Bajaj Electricals Limited Q4 FY23 Earnings Conference Call Insights

Key highlights from Bajaj Electricals Limited (BAJAJELEC) Q4 FY23 Earnings Concall

Q&A Highlights:

• [00:04:31] Achal Lohade from JM Financial asked about information on the receivables for the CP business including lighting and elaborate on the increase in EPC receivables days and its future outlook. E.C. Prasad CFO said that total receivables increased from INR1,361 crores to INR1,565 crores. EPC business receivables decreased from INR730 crores to INR434 crores while CP receivables increased from INR424 crores to INR838 crores due to a change in business mix and tough market conditions. This trend is expected to recede over the next couple of quarters.

• [00:06:56] Achal Lohade from JM Financial enquired on the extent of market share gain in large categories like fans, water heaters, and mixers following the growth in 3Q and 4Q. Anuj Poddar CEO said that there is no concrete third-party industry aggregate data to derive market share gain from. The company has been driving industry-leading growth over the last three years through product launches, portfolio expansion, and brand spend. Market share has been gained in coolers and fans in particular.

• [00:08:59] Anirudh Agarwal at ValueQuest asked if the company is on track for the GTM changes in consumer lighting to start playing out from 1Q and are there more things to be done on product pricing and consumer pull. Anuj Poddar CEO replied that consumer lighting degrew this quarter, but professional lighting compensated for the loss. Product launches are on track, but GTM is transitioning and will accelerate when market conditions improve.

• Anirudh Agarwal at ValueQuest asked how BAJAJELEC sees lighting margins playing out going ahead assuming B2B remains stronger for 1H and considering additional investments. Anuj Poddar CEO answered that BAJAJELEC is confident about margin expansion in the medium to long term. Professional lighting margins could reach 8-9%, and consumer lighting margins could reach the teens.

• [00:15:07] Aakash Javeri of Perpetual Investment asked about the consumer perception of 4-start and 5-star rated fans vs. the lower star-rated fans. Anuj Poddar CEO said that consumer behavior and market practices will evolve over the next 1-2 years. In fans, there is a polarized behavior with consumers buying either 1-star or 5-star fans. The focus should be on star-rating, not technology, as it will remain while technology evolves.

• [00:17:44] Aakash Javeri of Perpetual Investment enquired about information on the current channel inventory scenario and when it is expected to normalize for fans. Anuj Poddar CEO replied that by the end of 2Q, channel inventory trends should have normalized. BLDC products are already available and their pickup is expected to happen over the next couple of years.

• [00:19:06] Manoj Gori with Equirus asked about an update on the current status and future plans for appliances and Morphy Richards in FY24 and FY ’25. Anuj Poddar CEO said that appliance sales grew 16% in 4Q, driven by coolers. BAJAJELEC is expanding its export license and revamping the Morphy Richards product portfolio. Overall, the company is upgrading its appliances to be more premium and aspirational.

• [00:30:13] Arun Agarwal from Kotak Securities asked how the costs of the retailer bonding program, loyalty program and logistics have evolved during this quarter. Anuj Poddar CEO said fixed costs have increased due to the transition from outsourcing logistics. There is potential for 2-3 percentage points optimization in logistics over the next 2 years. The increase in other expenses is partly due to a reclassification of discounting and includes warranty costs and R&D investments.

• [00:32:51] Arun Agarwal at Kotak Securities enquired if there is anything one-off causing the increase in depreciation this quarter compared to the past few quarters. E.C. Prasad CFO replied that the increase in depreciation is due to taking logistics in-house and accounting for godown rentals as a right-to-use asset.

• [00:43:53] Achal Lohade at J.M. Financial asked how the company sees the underlying demand environment and are there any signs of change or continued weakness. Anuj Poddar CEO replied that there is continued demand weakness. Some commentary suggests issues in FMCG and essentials, but this has not yet been seen in the business.