Emami Limited (531162) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Emami Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Percy Panthaki from IIFL Capital. Thank you, and over to you, Mr. Panthaki.

Good evening. Welcome, everyone. I have with me the management of Emami. I have Mr. Mohan Goenka, Wholetime Director and Vice Chairman; Mr. Vivek Dhir, CEO, International Business; Mr. Gul Raj Bhatia, President of Healthcare; Mr. Manish Gupta, President of Sales; and Mr. Giriraj Bagri, Chief Growth Officer; and Mr. Rajesh Sharma, President of Finance and IR. Without further ado, I'll hand over the call to the management, who will take you through the results, and then we'll have Q&A. Over to you, sir.

Thank you, Percy. Very good afternoon, ladies and gentlemen. Thank you for taking this time to join us today for our earning call for the fourth quarter and the financial year ended 31st March '25. Consumption demand trends in quarter 4 remained similar to the previous quarter. While rural markets continue to perform well, mass urban demand remains subdued. In this scenario, I'm pleased to report that our core domestic business continued to deliver robust growth this quarter also, this time growing by double digit at 11% with volume growth of around 7%. This growth was achieved across brands and categories, reflecting strong well-rounded performance throughout the portfolio. Navratna and Dermicool range grew by 16%, BoroPlus range delivered growth of 27%, Healthcare range grew by 13% and Pain Management grew by 1%. In the male grooming category, our recent rebranding efforts are showing early success. The newly repositioned Smart & Handsome brand posted a 7% growth and Kesh King delivered flattish growth this quarter. After absorbing the revenue decline of 12% in our strategic investment portfolio, our overall domestic business grew by 9% in Q4 with a volume growth of about 5%. We are proactively addressing challenges in the Kesh King and The Man Company. We are sharpening Kesh King's strategy on solving for both medium-term strategic issues as well as tactical challenges in e-com, pricing SKU mix and media effectiveness. We are confident that these steps will drive a turnaround this year. Similarly, for The Man Company, we are targeting to ramp up growth this year, focused on scaling up marketplace, share, quick commerce, a 360 brand revamp and performance-based spend optimization to drive profitability. We are very happy to inform that Mr. Zairus Master has joined as the Chief Operating Officer and Director at The Man Company. He brings with him over 2 decades of rich experience across multiple industries. In his most recent role as Chief Business Officer at Honasa Consumer, Zairus played a pivotal role in managing brands like Mamaearth, the Derma Company, Aqualogica, Dr. Sheth’'s and BBlunt. During the quarter, we also forayed into the brightening category with the launch of Emami Pure Glow, a skincare offering designed to address evolving consumer needs. The brand has been rolled out in select markets, and we have onboarded Raashii Khanna as the face of Pure Glow. In FY '25, we introduced over 25 new products in our domestic business, including 11 new launches on our D2C portal Zanducare. Our digital-first portfolio on Zanducare continues to scale rapidly, growing over 50% year-on-year and now contributing over 80% of Zanducare sales. Products launched in the last 2 years now contribute around 50% to total Zanducare sales. On the distribution front, our organized channels, modern trade, e-com and institutional sales continue to perform strongly. In FY '25, these channels together contributed around 28% to our domestic revenue, a 140 basis points improvement year-on-year. While our overall domestic business grew by 7% in FY '25, the organized channels grew at almost double the pace at 13%. Turning to our international business. After a decline in Q3, we returned to growth in Q4, posting a 6% increase despite geopolitical and macroeconomic challenges in Bangladesh, Middle East and some parts of Africa. This growth was supported by strong performance in the SAARC, Southeast Asia, CIS and Africa regions. Our consolidated revenue for Q4 stood at INR 963 crores, an increase of 8%. Gross margins expanded by 10 basis points to 65.9% while EBITDA grew by 4% to INR 219 crores. Profit after (sic) [ before ] tax grew by 14% to INR 194 crores, and profit after tax grew by 9% to INR 162 crores. For FY '25, consolidated revenue at INR 3,809 crores grew by 6.5%. Gross margins expanded by 100 basis points to 68.6%. EBITDA grew by 8% to INR 1,025 crores and EBITDA margins for the full year improved by 40 basis points to 26.9%, while profit before tax grew by 13% to INR 894 crores, profit after tax grew by 11% to INR 806 crores. I am pleased to share that the Board of Directors have approved a special interim dividend of 200%, translating to INR 2 per equity share while celebrating 50 years of Emami, including the earlier two interim dividends of 400% each, that is INR 4 per share declared in Q2 and Q3, the total dividend payout for FY '25 stands at 1,000% or INR 10 per share, representing a payout ratio of 49% on adjusted PAT, fully aligned with our dividend policy and committed to maximizing shareholders' value. Looking ahead to the next financial year, we are optimistic about delivering a strong performance across the board. Our market shares and household penetration across brands are trending upwards, giving us confidence of sustaining growth in FY '26. With strategic actions being taken for Male Grooming range, Kesh King and The Man Company, we anticipate positive momentum for these brands in FY '26. We expect a gradual pickup in consumption supported by easing inflation, recent income tax benefits to individual taxpayers, higher government CapEx and a more accommodative monetary policy, including potential rate cuts. With our international business and strategic investments showing promising signs of rebound, we are excited about delivering robust all-round growth in FY '26. With this, I would now like to open the floor for questions. Thank you.

