Key highlights from Bajaj Electricals Limited (BAJAJELEC) Q1 FY23 Earnings Concall
Q&A Highlights:
- [00:04:35] Chirag Lodaya of Valuequest asked about gross margin, the reason for QoQ being up almost 350 bp, but QoQ consumer margins being flat. Anuj Poddar MD answered that it’s being looked at on a consolidated basis. But on a segmental basis, QonQ it’s flat. At an underlying level, BAJAJELEC delivered improvement in margins on a real basis.
- [00:05:43] Chirag Lodaya with Valuequest also asked about margin trajectory ahead, if there will be pressure or improvement. Anuj Poddar MD said that the company expects margins to start improving from 2Q23. While added that the full benefit of commodity cost reduction in margin will be seen in 3Q23.
- [00:06:29] Chirag Lodaya with Valuequest enquired about 3-year CAGR growth for appliance, lighting and Morphy Richards. Anuj Poddar MD replied that on an overall basis it’s about 7.4% on a 3–year CAGR basis for the consumer business.
- [00:10:29] Nikhil Kale from Axis Capital asked about the outlook on the margins going forward. Anuj Poddar MD answered that long-term outlook is good. As a company BAJAJELEC wants to expand its EBIT margin on consumer, with a guide of 1 percentage point per annum. BAJAJELEC is targeting a double-digit margin in the very near future.
- [00:11:33] Paarth Gala of JM Financial enquired about rural side being under pressure. Anuj Poddar MD said that rural demand has been weaker than urban as BAJAJELEC’s weightage of rural was higher. So on a consolidated basis, there was a slightly elevated impact. However, with good monsoon and MSP by govt., BAJAJELEC expects to see a bounce back in rural demand by 2Q and 3Q.
- [00:11:51] Paarth Gala of JM Financial also asked about an update on the demerger of the EPC business. Anuj Poddar MD said that the schemes have been filed with the stock exchanges. BAJAJELEC expects, unless there’s any further queries, it will have full approval from the exchanges within Aug. Post that it will be filing for NCLT approval.
- [00:14:09] Hitesh Taunk from ICICI Direct asked about the price hikes taken during 1Q23. Anuj Poddar MD clarified the company has taken approx. 5% hike on average across various categories in April. BAJAJELEC planned a further hike in May, June but didn’t take it looking at commodity prices starting to cool off.
- [00:17:13] Hitesh Taunk from ICICI Direct asked about the market share for leading products. Anuj Poddar MD said that though it doesn’t publish market share, in numbers, BAJAJELEC has gained market share mainly in fans, followed by lighting and appliances.
- [00:19:43] Akhilesh Bhandari with ICICI Prudential enquired about the gap between the price increase vs. the blended cost increase till 1Q23. Anuj Poddar MD answered that broadly for the last 4-5 quarters, BAJAJELEC has been running at a lag of 2-3 percentage points.
- [00:23:25] Charanjit Singh from DSP asked that what will be expected market growth for kitchen appliances category. Anuj Poddar MD said that at an overall industry level, BAJAJELEC have been and will continue to have a higher growth.
- [00:28:55] Rakesh Roy from Indsec Securities asked about the new launches and product additions in the CP business. Anuj Poddar MD answered that regarding launches, one will see more launches in 3Q and 4Q compared to what’s seen in 1Q and 2Q.
- [00:30:46] Harshit Golecha asked if the company is planning for any inorganic growth in the near future. Anuj Poddar MD said the company does actively evaluate every opportunity that comes. However added that the opportunity should meet BAJAJELEC’s strategic and financial parameters.
- [00:39:52] Aakash Fadia from YES Securities asked about the update on logistics cost saving initiatives currently. Anuj Poddar MD answered that BAJAJELEC has not yet realized the full benefits of that.
- [00:47:25] Amit Mahawar from Edelweiss asked about the investment in each business specifically in the next 1-2 years. Anuj Poddar MD clarified that it’s hard to quantify. In each business, what’s required is invested. The investment is not so much of money, but of people to strengthen management leadership talent across the board.
- [00:53:12] Chirag Lodaya from Valuequest enquired that if in coming quarters, BAJAJELEC will see positive volume growth due to the sharp price increase. Anuj Poddar MD said that it will see positive volume growth. 2Q23 will be a blend of some of legacy inventory higher cost inventory, but BAJAJELEC will start seeing improvement in Q2.
- [00:54:14] Rakesh Roy with Indsec Securities asked about the segment contribution in fan business in 1Q23 and ratios for 4Q22. Anuj Poddar MD replied that in fans, premium was about 20%, economy and mid another 20% and rest the lower segment. In 4Q22, the ratio was slightly lower with premium at 14-15%.