Concall AI

Emami — Q3 FY25 earnings call

Call held 28 Jan 2025

Management summary

Emami reported a resilient Q3 FY25 performance amidst a mixed macroeconomic environment, characterized by subdued urban demand and delayed winters. Despite challenges in male grooming and Kesh King, the company achieved robust growth in its core domestic business, BoroPlus, and healthcare segments. Significant margin expansion was driven by price hikes and cost reduction initiatives. Strategic rebranding of Fair and Handsome to Smart and Handsome, along with ongoing efforts in Kesh King and international markets, positions the company for future growth.

Highlights

Consolidated revenues for Q3 FY25 stood at INR 1,049 crores, reflecting a 5% growth.
Core domestic business grew by 8.6% with approximately 6% volume growth in Q3 FY25.
BoroPlus range demonstrated strong resilience, growing by 20% in Q3 FY25.
Healthcare range delivered robust growth of 13%, led by 90% growth in Zandu Care.
Gross margins expanded by 150 basis points to 70.3% in Q3 FY25.
EBITDA grew by 8% to INR 339 crores, with margins expanding by 70 basis points in Q3 FY25.
Profit after tax (PAT) increased by 8% to INR 279 crores in Q3 FY25.
The Board approved a second interim dividend of 400% (INR 4 per equity share), bringing cumulative FY24 dividends to 800% (INR 8 per share).

Concerns

Decline in male grooming and Kesh King segments

Key financials

2 periods

Headline

Consolidated Revenue
₹1,049 Cr
YoY +5%
Core Domestic Business Growth
8.6%
Core Domestic Volume Growth
6%
Gross Margin
70.3%
EBITDA
₹339 Cr
YoY +8%
PAT
₹279 Cr
YoY +8%

9M

FY25 Core Domestic Growth
7%
FY25 Core Domestic Volume Growth
5%
FY25 Gross Margin
69.6%
FY25 EBITDA
₹806 Cr
YoY +9%
FY25 PAT
₹644 Cr
YoY +12%

What they filed

Q1 FY27: revenue up 3.2%, net profit up 11.7% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	709	879	781	756	604 −15%	958 +9%	730 −7%	780 +3%
Expenses	483	550	590	556	437	572	533	564
EBITDA	226	328	191	201	168 −26%	385 +17%	196 +3%	215 +7%
Margin	32%	37%	24%	27%	28%	40%	27%	28%
Other income	34	10	66	21	54	9	25	53
Interest	1	0	1	0	0	0	0	1
Depreciation	40	40	39	39	40	40	36	34
Profit before tax	221	298	217	182	181 −18%	354 +19%	185 −15%	234 +29%
Tax rate	3%	6%	13%	10%	-1%	7%	10%	22%
Net profit	214	279	190	163	182 −15%	330 +18%	166 −13%	182 +12%
EPS	4.90	6.40	4.35	3.74	4.18	7.56	3.81	4.17

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

BoroPlus
20% Growth
Healthcare
13% Growth
Zandu Care
90% Growth
Navratna
3% Growth
Pain Management
3% Growth
Male Grooming (Fair & Handsome/Smart & Handsome)
-4% Decline
Kesh King
-10% Decline
Strategic Investments
-13% Decline
International Business
-3% Decline

Capital allocation

medium confidence

Capex Capex disclosed

So there is not significant capex till December.
Dividend ₹4/share (interim)

I'm pleased to inform that the Board of Directors have approved a second interim dividend of 400%, translating to INR4 per equity share for FY '24. This follows the first interim dividend of 400%, also amounting to INR4 per share declared in Q2. Cumulatively, we have distributed dividends of 800% equivalent to INR8 per share during FY '24, reaffirming our commitment to maximizing shareholders' return and aligning our dividend payout policy.
Liquidity Liquidity disclosed Operating cash flows for 9 months are estimated at INR 500-550 crores. Receivables cycle is around 16-17 days.

So if you look at our 9 months profit is almost -- EBITDA is almost INR800 crores plus and profit after tax would be INR640 crores. So there is not significant capex till December. So I think around INR500 crores, INR550 crores, kind of would be the operating cash flows.

Guidance & targets

Profitability

The Man Company Q4 Performance Profitability · Q4 FY25 · Medium confidence Significantly better than Q3

And going forward, in quarter 4, we expect quarter 4 to be significantly better than quarter 3.

— Giriraj Bagri

Brand Performance

Kesh King Revival Brand Performance · next one or two quarters · Medium confidence Come with a bang

I think it will take another one or two quarters, but then surely, we'll come with a bang.

— Mohan Goenka

New Product Launches

Smart & Handsome Male Grooming Range Rollout New Product Launches · next 3 months to 4 months · High confidence Start rolling out

as the extensions or the entire male grooming range is concerned, that we will start rolling out in the next 3 months to 4 months.