[Operator Instructions] First question comes from the line of Abneesh Roy with Nuvama.

Congrats on good numbers. My first question is on Zairus Master. So here, my question is what will be his key -- KRA from a next 2 to 3 years perspective? Man Company in the past few quarters, your stake has almost fully become 100%. And the numbers have been a bit volatile. And he has an excellent track record and excellent experience in Honasa, Unilever, Airtel, Nokia, et cetera. So what will be his main target over the next 2 to 3 years' time frame in Man Company?

Abneesh, so firstly, we are very excited to have him on board. We have been trying to reach out to him for quite some time. So this was absolutely part of our strategy to bring someone who understands this business very well. And of course, he has just joined a couple of weeks back, and he's a master in this. So of course, the target is to get back to growth to take The Man Company and other start-ups on the fast track, how can we get to substantial growth. Plus at the same time, of course, the targets are to see that the brands get to profit in some time. I'm not expecting profits immediately. But of course, the long-term target is to get these brands to profitability. But these are the two goals what he has right now.

And one follow-up here. Man Company was also a D2C start-up only. So in terms of now this new leadership and the overall performance has been a bit volatile. So is the original team now fully gone? And in terms of anything weak -- in the business model, is there something weak? Or is it just the demand scenario, which was weak and the transition was there? Anything you can call out where there was a change needed in terms of strategy?

So there hasn't been much change. Giriraj is on the call. So he is managing, as you know, all the start-ups. So Giriraj, if you can add whatever you want to add?

Yes. Thanks for the question. A couple of things. First, as Mohanji mentioned, we are very excited to have Zairus on board. And his mandate is essentially to be able to build a good team, restore scintillating growth rates this year itself and also a long-term path to profitability. As far as the original team is concerned and the volatility of management is concerned, I think that is behind us now. The promoters have stepped away completely from day-to-day operations, including their presence in the office. So they are gone. There is a complete brand revamp, which is planned very soon. So I expect a very significant rebound to happen in The Man Company in the months to come.

Sure. My second question is on the cooling products. Those have done quite well in Q4. My question is in Q1, the base is high because last year in Q1, you had done really well. What we are picking up in April and May, a lot of the other cooling categories have not done well because there was all this sudden rains in North India, thunder shower and temperature became low. So for example, AC sales, the cooler sales and even the beverages, all those have cooled off. So from that perspective and high base, how do you see this category in Q1, tough comparables in that scenario?

So Abneesh, you are absolutely right. This quarter is slightly challenging as far as the summer portfolio is concerned. We saw fantastic growth in Q4. So primary has happened. Unfortunately, southern markets and some parts of East and West have not done so well. So you are right, we are seeing sporadic rainfalls across India. So -- Sorry, there is some...

Yes, please go ahead.

Can you hear me? Okay. So yes, you're right. So summer has been -- is a slight dent. I think let us wait for another 2, 3 weeks. If we see some rebound, we have a higher base. So there would be slight challenge on our summer portfolio, but we will try to see if we can make up some of our other portfolios. [Technical Difficulty] this year, yes, that has not gone down so well. You can always reach out to Rajesh, Abneesh, if you want any further details.

Next question comes from the line of Shirish Pardeshi with Motilal Oswal Financial Services Limited.

Mohanji & team, congratulations. I was a little bit excited seeing BoroPlus sales has grown 27%. Did you see any sudden spike? I mean winter was extended, but is there anything new which has happened in that segment?

