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Going Strong

Vaibhav Global Ltd (VGL) started the new fiscal year on strong note. Sales grew by 24% yoy to Rs 682 cr, despite high base of last year due to covid related high traction. Gross margins came at 65% vs 64.3%/61.2% in Q1FY21/Q4FY21. It is also highest in last 4-5 yrs. EBITDA margins improved to 13.4% vs 13.4%/11.8% in Q1/Q4. Current quarter includes the initial phase launch expenses of Gemrnay business. Excluding this the EBITDA grew by 34% vs reported growth of 24%. The company had forayed into Germany with ~2mn investment during Q4FY21.

VGL is confident of breaking even in Germany within three years of roll out, given Germany is Europe’s largest home shopping market with 38 mn TV at homes. In the first year i.e. FY22, Germany is expected to do loss of $3-5 mn. Since the advent of COVID, the company has witnessed accelerated digital adoption. As a result, VGL has gained traction on TV Home shopping, ecommerce and several emerging platforms For FY22, the management has maintained its guidance of 16-18% retail volume growth.

Key highlights

* Both TV (4.5% yoy) and Web (6% yoy) witnessed sinlge digit volume growth on high base of last year due to Covid related purchases. However, as the sale of essential goods has declined, ASP of both TV and web have improved.

* The company has implemented another key initiative of launching TJC Plus for its UK customers. While the additional costs of such key initiatives are built into the benefits in the form of customer acquisition and retention will accrue over the time.

* Contribution of Budget Pay was 38%. Revenue from non-Jewellery products was 31%, in-line with FY21 levels.

* New registrations during TTM basis continue to be strong and came in at 2.9 lakh compared to 2.37 lakh in the corresponding period of the previous year. Customers bought an average of 30 pieces on TTM basis from as compared to 27 pieces in the corresponding period of the previous year.

* Retention rates stood at 45.7% on TTM basis compared to 50.5% for the same period last year. This is partly impacted by high new customer addition in Q1 FY20-21 owing to essential items offered last year.

* The company continued with its policy of recommending dividend every quarter and has approved a dividend of Rs. 1.5 per share for Q1.

Valuations and Recommendations

Our last quarter’s call of booking partial profits has worked well. The stock has corrected since then despite broader markets booming. However, as the demand outlook remains positive we believe investors can re-enter at current price. Though the company has narrowed thevaluation gap with other FMCG players, we believe there is still scope for further upmove. We recommend investors to re-enter at current levels

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