About the Company

Vaibhav Global is a company dealing in fashion jewellery and lifestyle products. They mainly source and assemble their products in India and South East Asia and sell these products in the US and UK primarily. They sell both to businesses and retail customers whom they reach through TV sales channels and shows through they reach more than 100 million TV homes in the US and UK.

Q4 FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 132 198 -33.33% 131 0.76% 462 543 -14.92%
PBT 23 108 -78.70% 14 64.29% 51 133 -61.7%
PAT 21 106 -80.19% 13 61.54% 47 127 -62.99%

Consolidated Financials (In Crs)
  Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 673 502 34.06% 729 -7.68% 2558 2001 27.84%
PBT 72 48 50% 116 -37.93% 344 236 46%
PAT 56 40 40% 92 -39.13% 272 190 43.16%

Detailed Results

  1. The company continued its phenomenal run in FY21 with a consolidated revenue rise of 34% YoY and PAT rise of 40% YoY. Retail revenues rose 33% YoY in Q4 & 31% YoY in FY21.
  2. EBITDA grew 41% YoY with margins improving 70 bps YoY to 12.8%.
  3. The company has declared a final dividend of Rs 1.5 per share bringing up the total dividend for FY21 to Rs 17.5 per share.
  4. TV sales accounted for 64% of sales while web sales accounted for 36% in FY21. Mobile sales accounted for 61% of web sales in Fy21.
  5. Non jewellery items now account for 31% of sales in FY21.
  6. The company has a TV reach of 79 million households in the USA and 25 million households in the UK.
  7. The revenue growth in different categories in Q4 is:
    1. TV sales: 27.9% up YoY (Rs 417 Cr)
    2. Web sales: 43.2% up YoY (Rs 242 Cr)
    3. B2B: 115.6% up YoY (Rs 7 Cr)
  8. Shop LC revenues grew 28.7% YoY to $62.7 million in Q4 & 22.2% YoY to $234.9 million in FY21.
  9. TJC UK revenues grew 35% YoY to GBP 20.1 million in Q4 & 31.6% YoY to GBP 80.2 million in FY21.
  10. TV sales volumes have risen to 2.05 million in Q4 from 1.529 million last year. Correspondingly average selling price has fallen to $27.9 from $29.5 a year ago.
  11. Web sales volumes have risen to 1.348 million from 1.067 million a year ago. The average selling price here has risen to $24.6 from $21.9 a year ago.
  12. Gross margins in Q4 have risen to 61.2% from 60.4% last year while EBITDA margin has risen to 12.8% from 12.4% in the same period.
  13. PAT margin in Q4 has also improved to 8.4% from 8% a year ago.
  14. The company has a negative net debt of Rs 377 Cr.
  15. Operating cash flow for FY21 was at Rs 324 Cr while free cash flow was at Rs 268 Cr.
  16. ROE in FY21 was at 32% while ROCE was at 61%.

Investor Conference Call Highlights

  1. VGL now has a cash balance of Rs 468 Cr on the balance sheet.
  2. The unique customer count has grown 38% YoY to a total of 501,000 (321,000 in USA & 179,000 in UK).
  3. Shop LC, USA added international marketplaces like Amazon and Walmart Canada to its system.
  4. VGL launched a new channel in TJC called TJC Beauty, which focuses on offering beauty products while providing viewers with expert reviews.
  5. The company recently announced the formation of Shop LC GmbH which will be covering Germany. Germany is Europe’s largest home trading market with 38 million TV homes. The management is confident of breaking even in Germany within 3 years of rollout.
  6. Capex in the German entity is expected to be at $2 million in FY22.
  7. VGL registered an average purchase of 27 pieces on a TTM basis in FY21 by customers as compared with 30 pieces in FY20.
  8. The customer retention rate stood at 51.5% on a TTM basis, which was higher than 50% last year.
  9. The management guides for 15% to 18% retail revenue growth in constant currency terms in UK & USA.
  10. During FY ’21, CapEx of INR 56 crore was incurred, mainly for investments in newly commissioned solar power projects, studio improvements, warehouse improvements, ERP, mobile upgrades, and website upgrades.
  11. Q4 expenses had 2 one-time items of a one-off COVID bonus payout and some initial OpEx on the German company setup.
  12. The new separate beauty channel is only live 4 hours a day compared to 24 hours of the regular new channels. It is to be scaled up slowly from 4 hours to 8 hours as more customers come in. it is operating at a profit currently.
  13. The management expects operating losses of $3-5 million in the first year of operations in Germany.
  14. The company is seeing the clearance and rising auctions pulling in higher ASPs in the web channel.
  15. The company is not going for a separate TV channel for Canada and is mainly relying on web channel and US shipping facilities to service Canadian customers. The company will only be using the TV channel from the U.S. broadcasting into Canada.
  16. The focus on German operations will be predominantly on jewelry.
  17. The management expects growth in digital to continue to outpace overall growth for VGL.
  18. The company has reduced its delivery time in UK to within 24 hours of dispatch.
  19. The debt has increased in FY21 as the company was eligible for the paycheck protection program loan in USA and it decided to take a PPP loan of $4.8 million. VGL has already applied for forgiveness as per the rules of the scheme but has not received audit confirmation yet.
  20. VGL will convert this $4.8 million into a grant on audit completion. Till then it will stand as a loan in the balance sheet.
  21. The $2 million capex in the German entity includes the website, new offices, and a new studio that is going to be built.
  22. Through social media and web channels, the company is targeting the female 40-plus demographic as most of its products are geared towards this segment.
  23. The packaging and distribution expense has risen sharply mainly due to the TJC PLUS membership program and the rising Lifestyle Products which incur higher shipping costs.

