Gillette India, the leading razor and blade manufacturer in India, saw its stock price surge over 7% to an all-time high of Rs 6,525 on Thursday after the company reported strong results for the September 2023 quarter.
Gillette Q3 Net Profit Jumps 24% On Robust Sales Growth
Gillette India posted a net profit of Rs 92.69 crore in Q3 FY23, marking a 24% jump over the same quarter last year. This was driven by robust sales growth across the company’s product portfolio.
Total revenue for the quarter stood at Rs 667.55 crore, up 8% compared to Rs 619.44 crore in Q3 FY22. Improved product mix and pricing actions taken earlier this year helped drive both topline growth and profitability expansion.
Gillette India follows July-June as its financial year.
Razors & Blades Business Rebounds Strongly
Gillette India’s core razors and blades business saw volumes rebound strongly after being impacted for several quarters due to COVID-19 related disruptions.
With increased mobility and out-of-home usage occasions returning, demand for grooming products picked up. This allowed Gillette India to improve capacity utilization at its manufacturing facilities.
The company was also able to take price hikes across its product portfolio earlier this year to offset rising input costs. This helped protect margins and boost profitability.
Premium Segment Growth Drives Market Share Gains
Gillette India continued to focus on premiumization across its portfolio which comprises brands like Gillette, Venus, Braun and Oral-B.
The company has launched innovative new products under the Gillette brand targeting upgraders in the market. This strategy of playing in the premium segment has helped Gillette India consistently gain market share over the last several quarters.
Premium products have higher gross margins which is also driving the improvement in overall profitability.
Strong Volume Growth Seen In Oral Care Category
Gillette India’s oral care business under the Oral-B brand witnessed strong volume growth during the quarter. This was aided by new product launches and increased marketing spends.
Oral-B continues to be the market leader in the premium oral care segment in India with over 50% market share. Gillette has further strengthened its leadership by launching innovative products like the Oral-B iO and Genius X toothbrushes.
The oral care category is expected to continue its robust growth trajectory on the back of rising awareness for oral hygiene in India.
Margins Improve On Better Capacity Utilization
In addition to price hikes taken earlier this year, Gillette India’s profitability also benefitted from better capacity utilization at its manufacturing plants.
With demand rebounding strongly, production volumes have improved markedly over the last few quarters. This has resulted in better absorption of fixed costs and aiding margin expansion.
Gross margins improved to 53.5% in Q3 FY23 compared to 51.9% last year. Operating profit margins jumped 370 basis points to 17.5%. This demonstrates the operating leverage in Gillette India’s business model.
Strong Cash Generation Reduces Debt Further
Gillette India’s improving profitability is also reflecting in stronger cash generation. This has allowed the company to reduce debt further.
Gillette India is now nearly debt free with cash and cash equivalents of Rs 352 crore as of September 2023. The company has reduced total debt by over 60% in the last five years to just Rs 4 crore currently.
The robust cash flows and light balance sheet provides flexibility for capital allocation towards growth investments and also potentially higher shareholder returns.
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Outlook Positive On Premiumization Focus
The outlook for Gillette India remains positive supported by the company’s focus on playing in the premium segment across categories.
New product launches planned for the coming quarters is expected to further strengthen Gillette’s leadership in the blades & razors, oral care and grooming products market.
According to analysts, Gillette India is poised to deliver 12-15% revenue growth and 18-20% earnings growth over the next 2 years.
The company’s strategy of chasing upgraders in the market and focus on premiumization has handsomely rewarded investors. The Gillette India stock has nearly tripled over the last 5 years delivering 30%+ compounded annual returns.
Thursday’s 7% rally has seen the stock hit new all-time highs continuing its dream run. With strong growth momentum expected to sustain, further upside is likely in the coming quarters.