.97% to Rs 1553.26 crore with export sales down by 13% to Rs 311.99 crore and domestic sales up by 2.39% to Rs 1518.27 crore. Eventually the PAT was up by 21.25% to Rs 177 crore. In domestic market all channels have witnessed growth with the exception of Rural Sales, which was on a high base last year. Also Teleshopping Channel has also closed. Despite early double digit fall in export sales for 9mFY20 that will be made up in the coming quarter.

Consolidated PAT for quarter ended Dec 2019 stood at Rs 60.20 crore (up 3% from 58.25 crore) on a sale of Rs 587.27 crore (down 1.06% from Rs 593.54) gained by lower taxation. Consolidated PAT for 9mFY20 stood at Rs176.35crore (against Rs 147.58 crore in 9mFY19) with sales up by 1.85% to Rs 1654.76 crore.

Growth appears flat mainly due to base effect. Save for Cookware, volume growth seen in Pressure cookers and key appliance categories.

Given the 'trade liquidity' concerns, company followed a cautious policy on primary sales to general as well as large format channels. Optimised and controlled Inventory given the market conditions. Actively working on making sure receivables are in control. Revised trade policies have gained more acceptance.

With HUL exiting gravity water purifier market, there is some opportunity to grab in case of gravity water purifier space as there is campaign against RO in social media.

Offerings for Rural market is around 8-10 SKUs compared to 700 SKUs for urban.

About 17-18% of the revenue in Q3FY20 came from modern format. E-commerce contribution continued to be significant and is a key growth driver.

At entry level lot more people have come up. In a distressed market, the people tend to discount more. The products are cheaper largely because of tax evasion.

Composition of sales and price-points had an impact on absolute value growth but margins remained healthy.

If the revenue growth is more than 10%, the margin will see expansion.

Overall the company is moving as per the plans and waiting for the economy to bounce back.

Rural demand is expected to pick-up following the good monsoon. Rebuilding of rural channels expected to yield results. Some of the old non performing accounts will start performing and the signs of green shoot is already seen in Jan 2020. Company will continue to broad base & consolidate its presence in a host of modern format stores. New accounts are also being pursued and added and the full impact of contribution from new accounts will be felt next fiscal. Around 40 new SKUs slated to be launched in Q4FY20.

Though rural demand is expected to improve in Q4, the rural sales for the company for current fiscal will be little lower than last fiscal.

Consolidation of export customers, that can improve exports going forward. Export business expected to gain traction from Q1 of FY21.

The company expect to incur only maintenance capex.

Judge brand accounts for 2% of sales of the company.

Oeanlng Solutions business continues to grow well.

Prestige Xclusive chain strength stood at 583 contributing significantly to total sales

The company continues to carry substantial free cash in excess of Rs 320 crores post capex and investments in UK subsidiary.

UK Subsidiary – HORWOOD: The salience of the Subsidiary's brands is far higher than all the peers. However, the uncertainty over Brexit continued to Impact business. But the company maintained the sales at previous year level. Better performance as compared to peers. Investments being made to improve market share and multi-channel presence. Acquired 51% stake in new EcoSoul Life business through stepdown subsidiary.