Analyst’s View

Vaibhav Global has established itself as an influential player in the jewellery exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through new selling mechanisms and product offerings. The company has had another blockbuster quarter with revenue growth of 34% & profit growth of 40% in Q4. It has also seen its unique user base expand 38% YoY to 5.01 lacs. The company has also launched a new channel TJC Beauty which is already profitable and has established its German subsidiary. It is expecting this new geography to break even in 3 years. It remains to be seen how long the company will be able to maintain its current growth pace and match up to its other TV sellers rivals like QVC and JTV, and whether the venture into the new country become fruitful as per management expectations. Nonetheless, given the company’s prudent and efficient cost management, its resilient supply chain, and its agility to introduce new products fast depending on changing situations, Vaibhav Global seems to be an interesting jewellery stock to watch out for.

 


 

Q3 FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 131 127 3.15% 122 7.38% 330 345 -4.35%
PBT 14 5 180.00% 15 -6.67% 28 25 12.00%
PAT 13 4 225.00% 13 0.00% 26 21 23.81%

 

Consolidated Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 729 567 28.57% 602 21.10% 1885 1499 25.75%
PBT 116 82 41% 89 30.34% 272 188 44.68%
PAT 92 66 39% 71 29.58% 216 151 43.05%

Detailed Results

  1. The company continued its phenomenal run in FY21 with a consolidated revenue rise of 29% YoY and PAT rise of 39% YoY. Retail revenues rose 30% YoY.
  2. EBITDA grew 37.3% YoY with margins improving 110 bps YoY to 17.4%.
  3. The company has declared a third interim dividend of Rs 7.5 per share for FY21.
  4. TV sales accounted for 64% of sales while web sales accounted for 36% in 9M. Mobile sales accounted for 59% of web sales in 9M.
  5. Non jewellery items now account for 32% of sales in 9M.
  6. The company has a TV reach of 74 million households in the USA and 25 million households in the UK.
  7. The revenue growth in different categories in Q3 is:
    1. TV sales: 24% up YoY (Rs 460 Cr)
    2. Web sales: 43% up YoY (Rs 256 Cr)
    3. B2B: 26.9% down YoY (Rs 9 Cr)
  8. Shop LC revenues grew 20% YoY to $65 million in Q3 & 19.9% YoY to $172 million in 9M.
  9. TJC UK revenues grew 32.7% YoY to GBP 24.3 million in Q3 & 30.6% YoY to GBP 60 million in 9M.
  10. TV sales volumes have risen to 2.134 million in Q3 from 1.719 million last year. Correspondingly average selling price has fallen to $29.2 from $30.5 a year ago.
  11. Web sales volumes have risen to 1.463 million from 1.171 million a year ago. The average selling price here has risen to $23.7 from $21.6 a year ago.
  12. Gross margins in Q3 have fallen slightly to 61.4% from 61.8% last year while EBITDA margin has risen to 17.4% from 16.3% in the same period.
  13. PAT margin in Q3 has also improved to 12.7% from 11.6% a year ago.
  14. The company has a negative net debt of Rs 304 Cr.
  15. Operating cash flow for 9M was at Rs 198 Cr while free cash flow was at Rs 166 Cr.
  16. ROE in 9M was at 30% while ROCE was at 56%.

Investor Conference Call Highlights

  1. The unique customer base has risen 33% YoY to 4.7 lacs.
  2. The company sees a good opportunity in the manufacturing and export of textiles and garments from India.
  3. Shop LC expanded its presence on third-party marketplaces by listing products on Amazon, eBay and Walmart in Canada.
  4. VGL also partnered with Mavrck, a leading all-in-one influencer marketing platform, to boost its influencer program.
  5. In TJC, the company launched a customer loyalty program TJC PLUS.
  6. As of Dec 2020, VGL has seen its customers buy an average of 27 pieces on TTM basis as compared to 30 pieces last year. The retention rate has improved slightly to 51.4% from 50.7% last year.
  7. The management provides guidance of achieving constant currency growth of 21-23% in FY21 and 15-17% in FY22.
  8. For 9M, budget pay contribution to overall retail revenues stood at 36%.
  9. Cash and cash equivalents stood at Rs 380 Cr as of 31st Dec 2020.
  10. The management maintains that it will not take any big risks and will be operating while maintaining 2 main guardrails of revenue growth of at least 15-17% and gross margins above 60%.
  11. For Reach, the company will be looking to expand to new countries. For Registrations, it will be setting marketing sped targets to improve new registrations. For Retention, it will be doing investment into sales force integration, marketing automation on cloud and Salesforce Commerce Cloud for the web platform. All 3 R’s should help the company increase the repeat rate from existing customers.
  12. New customer acquisition will be 50:50 for TV and web according to the management. It expects revenue contributions for both mediums to become 50:50 in 3 years’ time.
  13. The total volumes sold in marketplaces were 3 times that sold last year. But the company has not been able to complete successful transition for many of these customers to its main platform. Just 2% have transitioned to the main sites.
  14. On the other hand, social media conversions have been small as compared to marketplaces but these have been 100% conversions. The management also admits that customer acquisition costs from social media is much less than digital spend on search engines.
  15. The product innovation and experimentation have also yielded good results as to which products people are more ready to purchase online or through TV sales. Among these products are candies, biscuits, mid-market perfumes and personalized jewellery.
  16. The variations in average sales price are not of much import for the company as it is committed to maintaining its value image and staying at ASPs of roughly 50% of its competitors.
  17. The management admits that although VGL may be ahead of competitors like QVC in terms of its story point of better vertical sourcing, it still lags behind them in terms of digital understanding of customers.
  18. The company is close to Amazon in terms of logistics capability in UK and is aiming to do the same in USA.
  19. The fashion and apparel market in USA is 10 times that of the jewellery market. There is also no direct retailer catering to the company’s primary target segment of population with age above 40 years in USA and UK. The company is just looking to address this gap in the market and utilize its manufacturing and supply operations to capture this vacant space.
  20. Despite there being more brand consciousness in advanced economies like USA and UK, the value segment will always thrive no matter the spending habits of the demographic according to the management.
  21. In the TV space, the company’s competition is Curate Group, QVC, ShopHQ, Jewel Television & Ideal Shopping. In the digital space, all the marketplaces like Amazon, Walmart, etc are competitors for VGL.

