Earnings Call Transcript Analysis Report #
Financial Performance #
Key Metrics #
- Consolidated Revenue (Q3): INR 1,049 crores (+5% YoY).
- Core Domestic Business Revenue (Q3): +8.6% YoY.
- Core Domestic Business Volume (Q3): +6% YoY.
- International Business Revenue (Q3): -3% YoY.
- Strategic Investments Revenue (Q3): -13% YoY.
- Gross Margin (Q3): 70.3% (+150 bps YoY).
- EBITDA (Q3): INR 339 crores (+8% YoY), Margin +70 bps YoY.
- PAT (Q3): INR 279 crores (+8% YoY).
- 9M FY25 Gross Margin: 69.6% (+140 bps YoY).
- 9M FY25 EBITDA: INR 806 crores (+9% YoY).
- 9M FY25 PAT: INR 644 crores (+12% YoY).
- Dividend: Second interim dividend of INR 4/share (400%) declared, totaling INR 8/share (800%) for FY25 YTD.
Comparison #
- Core domestic business showed high single-digit growth for the second consecutive quarter in FY25.
- Gross margins expanded significantly both in Q3 and 9M FY25 compared to the previous year.
- Profit growth (EBITDA & PAT) outpaced revenue growth, indicating margin improvement.
Guidance/Forecasts #
- FY25 Tax Rate: Expected around 8-9%.
- FY26 Tax Rate: Expected within the range of 10%.
- FY26 Goodwill Amortization: Estimated around INR 90 crores.
- Operating Cash Flow (9M FY25): Estimated around INR 500-550 crores.
- Receivable Days: Approx. 16-17 days (slight improvement but pressure persists).
Areas of Growth/Decline #
- Growth: BoroPlus range (+20%, led by Antiseptic Cream), Healthcare range (+13%, driven by Zandu Care +90%), Navratna (+3%), Pain Management (+3%), Organized Channels (MT, e-comm, institutional) grew nearly double the pace of overall domestic business.
- Decline: Male Grooming (-4%), Kesh King (-10%), International Business (-3%, mainly due to Russia), Strategic Investments (-13%, impacted by The Man Company).
Strategic Initiatives & Business Updates #
Major Announcements #
- Rebranding of ‘Fair and Handsome’ to ‘Smart and Handsome’ to cater to a wider, holistic male grooming portfolio (face, body, hair). New brand ambassador: Kartik Aaryan.
New Products/Services/Markets #
- Launch of ‘Mentho Plus Balm Total’ in the Southern region (Dec ‘24).
- Planned rollout of new product extensions under ‘Smart and Handsome’ over the next 3-4 months.
- Product extensions in International markets (e.g., Africa, GCC MENA). Attempted shampoo launch under ‘7 Oils’ in Bangladesh with mixed results.
Operational Changes #
- Focus on improving performance of The Man Company (TMC) post-transition, including addressing Quick Commerce shift.
- BCG engaged to develop a turnaround strategy for Kesh King, looking beyond oil into shampoo and other hair care categories. Strategy expected in 1-2 quarters.
- Changed trade scheme approach for BoroPlus.
- Pricing adjustments (~1.5-2.5% on average on larger packs) implemented across some products.
Ongoing/Completed Projects #
- Smart and Handsome rebranding transition for base cream and face wash completed; new advertising launched mid-Jan ‘25.
- The Man Company management transition completed.
Market & Competitive Landscape #
Industry Trends #
- Mixed macroeconomic environment: Subdued urban demand vs. resilient rural demand.
- Delayed winters impacting seasonal categories.
- Shift in male grooming towards individuality, diversity, confidence, and holistic care.
- Pressure on traditional Ayurvedic formats like Arishtha/Asava (impacting Pancharishta).
- Growth in organized channels (MT, e-comm, Q-comm) continues, leading to channel conflict challenges.
Competitive Positioning #
- Smart and Handsome rebranding aims to solidify leadership in the evolving male grooming market.
- Kesh King decline attributed partly to category slowdown. Management sees minimal impact from Dabur’s Sesa acquisition currently.