Not really, Shirish, these -- when summer doesn't do so well, so BoroPlus does slightly better. And same trends is what we are seeing also in the first quarter. BoroPlus is doing -- though it's a very, very small base, but April and May, BoroPlus is shining better than our -- some of our summer items. So it is purely seasonal, honestly.

Okay. The other thing I wanted to check with you, the Smart & Handsome launch has happened towards the end of quarter or early, say, Jan?

Yes, we launched it in second week of January.

Okay. So by and large, we would have now phased out the assets and everything is getting replaced.

Absolutely, absolutely.

But is there any return which has happened on Fair & Handsome.

No, no, nothing at all. Nothing, not even 1%.

Okay. The other question was Pure and Glow. This is the entry into the skincare. What is the 2, 3 time lines we should be monitoring for next 3 to 4 quarters? I mean, yes, we are excited to see the new launch, which has happened. But if you actually look at the skincare category, there's a lot of clutteredness which is there. So what is it that we are talking different to the consumer?

Shirish, every category is cluttered. So -- of course, we have tried out in larger categories. That is part of our growth strategy. And branding is a big market, almost INR 3,000 crores, INR 4,000 crores market with monopoly of levers. So we are trying it out in certain markets, but [Technical Difficulty].

I think I lost you. Your voice is not continuous.

Oh, is it? Okay. Okay. So I'm saying, it's a large category. So we are trying it out in certain markets of South. Of course, it's based out of nature and science. We have some clinical results of 2x brighter look plus extra moisturization. So let us see, as I said, it's a large, pretty big market. So this is the initial response, we will take it nationally. Right now, it is at the test market stage, yes.

And we are manufacturing ourselves or it is contract?

It is in-house manufacturing. It is in-house manufacturing.

Okay. Last question on the strategic subsidiaries. I think the performance consolidation, these are all things which I understand. But then what are the...

Sorry, your voice was not clear, Shirish, come again.

On the Brillare and TMC, though we know and understand last year was consolidation as there were some hiccups. But over FY '25, if I ask FY '26, how you look at this business? I mean obviously, we have a business and these all things will happen, but there are some aspirations what we have left when the consolidation will happen?

Giriraj?

Yes. So when we look at FY '26, both for Brillare as well as for TMC, I -- we are looking forward to a high double-digit growth in both these businesses. And there is a significant investment that we are making in both these businesses to build the brand franchise, especially the top of the funnel as far as TMC and Brillare are concerned. And we are already seeing some green shoots when we look at certain channels and certain categories in the month of April and May. So we should look forward to strong double-digit growth in FY '26, both in Man Company and Brillare.

That's helpful, Giri. Just one follow-up on here. Can you say -- spell out what is the revenue we clocked for TMC and Brillare and what is our EBITDA loss we would have made on these two brands?

Specific, Shirish, we will avoid, okay?

But revenue, if you can share?

Yes. Revenue is about INR 150 crores and about INR 50 crores. We have excellent plans for healthcare, and Gul Raj is here. We have launched some significant brands in Zanducare, and we have robust plans for healthcare growth. So Gul Raj, you can also pitch in and share some ideas, plans, if you want for healthcare?

Right. So I think we've done fairly well in the healthcare portfolio, as indicated by Mr. Mohanji where we grew by 13% annualized. And it was led by three, four categories. One was the D2C portfolio, Zanducare. which had a growth of nearly 50%. And it was led both by new product launches and various initiatives led by improved marketing, better return on investments in the marketing space and also more aggressive claims in terms of our product benefits and efficacy. We also did well on some of the other categories in the portfolio in the OTC space on brands like Nityam, brands like cough syrup, where we grew in strong double digits along with the health juices also. And on the medical business, which we reach out to doctors for, we had good growth there also, both in quarter 4 and for the whole year. Going forward, we are going to drive improved marketing campaigns, focusing on a better return on investment, considering the fact that consumer shifts are also happening. Post-COVID, consumers have by and large reduced spends on health supplements, immunity products, et cetera, and they are spending more on discretionary products, more on consumption outside the home in terms of restaurants, QSRs, et cetera. So keeping these trends in mind, we are focusing on other categories besides health supplements, which can drive incremental volume, market share gain and overall growth. So there will also be focus on NPDs, but I think the focus will be compared to previously more on consolidating and leveraging the NPDs we launched to see how we are able to scale them up in a profitable manner. We'll also be doing a lot more initiatives on the medical business by way of improved doctor connect, medical marketing and also reaching out to more A-class doctors and focusing on certain therapies, which should give us higher returns.