Analyst’s View

Vaibhav Global has established itself as an influential player in the jewellery exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through new selling mechanisms and product offerings. The company has had another blockbuster quarter with revenue growth of 29% & profit growth of 45% in Q3. It has also seen its unique user base expand 33% YoY to 4.7 lac. The company is also looking to slowly establishing its presence in the digital medium especially in the social media and influencer space as conversions from these are 100%. VGL is also looking to capitalize on its target demographic of adults aged above 40 and address the gap of fashion and apparel in this age group. It remains to be seen how long the company will be able to maintain its current growth pace and match up to its other TV sellers rivals like QVC and JTV, and also compete with e-commerce giants like Amazon and Walmart in the web space. Nonetheless, given the company’s prudent and efficient cost management, its resilient supply chain, and its agility to introduce new products fast depending on changing situations, Vaibhav Global seems to be an interesting jewellery stock to watch out for.


Q2 FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 122 109 11.93% 77 58.44% 199 218 -8.72%
PBT 15 10 50.00% 0 3850.00% 14 20 -30.00%
PAT 13 8 62.50% 0 4433.33% 13 17 -23.53%

Consolidated Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 602 488 23.36% 555 8.47% 1156 932 24.03%
PBT 89 61 45.90% 67 32.84% 156 106 47.17%
PAT 71 49 44.90% 53 33.96% 123 85 44.71%

 

Detailed Results

  1. The company continued its good run in FY21 with a consolidated revenue rise of 23% YoY and PAT rise of 45% YoY. Retail revenues rose 29% YoY.
  2. EBITDA grew 42% YoY with margins at 16.5%.
  3. The company has declared a second interim dividend of Rs 5 per share.
  4. TV sales accounted for 64% of sales while web sales accounted for 36% in H1. Mobile sales accounted for 59% of web sales in H1.
  5. Non jewellery items now account for 32% of sales in H1.
  6. The company has a TV reach of 76 million households in the USA and 25 million households in the UK.
  7. The revenue growth in different categories in Q2 is:
    1. TV sales: 24% up YoY (Rs 387 Cr)
    2. Web sales: 40.5% up YoY (Rs 208 Cr)
    3. B2B: 85.8% down YoY (Rs 4 Cr)
  8. Shop LC revenues grew 19.5% YoY to $56.1 million in Q2 & 19.9% YoY to $107.1 million in H1.
  9. TJC UK revenues grew 26.2% YoY to GBP 18.7 million in Q2 & 29.1% YoY to GBP 35.8 million in H1.
  10. TV sales volumes have risen to 1.773 million in Q2 from 1.467 million last year. Correspondingly average selling price has fallen to $29.4 from $30.3 a year ago.
  11. Web sales volumes have risen to 1.292 million from 0.943 million a year ago. The average selling price here has fallen to $21.7 from $22.3 a year ago.
  12. Gross margins in Q2 have risen slightly to 62.9% from 61.3% last year while EBITDA margin has risen to 16.5% from 14.3% in the same period.
  13. PAT margin in Q2 has also improved to 11.8% from 10.1% a year ago.
  14. The company has a negative net debt of Rs 232 Cr.
  15. Operating cash flow for H1 was at Rs 93 Cr while free cash flow was at Rs 77 Cr.
  16. ROE in H1 was at 29% while ROCE was at 50%.

