Bajaj Corp, Dabur, Marico and Jyothy Lab

For FMCG in general
  • 2009 to 2014 were golden years
  • around 50% of market share is of food products in this sector (Dabur has siginificant revenue jump compared to previous quarter)
  • After food products, 22% personal care and 8% hair care.
  • India being relatively young population country – personal care + health + food products may continue to grow.
  • 2016-17 were somewhat muted. However Marico did lot better until early 2017 compared to their peers due to low raw material cost and better margins it seems (Copra prices and crude price). Due to same reasons but of opposite nature they are under pressure now.
I feel below are some of the main drivers/themes for coming 1-2 years:
  • Internet retailing on uptrend – expected to reach 70 Billion (7% of overall sale)
  • Consumption of products with natural ingredients on the rise
  • Normal Monsoon this year + rural penetration.
Why Natural ingredient consumptions? – Mighty coke/pepsi also forced to get into health oriented drinks. Dabur last quarter performance in otherwise muted market. Patanjali another example – they will generate healthy/natural product awareness but how they play in long term is yet to see.
Marico – 
key concerns – rising commodity prices, muted male grooming portfolio and persistent weakness in international business.
I think high copra prices will continue to put pressure on their margin. Copra surged 45% since begining of the year and crude too surged around 30%. Even with their recent 10% increment of price, I guess margin will remain under pressure.
Edible oil space – in long term they are trying to revamp their business strategy as it seems to be losing ground on innovation front. not much revenue growth in this core product. I am sure their experienced management must have seen similar situation in the past, but, personally, I will wait to get into this one.
Dabur –
Indian business revenue was up 10% y-o-y on the back of 7.2% vol growth.
International Business grew by 3.9% on constant currency basis on the back of strong growth in Egypt, Nigeria and Turkey
Operating margin at 21.4% in Q2 FY18 vs 20.6% in Q2 FY17 although not comparable due to GST
Domestic business (68% vs 65%)
International (31.6 vs 28.5%)
Oral care – growth of 22.8% (toothpaste category 26%)
Dabur –  Anmol coconut hair oil
Dabur Jasmine – more than 35% cheaper than parachute Jasmine
Dabur + Amazon – some specially created products only for amazon global customers
healthy pace of innovation and launches
growth across all their verticals (food, homelier, oral care, etc)
Dabur has been only company which has been able to withstand onslaught of Patanjali.
Somehow their name also inspires healthy product (who can forget chawanprash and perception it creates).
 
Bajaj Corp-
Almond drops accounts for more than 90% of total sales. 60% market share in volume and second to Marico parachute.
Acquired skin care brand Nomark in 2014. became no 1 cream in anti marks segment. currently second largest face wash from nomarks in india – they are attempting to make it all season cream.
marico parachute market share 32% and bajaj 10% (second)
plan to launch 6 new products in 2018 (one in q1 of 2018)
main raw material – Light Liquid Paraffin and Vegetable oil (stock to last little over 2017)
Nomark for international revenue drive + better penetration in rural areas combined with the name Bajaj.
I dislike pledged shares though.
 
Jyothy Lab
Henkel having an option to buy 26 percent stake in Jyothy Laboratories was the biggest trigger for the stock. The company’s board has notified that Henkel has decided to not exercise its option of buying 26 percent stake in Jyothy Laboratories, which is a big negative for the stock.
Revenue from personal care segment grew 46.7% at 50.7 crore against 34.6 crore in the year ago.
FMCG firm Jyothy Laboratoriestoday reported a 46.93 percent increase in its consolidated net profit at Rs 45.71 crore for the September quarter. The company had posted a net profit of Rs 31.11 crore during the same period of the previous fiscal, Jyothy Laboratories said in a regulatory filing.
GST comparable revenue growth 9.6% (volume growth 3.5%)
Gross Margin at 48.1% Vs 46.8% in the same period last year.
Fabric care – 4.4%
Dishwashing – 12.4%
Personal Care – 46.7% (50.7 vs 36.5 in revenue growth)
 
Brand wise revenue
Margo – 58.2%
Exo  15.1%
Henko – 10%
 
Category wise business share
Fabric care – 42% (Henko and Ujala)
Dishwashing 30%
Personal care – 12%
Household/insectisides – 12%
Margo neem leaves – 58% comparable growth

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