[Operator Instructions] Next question comes from the line of Harit Kapoor with Investec.

I had a few questions. So one was, if you look at the pain management category for years, for your business, it's been about 7 quarters now of kind of single-digit growth. Obviously, there was one degrowth quarter, but single-digit kind of growth. Mohanji, from a slightly medium- to long-term perspective, is that the kind of trajectory that we should also kind of look at mid-single, high single -- mid-single range in a category that has reasonable -- has got reasonable history, it should be kind of a normative growth? Or do you believe you can -- in any way, innovations, et cetera, can also kind of add a little bit more additional growth to this space? I ask as it's a high-margin segment, so just -- that was my first question.

So Harit, you're right. Pain management is an important segment for Emami. It almost contributes to 25% of our overall revenues. And it has got three products. One is Zandu Balm, which is the mother brand, green color; and Zandu Ultra Power and Mentho Plus Pain Balm. These are the three portfolios. So Ultra Power and Mentho Plus has consistently been growing, but unfortunately, the green pack, which is the main product is showing signs of some stress. So -- but anyhow, we have a robust plan for new products in pain management. We have launched a couple of products under this Zandu. And this year, again, we are launching one or two new offerings. So we are relying heavily on NPDs for growth in the pain portfolio.

Got it. We should see some of that into fiscal year '26 also, the NPD?

Yes, yes. Absolutely. This year, you will see two new launches.

Got it. The second was a short one. This Smart & Handsome growth, 7%. Is that indicative of the secondaries as well that you have -- retail level secondary growth is also 6%, 7%, 8%?

Absolutely. So after a long time, we have seen some momentum in Smart & Handsome. You guys know that this brand was continuously declining. And post the relaunch, we have arrested the degrowth. We are yet to see double-digit growth, what is targeted. But as I had mentioned earlier also that now this is a male grooming segment. It's not just the cream and the facewash. So you would see a very extensive male grooming products coming under Smart & Handsome. And of course, we would see growth in this Smart & Handsome. At the same time, I must say that the strategy for Kesh King is also ready by BCG. Hopefully, we will be rolling out in the second quarter. So by and large, I think, we have addressed most of the issues, whether it is the Kesh King, Man Company with Zairus, we are very excited. With Brillare also, I think, should signs -- should grow. Smart & Handsome, the decline has been arrested. Healthcare, we are very optimistic of double-digit growth. Other than pain management, I think, which -- we are expecting 5%, 6% growth. Others should do slightly better.

Got it. The last question was on price growth. So this quarter looks like a 3% type of growth at overall level on pricing. So just wanted your outlook on what should be kind of pricing growth assumption for FY '26? I know it's normally a 2% up and down a little bit, but just your sense on what it looks like for '26.

Should expect in similar lines, Harit, around 2% to 3%.

[Operator Instructions] Next question comes from the line of Ajay Thakur with Anand Rathi Securities.

So sir, I had two questions. One was just wanted to get a sense on the summer products, how the volume trajectory had been for both Navratna and the Dermicool, given the fact that their revenue growth has been pretty robust during the quarter. And also, if you can share some outlook for Q1 for the rest of the summer season?

This is a difficult one, Ajay. As I said, summer has not gone down so well, unfortunately. We had, of course, done some primaries in Q4. So the secondaries are slightly on the lower side because of rains. So we have yet another 4 weeks of summer left. Let us hope if some markets rebound, then we might see low single-digit growth. But we are -- yes, I would -- Manish, do you want to add anything? Manish Gupta is here. So Manish, if you want to add anything?

Yes. Yes. So all I will say is that from a Q4 perspective, what the change we did in our strategy was to streamline how we load up the trade and everything. So we've been very disciplined in our loading and the results are showing in the Q4 results and both the primary and secondary part was very nice. April is where the pain point is as we have been discussing that the consumer offtakes have not been in line with the preparation that all the brands have done across the categories. And it is more pronounced in Talc. Oils are not so much impacted. Talc is the one which is facing the heat. And within that, as Mohanji mentioned earlier, it's south and parts of the lower Maharashtra and the parts of Odisha and all that. Now from an outlook perspective, all I can say is that Talc is the one where we are right now keeping our fingers crossed. But having said that, mid-singles should not be a problem. Repeating the base is always tough. That's the current challenge we are having internally. Oil so far looks robust. So while we would have loved more, I would say that mid-singles still is not far away. Hope that helps.