Investor Conference Call Highlights

  1. VGL’s retail business volumes exceeded 3 million pieces in this quarter. The company served approximately 450,000 unique customers in H1 which was up 27% YoY.
  2. In Shop LC, the company did theme events like Christmas in August that received a strong response, enhanced studio set-ups both indoor and outdoor and expanded marketplace presence to Overstock.com.
  3. In TJC UK, the company launched QuickPay for preregistered customers on the website, Rising Auction was made available on the mobile app, expanded its presence to the Fruugo! and Wayfair marketplaces, launched social DR, & organized 2 virtual customer open days.
  4. The company rolled out Microsoft D 365 ERP to both retail units in the U.K. and U.S. in the quarter.
  5. The company added new geographies into its network in Q2. They were South Korea and Japan for beauty products and Vietnam for apparel.
  6. VGL successfully commissioned a 1-megawatt solar PV power generation project under captive use in Bikaner, Rajasthan. The management expects renewable power to meet 100% of company requirements next year from the current 45%.
  7. New registrations on a TTM basis came in at 260,000 compared to 180,000 last year.
  8. Average customer spending was in 27 items vs 30 items a year ago.
  9. The repeat rate is low due to a sharp increase in new customers in H1 this year.
  10. The management expects to maintain at least 18-20% constant currency growth in retail revenues in H2.
  11. In H1, the contribution of Budget Pay to retail revenues was 36%.
  12. Capex incurred during H1 was at Rs 16 Cr.
  13. The management has admitted that one reason for the rapid rise in customer addition has been COVID-19 as people have been confined to their homes. But product portfolio addition and merchandising efforts have also led to capitalizing on the opportunities created.
  14. The management maintains a growth CAGR of 15-17% in the medium term.
  15. 30% of expenses are variable having shipping costs, credit card expenses, marketplaces, etc in them. 10% is semi-variable which includes freights. The rest 60% is fixed in nature.
  16. The essential category has gone down to 3.5% of sales in Q2 from 13.5% of sales in Q1. The drop-in space has been taken up by jewelery and other LSP categories.
  17. In the non-jewellery, beauty product has been the most resilient segment for VGL. The second one would be home products like utensils, home décor, etc.
  18. Other income has come down for the company due to a fall in global interest rates. Most of the company’s funds are in the USA where rates have fallen low.
  19. The company has hired a 20-year experienced veteran from HSN to lead its OTT initiative. VGL hopes to do a business of $2 million in FY21 in OTT which is less than 1% of overall sales. This figure is expected to accelerate in the near future.
  20. The company is not in direct competition with Amazon and is even listed as a seller on Amazon. Amazon is expected to contribute to $13 million of sales in FY21 vs $4.5 million last year.
  21. VGL’s India unit has started to put products on Amazon Japan and Amazon Germany.
  22. The newly revised app for VGL will be launched in the USA in Q4 as the company doesn’t want to take chances of new customer experience during peak season.
  23. The company doesn’t provide Budget Pay on under-$20 products which contain the most essential items. In the long run, the management expects 40% to 45% of sales to come from Budget Pay.
  24. The company is looking to do some manufacturing capacity additions in India in the next few years. This would add Rs 10 Cr to its normal Capex run rate of Rs 30-35 Cr per year.
  25. The lifetime value of a customer who is omnichannel is approximately 15x than of the web-only customer and about 8x of a TV-only customer. Thus the company is looking to transition a single channel customer to as many channels as possible.
  26. Almost 11% of customers are now omnichannel.
  27. VGL is creating a team for branding and looking to hire professionals to develop in-house brands and product merchandising and strengthening the team from a strategic point of view, as its competitors are doing.
  28. The current OTA network reaches 20 million households and the company is aiming to reach all of these from its current level of 13-14 million in the USA.

Analyst’s View

Vaibhav Global has established itself as an influential player in the jewellery exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through new selling mechanisms and product offerings. The company has had another blockbuster quarter with profit growth of 45% in the current uncertain times. It has expanded its customer engagement to a more varied customer base than its traditional jewellery customer set and into newer segments like beauty and home care. The company is also looking to slowly establishing its presence in the digital medium where sales growth has been the fastest. It remains to be seen how long the company will be able to maintain its current growth pace and match up to its other TV sellers rivals like QVC and JTV, all of which have an established customer base and earns way higher per household than the company. Nonetheless, given the company’s prudent and efficient cost management, its resilient supply chain, and its agility to introduce new products fast depending on changing situations, Vaibhav Global seems to be an interesting jewellery stock to watch out for.

 


Q1 FY21 Updates

Financial Results & Highlights

 

Standalone Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 77 109 -29.36% 198 -61.11%
PBT 0 10 -104.00% 108 -100.37%
PAT 0 8 -103.75% 106 -100.28%

 

Consolidated Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 555 444 25.00% 502 10.56%
PBT 67 45 48.89% 48 39.58%
PAT 53 36 47.22% 40 32.50%

 

