Vaibhav Global ~ Vertically integrated value e-tailer of Jewellery and Lifestyle Products

Vaibhav Global Q1 FY25 Earnings Analysis: Key takeaways!!

Business Outlook:

• Revenue grew 15% YoY to Rs. 756 crores, driven by digital growth and recent acquisitions
• Gross margin expanded significantly to 66.1% from 61.2% last year
• EBITDA margin contracted to 8.7% from 10% due to higher marketing and broadcasting costs
• Management reiterated FY25 revenue growth guidance of 14-17% with operating leverage
• Mid-teens revenue growth projected for future periods with continued operating leverage

Strategic Initiatives:

• Focusing on “4R Strategy” – Widening Reach, New Customer Registration, Customer Retention, and Repeat Purchases
• Investing in digital marketing and better TV channel positions to drive growth
• Integrating recent acquisitions Ideal World and Mindful Souls
• Leveraging VGL’s supply chain to improve profitability of acquired businesses
• Exited low-margin apparel manufacturing business

Trends and Themes:

• Shift towards digital channels – now 40% of revenue and 45% of volume
• Budget Pay EMI option contributing 38% of B2C revenue
• Expanding customer base – unique customers up 37% YoY to 636,000
• Focus on sustainability – using renewable energy, rainwater harvesting

Industry Tailwinds:

• Growth in online retail industry, especially in the US
• Recovery expected in UK and German economies as interest rates moderate

Industry Headwinds:

• Cautious consumer sentiment in UK due to economic uncertainty
• Overall jewelry market seeing negative growth in US
• Election cycle in US may impact viewership

Analyst Concerns and Management Response:

• Rising content and broadcasting costs (20% of revenue in Q1)
  Management: Expects to moderate to 18% for full year, sees operating leverage ahead
• Slow growth in core US/UK markets
  Management: Expects improvement as macro conditions stabilize, mid-teens growth sustainable

Competitive Landscape:
The company positions itself as vertically integrated with quick turnaround times

Guidance and Outlook:

• FY25 revenue growth of 14-17% with operating leverage
• 200 bps gross margin expansion expected YoY
• Germany to be profitable at operating level by H2 FY25
• Mid-teens revenue growth expected in future periods

Capital Allocation Strategy:

• Declared interim dividend of Rs 1.5 per share (90% payout)
• Focused on organic growth and integrating recent acquisitions
• No immediate plans for further geographic expansion

Opportunities & Risks:

Opportunities:

• Further digital penetration and customer migration from TV to digital
• Geographic expansion (e.g. Japan in 3+ years)
• Margin improvement as acquisitions integrate

Risks:

• Macro uncertainties in key markets
• Rising customer acquisition costs
• Integration challenges with acquisitions

Customer Sentiment:

• Strong in US, cautious in UK, improving in Germany
• Overall retention rate of 40%, repeat purchases of 24 pieces per annum

Top 3 Takeaways:

1. Digital growth and acquisition integration driving revenue, but near-term margin pressure
2. Management confident in mid-teens growth sustainability with operating leverage
3. Focus on customer acquisition and retention through omnichannel strategy