Q2FY22 Result Analysis
- The Consolidated total revenue from operations of the company has just grown by 6% YoY from Rs. 599 Cr. in the quarter ended 30th September 2020 to Rs. 635 Cr. in the quarter ended 30th September 2021. Sequentially, the revenue has gone down by 6.9% from Rs. 682 Cr. in the quarter ended 30th June 2021.
- The Earnings Before Interest, Taxes, Depreciation & Amortisation (EBITDA) of the company have also fallen by 30.2% YoY from Rs. 96 Cr. in Q2FY21 to Rs. 67 Cr. in Q2FY22. The EBITDA of the company went down by 26.8% from Rs. 91 Cr. in Q1FY22.
- The EBITDA margin has contracted by 550 bps YoY and 290 bps QoQ to 10.5% in the quarter ended 30th September 2021.
- The Profit Before Tax (PBT) has also distressed by 34.6% YoY to Rs. 58 Cr. in Q2FY22 against Rs. 89 Cr. in Q2FY21. Quarter-on-Quarter the PBT has decreased by 51% from Rs. 119 Cr. in Q1FY22.
- The company has generated a Net Profit of Rs. 42 Cr. distressed by 40.3% YoY and 57.3% QoQ from Rs. 71 Cr. and Rs. 99 Cr. in Q2FY21 and Q1FY22 respectively.
- The Net Profit Margin stood at 6.6% in Q2FY22 which has contracted by 520 bps YoY and 790 bps QoQ.
- The Board of Directors has declared an interim dividend of Rs. 1.5 per equity share. The Company has fixed 06 November 2021 as the record date for payment of interim dividend.
- Also in addition to the above interim dividend of Rs. 1.5 per equity share, an interim dividend of Rs. 1.5 per share i.e., 75% on Equity Capital was declared and paid during the current period. Hence total dividend of Rs. 3 per share has been declared during the current period.
- During the current quarter, Shop TJS Limited, UK has sold its 100% investment in wholly-owned subsidiary Shop LC GmbH, Germany to its parent company, i.e., Vaibhav Global Limited, India.
- Digital revenue mix continuously increasing, now at 36% of total retail revenue.
- Margin momentarily impacted by elevated sea freight and sustained investment on digital platforms.
- Cognizant investments in Digital Platforms and Broadcasting resulted in a 5.3% increase in new customers over pandemic induced a higher base of customers of last year. Adjusting for customers who bought essentials only, the increase would be 33.9%, and compared to Q2 FY20, the increase would be substantially higher at 61.0%.
- Significant increase in Unique Customers (TTM basis) to 4,75,195 from 4,46,905 during the same period last year (6.3% Y-o-Y).
- Operations commenced in Germany with e-tailing across prominent TV and Digital Platforms Live TV Broadcasting in 21 mn households.
- Launched 2 new D2C Brands: TAMSY (female apparel brand) and RACHEL GALLEY (jewelry brand).
- Invested in GEEK+ robotic automation in warehouses (USA and UK) leading to substantial improvement in picking capacity.
- 100% power requirement at manufacturing units in Jaipur (India) is catered by 3.23 MW solar power capacity
Earnings Call Highlights:
- New Investments has already given the company a 5.3% increase in new customers in Q2 compared to pre-pandemic induced high new customers count in Q2FY21.
- New Registrations during the 12-month period continued to be strong at 3 Lakhs corresponding period of the previous 12 months.
- Customers bought an average of 30 pieces on a ttm basis from the company compared to 27 pieces in the corresponding period of the previous year.
- Retention rate stood at 44% on a ttm basis compared to 50% for the same period last year. This is partly impacted by high new customer addition in Q2FY21 going to essential items offered.
- The retention rate of the old customer base continues to remain strong.
- TV Revenues have shown marginal improvement YoY witnessing strong growth of 24.6% YoY.
- Digital Revenue in Q2FY22 increased by 8.6% YoY over the same quarter in FY20 it grew by 52.9% YoY to Rs. 226 Cr. during this current quarter.
- TV contribution to retail revenues is now at 64% while the balance is 36% accruing from the digital segment as the business continues to get greater traction there.
- In the overall product mix, revenue contribution from non-jewelry products was at 30% in Q2 which has significantly increased from single-digit levels a few years back.
- During the quarter, Budget Pay contributed 38% of Total Retail Revenues. The Budget Pay feature provides the customer with the convenience of buying on EMIs
- Operating Cash Flow came in at Rs. 53 Cr. and Free Cash Flow (FCF) was negative Rs. 27 Cr. FCF also reflected planned higher CAPEX on warehouse automation, digital capability building measures, and initial operating cost of Germany
- Gross Margins continues to be strong, however, EBITDA margin was impacted due to several factors, including higher shipping costs owing to global supply chain constraints, initial operations costs in the recently launched German operations, increased airtime spend as onboarded new TV Channels and OTT platforms, and stepped up digital market investments.
- A slight drop in EBITDA Margins of Q2FY22 (excluding Germany) was partly impacted by a short-term increase in sea freights owing to global supply chain constraints, and new increased investment in new TV OTA Channels as well as accelerated investment in digital marketing spends.
- The Management expects most of these margin-affecting factors to be transient and the company will rebound to a growth trajectory in the coming quarters.
- The destruction in the global supply chain resulted in higher inventory levels and consequently higher increased working capital investments.
The Company launched ‘TAMSY’- a new fashion apparel brand for women in USA, UK, and Germany.
During the quarter, the company also acquired worldwide online brand rights of ‘RACHEL GALLEY’- a UK-based multiple-award-winning jewelry brand.
The management is confident of its prospect and delivered growth guidance of 16% to 18% for the current year.
What Should Investors Do?
Vaibhav Global Limited has posted poor quarterly results for Q2FY22 but the management has given positive commentary on the growth trajectory and the company’s performances for the coming quarter. Do follow due diligence before making any investment decision or do consult a financial advisor before making any investment decisions.