Detailed Results

    1. The company had a good quarter with a consolidated revenue rise of 25% YoY and PAT rise of 47% YoY. Retail revenues rose 32% YoY.
    2. EBITDA grew 42% YoY with margins at 14.1%.
    3. The company has declared an interim dividend of Rs 5 per share.
    4. TV sales accounted for 63% of sales while web sales accounted for 37%. Mobile sales accounted for 59% of web sales in Q1.
    5. Non jewellery items now account for 36% of sales.
    6. The company has a TV reach of 75 million households in the USA and 25 million households in the UK.
    7. The key demographic for the company remains the age group of above 45 which 83% of which still prefers watching traditional TV.
    8. The revenue growth in different categories in Q1 is:
      • TV sales: 24.8% up YoY (Rs 342 Cr)
      • Web sales: 47% up YoY (Rs 203 Cr)
      • B2B: 83% down YoY (Rs 5 Cr)
    9. Shop LC revenues grew 20.3% YoY to $51 million in Q1.
    10. TJC UK revenues grew 31.5% YoY to GBP 17.1 million in Q1.
    11. TV sales volumes have risen to 1.88 million in Q1 from 1.35 million last year. Correspondingly average selling price has fallen to $24.1 from $29.2 a year ago.
    12. Web sales volumes have risen to 1.3 million from 0.93 million a year ago. The average selling price here has fallen to $20.6 from $21.3 a year ago.
    13. Gross margins have risen slightly to 64.3% from 63.1% last year while EBITDA margin has risen to 14.1% from 12.4% in the same period.
    14. PAT margin has also improved to 9.6% from 8.2% a year ago.
    15. The company has a negative net debt of Rs 279 Cr.
    16. Operating cash flow for Q1 was at Rs 87 Cr while free cash flow was at Rs 82 Cr.
    17. ROE was at 26% while ROCE was at 49%.

Investor Conference Call Highlights

  1. On a trailing 12-month basis, the company served 426,000 unique customers in Q1FY21 compared to 347,000 in Q1 last year, an increase of 23% YoY.
  2. The company’s global supply chain network includes manufacturing setups in India and China and direct sourcing from micro-markets in more than 20 countries. When China and India were in respective lockdowns, other countries picked up the slack and kept retail operations adequately stocked.
  3. New registrations in the quarter jumped to 96,000 from 36,000 the same quarter last year.
  4. The company’s repeat rate defined as the average annualized quantity purchased by each customer on a trailing 12-month basis stood at 27.2 pieces per customer compared to 30.5 customers last year. The customer retention rate stands at 50.5% from 50.2% in Q1 of last year.
  5. The management continues to guide for 15-17% revenue growth in FY21 keeping in mind the uncertainties ahead.
  6. In the last 3 years, the company increased its market share in the UK from 1.5% to 3% emphasizing huge room for market capture and growth for the company.
  7. The company is still 1/3rd as efficient as Amazon in its warehouse operations thus showing room for operational efficiency. It is looking to add automation within its warehouses to do so. The majority of the company’s warehouses are in the UK and the USA.
  8. The company will add warehouses as soon as it runs out of capacity. It is also planning on setting up warehouses in both the East and West coasts in the USA. Right now it only has 1 location in South Central USA.
  9. The gross margins for the company is almost the same in online marketplaces like Amazon and its own digital properties.
  10. The company’s primary focus is on moving its customers from all channels (including social media) on to digital properties or television as this increases lifetime value a lot (at least 5x according to management).
  11. The current customer demographic is from 25 to 75 years.
  12. In terms of age, TV has the oldest customer set while digital has a little lower set. Social media has the lowest age set.
  13. TV revenue is expected to rise continuously as the company is still getting only $3 per home as compared to $25 to $ 60 for most of its competitors like QVC.
  14. Currently, the company is broadcasting at less than 2 channels per home while QVC is at 3.5 to 4 channels per home. This also shows the room for operational growth for the company.
  15. For the last 4 months, the company has started to advertise products through videos and still images on Facebook & Instagram. It is still early days to project the growth for this medium.
  16. The cost of acquisition for new customers is still very small and this si because it has become comparatively easier to acquire customers due to a decline in footfall in brick and mortar stores.
  17. The company has a waterfall systems in place, which is about more than 10 tactics to engage those customers in different ways through discounts, through offerings, through the catalog, through calling, etc.
  18. The product mix has reversed already with essentials falling to 7% from 17% in the last quarter. Jewellery is rising on the other hand improving the product mix for the company. Kitchen products are also continuing to sell well for the company.
  19. Marketplace sales for the company was at $4 million in Fy21 and is expected to be around $10-12 million in FY21, an increase of almost 3 times.
  20. Employee and other expenses have risen 20% & 26% YoY respectively as VGL paid higher salaries to its warehouse staff and studio production teams who operated in the pandemic from the site. Without these extra costs & forex changes, the increase would have been 8-9%.
  21. The OCVID cost of 4-5% is expected to reverse from Q2 onwards.
  22. Other Jewellery and household products, no other products are sold back and are mostly discarded if the seals are broken.
  23. Most of the unsold items are cleared off using auctions or clearance sales.
  24. The company is seeing good traction in the fabric Kaftan and it has started a factory for it in Jaipur which started last month.
  25. The company reiterated that it will only be going into new products which yield gross margins of above 60%.
  26. The company has also been aggressively marketing to customers in OTT and streaming services to transitioning those customers to the main business.
  27. The platform costs for the company on social media is 35-40% of sales currently. In online marketplaces, these costs are at 30-35%.
  28. The management believes that elevated growth levels should stay as long as people continue to stay at home. Once normal activities start, growth should come down to the earlier 15-17%.
  29. The company has had negligible addition to interest costs form forex impact on its working capital loan.
  30. The company continues to add more than 150 products each day.
  31. The company has a long term plan to enter Germany and Japan, but there are no plans to do so in the short term.
  32. The most dominant competitors for the company in the UK and USA are the Qurate Group which has more than 90% market share in both countries.
  33. The management has described VGL as Zara which develops its own products and sells them under the central brand, while Qurate is like Macy’s which its own brands as well as third party brands.
  34. The company has not any impact on its customer set from the reversal in payroll provision by the USA government.