— Mohan Goenka

Tax Rate

Current FY Tax Rate Tax Rate · FY25 · High confidence 8-9%

So, Ajay, for FY '25, I think the current trajectory should be there around 8%, 9% kind of tax rate.

— Rajesh Sharma
Next FY Tax Rate Tax Rate · FY26 · High confidence Around 10%

And going ahead for next year also, it should be within the range of 10% kind of.

— Rajesh Sharma

Pricing

Weighted Average Price Increase Pricing · coming quarter · High confidence 1.5-2%

It would be in the range of 1.5% to 2%.

— Mohan Goenka

International Business

International Business Revival International Business · Q4 FY25 · Medium confidence Good revival

We have been not been able to deliver the growth. But when we look at 20 quarters, we would have decent, and we'll see a good rival in quarter 4, again. We should have good revival in quarter 4. That's more an aberration which is happening.

— Mohan Goenka

Rural Contribution

Rural Share of Domestic Business Rural Contribution · High confidence 53-54%

Yes. So rural would still be -- if you exclude that, if you take the overall business, it should still be about 53%, 54% of the domestic business.

— Mohan Goenka

CSD Contribution

CSD Share of Business CSD Contribution · High confidence Around 4%

Around 4%.

— Mohan Goenka

What to watch in Q4 FY25

The Man Company Q4 Performance

next quarter

Current Sequential month-on-month improvement in Q3

Target Significantly better than Q3

Why it matters

To verify the effectiveness of turnaround strategies and the brand's recovery trajectory.

And going forward, in quarter 4, we expect quarter 4 to be significantly better than quarter 3.

Risks & concerns

Decline in male grooming and Kesh King segments
high

Male grooming declined by 4% and Kesh King by 10%, requiring strategic intervention.

Management acknowledged
Subdued urban demand
medium

Urban demand remained subdued, impacted by rising food inflation and cash-strapped retail and wholesale trade.

Management acknowledged
Delayed winters impacting seasonal categories
medium

Delayed winters hurt seasonal categories, further adding to the complexities of the market dynamics.

Management acknowledged
International business underperformance (Russia, Bangladesh)
medium

Massive decline in Russia due to high inflation; Bangladesh impacted by political instability and high interest rates affecting credit.

Management acknowledged
Channel conflict due to diverse SKU strategies
medium

Channel conflict exists, managed by segregating packs for individual channels (rural, modern trade, e-com).

Management acknowledged
Pancharishta category pressure
medium

The Arishtha/Asava format, including Pancharishta, is seeing volume growth pressure across the industry due to evolving consumer preferences.

Management acknowledged
Liquidity constraints in retail and wholesale trade channels
medium

Persistent issue since COVID, impacting credit cycles, with no clear timeline for improvement.

Analyst acknowledged

Q&A highlights

6 direct

Drivers of BoroPlus and Healthcare growth Direct

So, Avnish, yes, BoroPlus growth has been led by the core antiseptic cream, okay, where we have grown phenomenally in double digits, more than 20%. So yes, I would say the base was also low, but even though even at a lower base, growth of 20% was really exciting.

Clarifies that strong growth in key segments like BoroPlus and Healthcare was driven by core products and market share gains, not just base effect, indicating underlying strength.

Asked by Avnish Roy

Recovery strategy for The Man Company Direct

As far as The Man Company is concerned, we are seeing a sequential month-on-month improvement in performance. And going forward, in quarter 4, we expect quarter 4 to be significantly better than quarter 3.

Provides insight into the turnaround efforts for a struggling brand, attributing past challenges to compressed festive season, delayed shift to quick commerce, and transition issues, with an optimistic outlook for Q4.

Asked by Avnish Roy

Changes and timeline for Kesh King brand revival Partial

So, Harit, we have continuously been mentioning that BCG is on it, okay? ...Similarly, Kesh King is being evaluated by BCG. Let them come up with a robust strategy. Once they come up with that and we start implementing, I'm sure the brand should revive. I think it will take another one or two quarters, but then surely, we'll come with a bang.

Highlights that a strategic review by BCG is underway for Kesh King, indicating a planned overhaul, but the specific strategy and its impact are still a few quarters away from being visible.

Asked by Harit Kapoor

Drivers of gross margin expansion Direct

So both the price hikes which we have taken or the realizations improvement, which we have seen during the quarter and also lower input prices on some of the areas and some of the cost reduction initiatives which we have taken, so all this put together has helped us to get this margin expansion on the gross margin front.

Explains the multi-faceted approach to margin improvement, combining pricing power (especially on larger packs), favorable input costs (packaging), and internal efficiencies, which is crucial for profitability.

Asked by Percy Panthaki

Challenges and outlook for International Business Direct

International business, we couldn't do much in Russia with a very high inflation environment over there. And that is the prime reason. When we look at the quarter, we had a massive decline in that particular geography. But cumulatively, for the 9 months, still Russia has delivered double-digit growth.

