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Emamihosted a conference call on May 25, 2021. In the conference call the company was represented Rajesh Sharma, VP Finance, Mohan Goenka, Director.
Key takeaways of the call
Momentum of recovery is somewhat affected due to second wave of covid 19, however company was better prepared this time and covid graph is also on downward trend now.
Company was able to increase ProfitabilityQoQ, however institutional business declined by 3%.
On base year of FY19 (Non- covid year) company grew by 14%.
Company has increased its focus on healthcare business which is doing well; ecommerce portal is also showing strong performance. Management believes healthcare offers good headroom for growth.
New product launch- Emami introduced jaggery based variant of zanduchyavanprash along with few other launches. New launches contributed to 3% of total sales in Q4 and 4% in FY21.
Company expects increased focus on sales and distribution will drive higher margins.
Increased input cost pressure led to gross margin decline of 250 bps. To tackle this, company has taken price increases of around 4%. Going forward Company doesn't see any pressure on gross margins.
Despite cash outflows of dividends and share buyback, company closed FY21 with cash surplus of Rs 357 crore. Going forward company expects to pay stable dividends similar to current year.
Sanitizer business did not grow in second wave of covid 19 like it did in first wave.
Kesh king outlook- in themonth of April sales were good, but in May 21 sales took a toll as most states are in lockdown. Company is confident sales will bounce back.
For healthcare segment company expects 20% growth in FY22 even with high base, due to aggressive advertising strategies by management.
Zandu portal- on month on month basisbusiness is around Rs 2 crore, company has a database of 42 lakh consumers from the portal. Going forward company will launch more products in portal.
Sales and distribution- company has twocenters, from which distribution of products take place. Also Emami has tied up with delivery partners to increase reach, going forward company expects to open more such centers.
Navratan- is a rural brand; it got affected in Q1FY22 due to unexpected lockdown. Management expects as soon as unlock starts sales will rebound.
Focus will continue on healthcare portfolio as currently company is a small player and there is headroom for growth, some exclusive products will come forZandu portal going forward.
In FY22 contribution from international business could touch 17.5-18% of total revenue. International business profitability is lower as compared to domestic business.
Ecommerce contribution is 3.7% of total domestic sales for FY21.
Distribution expansion plans- Company plans to increase focus on ecommerce, standalone model trade, chemist outlets and rural expansion. The project got delayed due to lockdown but management expects it to start by 15thJune 2021.
Other income- in Q4FY21 due to one offs items other income rose sharply.
Company expects effective tax rate for FY22 and FY23 to be 20%.
Promoter Shares pledged is reduced to30% as at 31st March 2021.
Other Highlights
In Q4FY21 Domestic Business Net Sales grew by 44% and international business net sales grew by 28%.
Cash Profits of the company grew by 57% in Q4FY21. (Cash Profit= PAT+ Depreciation & Amortization).
All major brands grew by more than 30% during Q4FY21.While Modern trade grew by 46%, ecommerce continued its robust run growing by 3x in quarter ended march 2021.
In Q4FY21, ecommerce business increased its contribution by 200 bps, which now stands at 4% of total domestic revenues.
The Canteen stores department(CSD) business declined by 3% during the quarter.
During the quarter, input cost pressure increased due to inflation in key commodities.
Board declared two interim dividends of Rs 4/- each, cumulatively amounting to Rs 356 crore. The Company also completed Buyback of its shares amounting to Rs 221 crore (including taxes).
Revenue split of Q4FY21- 80% came from domestic sales, 17% International sales and 3% Institutional sales. Overall volume growth was 33% in Q4FY21.
Domestic Brand wise Performance in Q4FY21 compared to Q4FY20- Healthcare Range grew 67%, Pain Management Range 38% , Navratna Range 28%, Kesh King Range 45% , BoroPlus Range 5x , Male Grooming Range 26% and 7 Oils in One 39%.
DomesticBrand wise Performance in FY21 compared to FY20- Healthcare Range grew 45%, Pain Management Range 23%,Navratna Range -8%, Kesh King Range 15%, BoroPlus Range 15%, Male Grooming Range -26% and 7 Oils in One 10%.
Company Launched 40+products in FY21.
International Business Sales Performance in Q4FY21- MENAP (Middle East, North Africa & Pakistan) grew by 53%, SAARC (South Asian Association for Regional Cooperation) grew by 14% and Africa grew by 32%.
International Business Revenue split of Q4FY21- MENAP (Middle East, North Africa & Pakistan) stands at 41%, SAARC (South Asian Association for Regional Cooperation) stands at 39%, CIS (Commonwealth of Independent States) stands at 11% and others stands at 9%.
Management Commentary:Mr Mohan Goenka, Director "We are very happy to have continued with our growth momentum and consistently delivered broad based growth across brands, channels and businesses and close the fourth quarter with an overall revenue growth of 37% and EBIDTA growth of 65%, despite increase in major input costs in Q4FY21. While rural demand has sustained, urban demand is gradually picking up. Our domestic business grew by 44%, International business by 28% in Q4FY21 and we continued to improve our sales and profitability quarter on quarter."
Mr Harsha V Agarwal, Director "This quarter's performance delivering a consistent all-round growth meets with our expectation. All our major brands grew by more than 30% during the quarter with the Healthcare range's performance leading the growth chart by 67%, followed by Kesh King which grew by 45%, Pain Management range by 38%, Navratna by 28%, BoroPlus by 4.5 times and Male Grooming range by 26%. Contribution of e-commerce business also increased from 1.7% of Domestic sales in Q4FY20 to 3.7% in Q4FY21. In our International Business, our new brand Creme 21 has consolidated its position and have come out on tops followed closely by 7 Oils in One. During the quarter, we invested in brand building, resulting in 37% growth in our ad spends, which is in line with our sales growth. With our focus on digitization and evolved business strategies, we are confident of continuing the growth momentum in the long run despite the 2nd wave of COVID-19".
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