Analyst’s View

Vaibhav Global has established itself as an influential player in the jewellery exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through new selling mechanisms and product offerings. The company has had a blockbuster quarter with profit growth of more than 47% in the current uncertain times. It has expanded its customer engagement to a more varied customer base than its traditional jewellery customer set and into newer mediums like social media. The company is also looking slowly establishing its presence in the digital medium where sales growth has been the fastest. It remains to be seen how long the company will be able to maintain its current growth pace and match up to its other TV seller rivals like QVC and JTV, all of which have an established customer base and earns way higher per household than the company. Nonetheless, given the company’s prudent and efficient cost management, its resilient supply chain, and its agility to introduce new products fast depending on changing situations, Vaibhav Global seems to be an interesting jewellery stock to watch out for.


 

Q4 FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 198 129 53.49% 127 55.91% 543 489 11.04%
PBT 108 12 800.00% 5 2060.00% 133 40 232.50%
PAT 106 10 960.00% 4 2550.00% 127 33 284.85%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 502 467 7.49% 567 -11.46% 2001 1828 9.46%
PBT 48 39 23.08% 82 -41.46% 236 188 25.53%
PAT 40 32 25.00% 66 -39.39% 190 154 23.38%

Detailed Results

    1. The company had a good quarter with a consolidated revenue rise of more than 7.5% YoY and PAT rise of 25% YoY.
    2. FY20 was good for the company with a 9.5% YoY rise in consolidated revenues and a 23% YoY rise in consolidated profits.
    3. TV sales accounted for 67% of sales while web sales accounted for 33%. Mobile sales accounted for 60% of web sales in FY20.
    4. Non jewellery items now account for 22% of sales.
    5. The company has a TV reach of 74 million households in the USA and 25 million households in the UK.
    6. The key demographic for the company remains the age group of above 45 which 83% of which still prefers watching traditional TV.
    7. The revenue growth in different categories in FY20 is:
      • TV sales: 11% up YoY (Rs 1285 Cr)
      • Web sales: 24% up YoY (Rs 633 Cr)
      • B2B: 54% down YoY (Rs 69 Cr)
    8. Shop LC revenues grew 12.66% YoY to $192.2 million in FY20.
    9. TJC UK revenues grew 18.48% YoY to GBP 60.9 million in FY20.
    10. TV sales volumes have fallen to 6.07 million in FY20 from 6.275 million in FY19. Correspondingly average selling price has risen to $29.9 from $26.4 a year ago.
    11. Web sales volumes have risen to 4.11 million from 3.52 million a year ago. The average selling price here has also risen to $21.7 from $20.7 a year ago.
    12. Gross margins have declined slightly to 61.6% from 62.5% in FY20 while EBITDA margin has risen to 13.9% from 12% in the same period.
    13. PAT margin has also improved to 9.6% in FY20 from 8.5% a year ago.
    14. The company has a negative net debt of Rs 194 Cr.
    15. Operating cash flow for FY20 was at Rs 211 Cr while free cash flow was at Rs 176 Cr.

Investor Conference Call Highlights

  1. The company has augmented product offerings across its omnichannel sales platform to include over 250 essential products, including masks, sanitizer, health supplements, kitchen accessories, colouring books, board games, etc.
  2. The management has stated that the aim of the gross margin is to keep it above 60%. The exact value may vary as the product mix keeps changing.
  3. The management is guiding for 15-17% revenue growth in FY21.
  4. The company is aiming to expand rapidly in the OTA and OTT segments and acquire new customers with their essentials category who after the experience from the company may continue to stay in these segments or even start ordering from the default jewellery segment for the company increasing repeat purchases and customer stickiness.
  5. The company has formulated a dividend payout policy of distributing 20-30% of free cash flow each year. The payout for FY20 was at 25% of free cash flow.
  6. The management expects a growth rate of 17-20% in the UK to persist for FY21 and beyond.
  7. Currently, jewellery accounts for 80% of sales in the USA and 58% of sales in the UK. The management does not have any ratio or product mix in mind and will allow each product line to develop on its own.
  8. The management has stated that the guiding principle for them to add new product lines is to see immediate product traction and to maintain overall gross margins at >60%.
  9. The company continues to see good growth in online marketplaces. Although the transition from these marketplaces to the main site is low, the customer stickiness is the same as for direct customers in digital platforms.
  10. The management has stated that the growth in web sales in Q4 has been low at 10% YoY mainly because of the high base in Q4 last year and some nervousness from the COVID-19 situation in March. The management remains confident of maintaining a growth rate of >25% in this category in FY21.
  11. Although the essentials category is currently 15% of total sales, the management does not expect it to stay at this level in the future when incremental demand for these products goes down. But in the short term, this has helped the company a lot with customer engagement and getting its name out there.
  12. Around 40-45% of sales for the company are on EMIs. The company has not seen any delinquencies on them yet since they are mostly small-ticket items.
  13. The company does weekly reviews of all marketplaces based on the performance and potential of the medium. For most of these platforms, the company pays a fixed fee depending on the number of outlets or homes in question.
  14. B2B sales remain opportunistic for the company and thus it can vary a lot depending on contracts and new customers coming in.
  15. The company is also looking into influencer advertising and promotions on Instagram, Pixel, and TV Page to open up new avenues for growth and customer acquisition in the web channel.
  16. The management has mentioned that the dip in gross margins has not been due to the addition of essential category, rather it may be because the company ran a clearance sale in Q4 because of the impending environment which has resulted in a dip in gross margins.
  17. The management is guiding for 15-17% constant currency growth for the company in FY21.
  18. The management has refrained from providing any guidance on average selling price as it may vary depending on the changing product mix. The average selling price has fallen QoQ in Q4 mainly due to the addition of the essentials category.
  19. The number of unique customers in Q4 rose 6.6% YoY to 178,000.
  20. The company is seeing jewellery with low price points with the motive of faith like crosses and of affection like charm bracelets, etc doing well in current times and the company is agile enough to bring back high price items like rings and handbags once the economy comes back strong and demand for such products revives.
  21. The management has clarified that it has a similar margin profile for all items in jewellery irrespective of pricing.
  22. The company has not faced any supply issues from the lockdown in India as the India specific products like turmeric powder was indeed available as it was essential goods and the non-essential goods were easily sourced from other locations.
  23. The management had mentioned that QVC earned almost $60 per household per year while Shop LC earned only $3 per household per year to show the potential and room for growth for the company in this medium.
  24. Other competitors for the company include JTV and ShopHQ which both earn almost $10 per household per year. JTV is the only one that is purely based on jewellery and it makes around $500-600 million of sales each year.
  25. The company may see platform costs for TV go down as cost-cutting in cable continues.
  26. The increase in finance costs is mainly due to exchange loss on the dollar loan which is classified as interest expenses according to Ind AS.
  27. The company has a debt of Rs 63 Cr on the books which mainly on account of the working capital loans.
  28. Most of the company’s mobile sales is through the website and the company has recently brought onboard a CTO to accelerate the mobile app development and develop it as a sustainable source for mobile engagement with these customers.