Details the specific headwinds faced by the international business, particularly the impact of high inflation in Russia and political instability in Bangladesh, while also mentioning product expansion efforts in other geographies.

Asked by Tanay

Management of channel conflict with emerging channels Direct

So the only way is segregating the packs for individual channels because you can minimize the conflict.

Reveals the company's strategy to mitigate channel conflict between traditional trade, modern trade, and e-commerce by differentiating product SKUs for each channel, which is a common challenge in the FMCG sector.

Asked by Shrish Pardeshi

Pancharishta's growth challenges and strategy Direct

So this whole format is seeing a bit of a pressure in terms of volume growth across organizations, across categories. We also know that some other companies which have large brands in this format are also struggling. So, like I said, there is a certain challenge which we may be seeing from a consumer perspective in terms of the more modern, the more millennial consumer is not wanting to accept it, and we are trying to address this issue also from a packaging and other perspective.

Acknowledges the specific challenge with Pancharishta, attributing it to a broader category trend and evolving consumer preferences, and outlines plans for new campaigns and modernizing packaging.

Asked by Shrish Pardeshi

Impact of liquidity constraints in retail and wholesale trade channels Partial

No, it's a as I said, Rahul, this is a problem which has been going on since many, many, many quarters. It's not a new problem. Maybe we've just highlighted it in our con call, okay? So that's why the credit cycles and everything has been consistent since the COVID.

Confirms the ongoing issue of liquidity constraints in trade channels, indicating it's a persistent challenge affecting credit cycles and potentially growth, with no clear timeline for improvement.

Asked by Rahul Agarwal

3 min read 7 chapters

Detailed narrative

Q3 FY25 Performance Overview and Macroeconomic Context

Emami reported consolidated revenues of INR 1,049 crores for Q3 FY25, marking a 5% growth. The core domestic business grew by a robust 8.6%, with approximately 6% volume growth. This performance was achieved despite a mixed macroeconomic environment, including subdued urban demand, rising food inflation, and delayed winters impacting seasonal categories. Rural demand, however, showed resilience, supported by favorable monsoons and good harvests.

Segmental Performance Highlights and Challenges

The BoroPlus range demonstrated remarkable resilience, growing by 20%, primarily driven by antiseptic cream. The healthcare range delivered strong growth of 13%, with Zandu Care leading at 90% growth, while Navratna and Pain Management grew by 3% each. Conversely, male grooming (Fair & Handsome/Smart & Handsome) and Kesh King declined by 4% and 10% respectively. Strategic investments and international business also saw declines of 13% and 3% respectively.

Margin Expansion and Profitability

The company achieved significant margin expansion in Q3 FY25. Gross margins expanded by 150 basis points to 70.3%, driven by price hikes, improved realizations, lower input prices (especially packaging materials), and cost reduction initiatives. EBITDA grew by 8% to INR 339 crores, with margins expanding by 70 basis points. Profit after tax (PAT) also increased by 8% to INR 279 crores, reflecting efficient cost management and improved operational leverage.

Strategic Brand Initiatives: Smart & Handsome and Kesh King

A significant milestone was the rebranding of Fair and Handsome to Smart and Handsome, aiming to cater to a wider male grooming portfolio. The transition for base cream and face wash is complete, with new advertising launched in January 2025, and extensions rolling out in the next 3-4 months. For Kesh King, which declined by 10%, a strategic evaluation by BCG is underway, with management expecting a revival within the next one or two quarters. The Man Company is also showing sequential month-on-month improvement, with Q4 expected to be significantly better than Q3.

Distribution and Channel Dynamics

Organized channels, including modern trade, e-commerce, and institutional sales, now contribute 28.6% of domestic business, an increase of 160 basis points. These channels grew at nearly double the pace of overall domestic business. The company manages channel conflict by segregating product packs for different channels (sachets for rural, large packs for modern trade/e-commerce, mid-packs for general trade). Rural contribution to domestic business is estimated at 53-54%, with CSD contributing around 4%.

International Business Challenges and Outlook

The international business faced challenges, declining by 3% in Q3. A major factor was a 'massive decline' in Russia due to high inflation, although 9-month cumulative growth for Russia remains double-digit. Bangladesh also experienced mixed responses to new launches and political instability. The company is expanding product offerings in Africa and GCC MENA regions and anticipates a 'good revival' in the international business in Q4.

Capital Allocation and Shareholder Returns

The Board approved a second interim dividend of 400%, translating to INR 4 per equity share for FY24. This brings the cumulative dividends for FY24 to 800%, or INR 8 per share, reinforcing the commitment to shareholder returns. The company reported minimal capital expenditure up to December 2024, with estimated operating cash flows for the nine months at INR 500-550 crores. Receivables cycle is stable at 16-17 days.

This is an AI-generated summary of a publicly available earnings call transcript.

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