Bajaj Corp Q4FY17 Concall Summary

Bajaj Corp

Financial Highlights

Bajaj Corp Q4FY17 financials
  • Revenue growth is flat vis-à-vis the last financial year.
  • In terms of volume sales, there was a drop of 3.2% during this financial year
  • EBITDA for the year is 270 crores which is a decline of 3% over the EBITDA of the last financial year.
  • The EBITDA margin remains a very healthy 34.2%
  • PBT and PAT are 280 crores and 220 crores after adjusting the exceptional item of 18.38 crores
  • For Q4 17, volumes have declined at 6.9% whereas the turnover has declined by 1.9%

Market Conditions

  • Environment continues to remain subdued with overall Hair Oil market growth at just 1.6% in value terms for FY 17
  • Volume  growth of the Light Hair Oil was slightly better at 4%
  • Hair Oil industry volume growth has picked up marginally vis-à-vis the third quarter but not substantially
  • Revival in Hair Oil growth are more in the urban markets compared to urban markets

Business Highlights

  • Strain on the primary sales volume is mainly due to destocking that continues in the wholesale segments as well as the rural markets
  • 47% of the sales comes from wholesale
  • Increased focus on improving efficiency of the sales force to improve direct reach
  • Currently, they have around between 6 lakhs - 6.5 lakhs direct outlets. Have the aim to reach around 7-7.5 lakhs outlet directly
  • Modern trade growth was 24% in Q4. Cash purchases have started after the adverse impact of demonetization.
  • Gross margins not expected to increase this year.
  • Secondary sales growth in Q4 was around 3%-3.5%.
  • Inventory level at the distributor end currently is 30 days. It has gone down in Q4 after moving up in Q3
  • Minimum of 1/3rd of Pat to be given as dividend. If Cash is not utilized, they can give more
  • In Bajaj Almond Drops, around 50% of sales is still in glass Bottles. Other 50% in PET bottles
  • Aim to increase their focus on the rural market.

Market share

  • Market share in Feb 2017 has touched an all-time high of 61.3% in value terms
  • Intent to reach a market share of about 65% by 2018
  • Plan to increase market share in States in which they have less than 50% market share like West Bengal
  • Relative Market share this year is 4.6 which is highest till now
  • Market share for the year is 30 bps less due to emergence of smaller player
  • The rural sector should see a reversal if the monsoon as good this year

Raw Material Prices

  • LLP remained at Rs. 46.22 per kg versus Rs. 46.37 per kg which was there in the third quarter of this financial year.
  • Spot prices of LLP have gone up to Rs. 64 a kg, they are still using the LLP which we stored at Rs. 46 a kg
    Nomarks
  • New communication strategy to be used on the back of extensive clinical trials done on the brand.
  • The focus in the test market is on using chemist panel for distributing Nomarks Cream and using an integrated marketing campaign to improve consumer awareness and preference for the brand
  • Will be extending this strategy both in terms of communication and distribution in more states
  • On back of this and our improved reach in international markets, we should see a reversal of sales trends on Nomarks in the first half of this financial year
  • //;;;;The urban states you will see more focus on Nomarks
  • FAL (Fair and Lovely) has grown the market significantly in the last two months because of increase in the grocery part of the business
  • FAL is not chemist driven product. It is a process or general merchant driven product
  • Would get into 4 more states, by May-June of this year

Value-added Perfumed Hair Oil

  • They expect this category to grow rapidly as this category has been growing at 5% for the past few years while the volumes for regular coconut oil has decreased by 7%.
  • Within this category, they have high hopes from Amla lite, VACNO, Ayurvedic and Cooling sub-categories

Demonitization

  • Impact of demonetization has majorly waned down in q4
  • Secondary sales showed a growth of 3-3.5% which is 5% higher compared to Q3
  • Cash purchases have also started picking up after the adverse impact of demonetization
  • However, Demonetization derailed their project on launching new products in first quarter of FY 18.

GST

  • GST will help in providing tax benefits for their Guwahati factory
  • Expected to have major impact on the wholesale market
  • Still un-clarity on whether they would come under 18% bracket or 28% bracket
  • Sales Force Automation programme- Saathi
  • The company has more than 1000 odd sales people in the market
  • Certain percentage of these sales people may be operating sub optimally as difficult to keep track of everyone
  • Now, each officer has 5-6 people under him and he can actually find out where there is a slack in sales calls

Exports

  • Grown by 56% this quarter in value term
  • Added 4 new markets. Among the big markets that we have added is Russia and Egypt. Among the smaller markets we have added markets in Africa like Kenya and Ethiopia
  • Currently around 5.7% of total turnover, It was under 4% in Q4 16

Key Focus Areas for Future

  • Increase Market share gains from other hair oil segments
  • Focus on rural penetration
  • Leverage existing strengths to introduce new products
  • Pursue inorganic opportunities

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