Analyst’s View

Vaibhav Global has established itself as an influential player in the jewellery exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through new selling mechanisms and product offerings. The company has done well to pivot fast to selling essential goods in the current disruptive times due to COVID-19 where a clear demand for such products has risen in the market. It has also helped the company enhance and expand its customer engagement to a more varied customer base than its traditional jewellery customer set. The company is also looking into innovative means like influencer promotion programs and expanding smaller ticket jewellery items of faith like crosses and rosaries which may prove instrumental in current times where high ticket and discretionary purchases like handbags may go down. It remains to be seen whether the company will be able to maintain its current growth pace and match up to its other TV seller rivals like QVC and JTV, all of which have an established customer base and earn way higher per household than the company. Nonetheless, given the company’s prudent and efficient cost management, its resilient supply chain, and its agility to introduce new products fast depending on changing situations, Vaibhav Global seems to be an interesting jewellery sector to watch out for.


 

 

Q1 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 109.4 122 -10.33% 129.5 -15.52%
PBT 9.95 12.67 -21.47% 12.38 -19.63%
PAT 8.31 10.42 -20.25% 9.64 -13.80%

 

Consolidated Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 443.67 394 12.61% 466.63 -4.92%
PBT 45.16 36.84 22.58% 39.27 15.00%
PAT 36.01 30.04 19.87% 32.45 10.97%

 

Detailed Results

    1. The company had a good quarter with a consolidated revenue rise of more than 12% YoY.
    2. The profits for the company also rose 20% YoY showcasing a good quarter.
    3. The total sales volumes for Q1FY20 stood at 2.3 million products. Out of this, 1.36 million units were from home TV shopping while 0.93 million was from web shopping.
    4. TV sales revenues grew 11% YoY while web sales grew 43% YoY.
    5. The company’s reach came to 99.4 million TV homes.
    6. Average quantity sold per customer was at 31 items per customer.
    7. The revenue growth in the Shop LC was more than 20% YoY in dollar terms while TJC UK revenues grew around 15% YoY in pound terms.
    8. Sales volume growth for TV sales was 6.6% YoY while web sales volumes grew 33.7% YoY.
    9. Gross profit margins improved 2.5% YoY to 63.1% in Q1FY20 while EBITDA margin grew 1% YoY to 12.4% in Q1FY20.
    10. B2B sales are on a decline with revenues falling to Rs 28 Cr from Rs 48 Cr last year.
    11. The company has a negative net debt position of Rs 216 Cr implying a very strong cash position for the company.
    12. The company announced a share buyback program of a maximum buyback price of Rs 1000 and allotted Rs 72 Cr for this purpose in May ’19.