Quite helpful, sir. Sir, second question was more on the correction in the crude oil prices and the -- given that has some bit of a correlation with both LLP and packaging cost. Have you seen some benefit accruing in both these segments? And outlook on the gross margins, that would be helpful.

So Ajay, you have seen that our GCs have been at all-time high. And I have continuously been maintaining that I don't see any pressure on our GCs this year also. So you are right, the costs are benign. And there might be slight benefit, might be I think 0.5 basis points or something. So let us hope -- let us see if the prices remain at the same level, then we don't see any pressure on margins. We also have Vivek who looks after the international business and international now contributes to almost 20% of our total revenue. It's a significant large business for us. So Vivek, would you want to say anything on the growth or our plans for anything you want to share?

Sir, I think, Bangladesh has improved quite a bit. When we had closed quarter 3, we were in a bit of a trouble, in line with the industry over there. But Q4, we have seen a rebound. January was still okay. February, March, we delivered very good numbers over there. GCC is still showing some sign of the growth and everything. Russia, CIS is also decent for us. Only place of trouble is one or two countries in Africa, which are decent for us. But by and large, more places, we are seeing good growth numbers over here.

[Operator Instructions] Next question comes from the line of Percy Panthaki with IIFL Capital.

Very glad to see back in positive territory. Can you give some more detail on exactly what was the work that went behind turning this brand around and sort of getting this performance back?

So Percy, it was all-around 360 plan right from changing the brand name to very aggressive marketing, both urban, rural, TV, OTT, digital. So everything, money, I think it was in Q4, we went very aggressive on go-to-market strategy. So it was a well-planned rollout strategy for Smart & Handsome. We hope that the momentum continues. That is what we are seeing. We are more optimistic on the facewash category because that is a very fast-growing category. And on the other male grooming launches that we have planned for this year, we have plans in place. We will be rolling out in Q2. So we have been working for last 2 years now, and you would see some aggressive plans for this year for Smart & Handsome.

Got it. Sir, has there been any change in formulation along with the relaunch?

A minor tweak happens, Percy, which is in line with what the consumer needs are. So that is what it is. But overall, I can say -- our overall strategy, what we have been planning for quite some time now has done well. Other than some dent in summer, I think most of the brands are in a very strong position. As far as manpower is concerned, with Zairus coming in, I think that is complete now. Second quarter, as I said, we would be rolling out with the strategy on Kesh King, what BCG has recommended. So with that, I think more or less all our brands relaunches are done. So we are going aggressive on advertising. We have done almost, I think, INR 650 crores, INR 670 crores of advertising this year, which is quite significant, and we will continue with that this year. So that's it. I think if summer fares well for the next 4 weeks, hopefully, we will see some good numbers.

Got it. Got it, sir. Just another question is on your innovation rate. What is the contribution of new products for this fiscal FY '25 that is just closed? And what would that similar number be targeted at for FY '26?

Roughly about...

Roughly it is around 4% kind of revenue what we have generated from the products launched in the last 2 to 3 years.

And will it be similar going ahead or...

So it should be in the range of 3% kind of minimum. depends -- again, it depends on the success we get going ahead on that.

Got it. And what is the thought processing of any new product launch or not new product, but I would say any adjacencies, any new categories that you want to get into? Is it -- I mean, you did mention that in Smart & Handsome, it would be a broader male grooming play. So I'm assuming some more subcategories would get launched there. But apart from that, do you think that your product portfolio is complete apart from the usual sort of varianting, innovation, renovation that goes on in any FMCG company? Or would you like to enter any adjacent subcategories over the next 2, 3 years?

Percy, that is never complete. There are a lot of opportunities in Zandu. In Pain, I said, there are a couple of launches planned. In Male Grooming, in Kesh King also, there are some D2C areas that we are going to come out with. This year itself, we came with 25 new products, primarily in Zanducare. So we are -- this NPD momentum would continue. It is now a different strategy altogether for e-com coupon, there are very different offerings. For mass market, there are different offerings. For MT, there are different offerings. So it's like there are a lot of opportunities identified and which would all be rolled out by -- in quarter-wise. So yes, should that...

Got it. Got it, sir. Moderator, can you just announce -- I see there are no more people in the queue. So just announce it once. And if nobody comes up, then we can close the call.

[Operator Instructions] Ladies and gentlemen, as there are no further questions, we have reached the end of question-and-answer session. On behalf of Emami Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

Thank you to all the participants for joining us today on our fourth quarter results. Thank you, IIFL, for arranging the call. Thank you.

Thank you.