Investor Conference Call Highlights

  1. The company reported an average net worth of 22% and return on average capital employed of 39% in Q1.
  2. The percentage of non-jewelry sales in the quarter was at 18%. The management had guided that they do not have a specific target in mind but they expect the segment to grow from its current revenue contribution levels.
  3. The management has guided that this increase in non-jewelry item sales should not affect margins detrimentally.
  4. The management has refrained from providing any guidance on margins but they remain confident of revenue growth of 14-16% for FY20.
  5. The company is looking to keep prices with the band of +/- 5%. They will not restrict price increases according to seasonality.
  6. The company has seen good growth in sales through online market places like Amazon.
  7. The company is also looking to enter into new mediums of streaming services like AppleTV and Amazon Prime as a new sales channel.
  8. The customer retention rate in both UK and USA is around 50%.
  9. The company’s Budget Pay system has been very helpful in sales with around 35% of US sales and 40% of UK sales coming through this system.
  10. The mobile platform is also going strong and contributing to 27-28% of web sales numbers.
  11. The company also does online auctions in the mobile platform to sell the leftover inventory from TV sales which further contributes to 25-27% of web sales.
  12. The management is looking for 4 main metrics for their performance. They are:
    • Reach: Reach remains at 99.4 million TV homes.
    • Registration: Registration rate of new customers has grown 6% YoY.
    • Retention Rate: Retention rate has grown by 5.1% QoQ.
    • Repeat Purchase: Repeat purchase were up 3% for Q1.
  13. The company is encouraging its TV customers to try its web catalogs as they have found out that multi-channel customer lifetime value is much higher than any single-channel customer.
  14. Around 10-12% of sales are coming from online-only customers. The rest of the web sales are from multichannel customers with both TV and web access.
  15. The company is trying to acquire new customers from direct social media mechanism but they believe online marketplaces offer more robust customer acquisition rates.
  16. The management is confident of opening the buyback window from 20th
  17. The company added 36,499 new customers in Q1. This was up more than 100% YoY.

Analyst’s View

Vaibhav Global has established itself as an influential player in the jewelry exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through newer selling mechanisms like through their website and app. The company has been very proactive with their 4Rs agenda for achieving their long term goals. The company has delivered good growth numbers on the back of their rapidly expanding web shopping business and have shown good market awareness by converting a lot of their TV only customers into multichannel customers who can be reached through the web as well. It remains to be seen how the company navigates the slow decline of traditional TV and the advent of streaming services. Nonetheless, on the back of their consistent success of the past few years and their proactive stance in following the 4Rs for sustained growth of the company, Vaibhav Global remains a good investment option for anyone banking on the jewelry or the telecommerce industry.

 

 


 

 

Q3 2019 Updates

Financial Results & Highlights

Consolidated Financials (In Lacs)

Q3FY19 Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18 9M% Change
Sales  51371.46 46363.97  10.8%  45375.84 13.21% 136151.94 115427.68  17.95%
PBT  6446.42  5520.15  16.77%  4757.8  35.49%  14888.54  9508.14  56.58%
PAT  5251.38  4553.11  15.34%  3915.48 34.13%  12171.53  8056.01  51.07%


Detailed Results

  1. Have sold more than 2.9 million products this quarter while accessing more than 100 million TV homes directly (75 million in US and 25 million in UK).
  2. Retail volumes were up 18% YoY at 2.9 million with home TV shopping volumes coming at 1.92 million and web shopping volumes coming at just less than 1 million units.
  3. Strong ROE and ROCE reported for 9M19 at 23% and 37% respectively.
  4. Gross margin increased to 64% this quarter vs 57.4% last year.
  5. EBITDA margin improved to 13.9% vs 13.4% last year.

Investor Conference Call Highlights

  1. First time quarterly revenues crossed 500 cr. Retail revenue grew faster than B2B.
  2. Retail growth was backed by high volume growth in both TV and web platform.
  3. Both web and TV platform are integrated resulting into satisfaction and enhanced consumer experience.
  4. B2B revenues were lower. B2B remains an opportunistic business option for the company
  5. Owned call center and in-house analytics to further enhance consumer experience.
  6. First time quarterly profit crossed 50 Cr.
  7. Strong operating cash flow and free cash flow demonstrating strength of the business model.
  8. Contribution from lifestyle products now stands at 15% of total revenue.
  9. Non-jewelry is a larger market than jewelry market.
  10. Several initiatives have been undertaken to increase enhanced
  11. One day flash sale of 75000 units during the quarter.
  12. Budget pay (instalment option) has helped the company increase its sales considerably. 38% of sales happen through this channel.
  13. Mobie app has been improved with better functionalities.
  14. Q3 59000 new customer registrations were added.  There are 3337000 unique customers for company’s products.
  15. Reduced B2B sales has led to high cash generation. No major capex plan, so free cash flow should be healthy going forward. Company has started distributing dividends.
  16. Company adopts 4R- Reach, Registrations, Repeat purchase and Retention.
  17. TV viewership granular data suggests that the company’s target audience (45-75 age) has not yet seen any decline in viewership. However, company is preparing for the change in consumption pattern and investing in digital and social media heavily. It is already being translated into increased sales through web.
  18. Storing products with Amazon helps company to contain shipping costs.
  19. Sourcing from USA and UK is 5-7%. 50% of the balance is from India and rest from China, Thailand & Indonesia. They do not think China USA tariff can be of a problem for them because they have a very fast turnaround time. Every month they ship 100 new products from China.

Analyst’s View

Vaibhav Global have established themselves as an influential player in the jewellery exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through newer selling mechanisms like through their website and app. They are also proactive in terms of generating customer demand through the use of flash sales and other mechanisms to address customers outside their target audience of age 45-75. This has seen them lean heavily on online sales channels which is widely expected to open new doors for the company in the future. Thus, Vaibhav Global seems like a reliable bet as a good growth investment in the jewellery and lifestyle products segment.

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