ORIENTELEC - Orient Electric Limited Share Price

For the quarter ended March 31, 2025, Orient Electric Limited management provided a positive outlook, emphasizing the resilience and adaptability of the company amidst challenging market conditions. Revenue for Q4 was reported at INR 862 crores, representing a 9.4% year-on-year growth. The full-year revenue reached INR 3,094 crores, marking a robust 10% growth compared to the previous year. Notably, this marks the company's second consecutive year of double-digit growth.

Key highlights from management included:

1. Premiumization Strategy: The initiative was a cornerstone for growth, with new launches in BLDC fans contributing to over 50% growth year-on-year. The company aims to increase the premium product mix in its fan segment to 40% in the coming years.

2. Strengthening Portfolio: The lighting segment has emerged as a major growth driver, achieving a high double-digit growth in B2C. The B2B business also reported over 20% growth year-on-year.

3. Distribution Expansion: Direct-to-market sales continue to thrive, with revenue from DTM states growing at a high double-digit rate. The company aims to expand its DTM network further.

4. Cost Efficiency: Through the Project Sanchay program, Orient Electric achieved cost savings of INR 75 crores in FY 25, impacting overall profitability positively.

5. Margin Improvement: The EBITDA margin improved to 7.8%, a significant increase of 385 basis points. The management is targeting double-digit margins within the next 7 to 8 quarters.

6. E-commerce Initiatives: The partnership with Zepto for quick deliveries reflects the company's digital-first approach, enhancing customer experience.

The management expressed confidence in its future trajectory, focusing on innovation, customer-centric strategies, and operational efficiency to navigate upcoming challenges.

Here are the major questions from the Q&A section of the earnings call transcript along with detailed answers from Ravindra Singh Negi, Managing Director & CEO of Orient Electric Limited:

Question 1: "Sir, the first question I had was that in your presentation, you mentioned you've added about 4,200 retailers on the fan side. Just wanted to understand how much more room is left in terms of your retail expansion, which could continue to drive market share gains or growth for you just through this distribution expansion initiative?"

Answer: Thank you, Dhruv. As we speak, we have around 50,000 to 55,000 direct retailers through our DTM, alongside 80,000 to 85,000 in indirect presence. With the industry comprising about 130,000 unique retailers in the fans category, there's still significant room for expansion. Our goal is to enhance both numeric and weighted distribution, which is essential for our continued growth.

Question 2: "Over the next 3 or 4 years, is the organization sort of in place to double its profit, or is there more work that would require?"

Answer: We're focusing on strategic pillars like premiumization across various segments, not only in fans but in lighting and switchgears. We're targeting double-digit margins in the next 7-8 quarters, which should put us in a competitive position. Our investments in Hyderabad and organizational improvements will also support our goal of increasing profitability over the next few years.

Question 3: "In this quarter, we've seen a Y-o-Y decline of about 10% in other expenses. Was there something one-off in the base quarter?"

Answer: Yes, last year included an EPR contribution that affected the baseline. While that's part of the decline, we've also seen effective cost management. Even when normalizing for EPR, we've improved our cost controls, reflecting our operational efficiencies.

Question 4: "What sort of improvement are you looking for in the next 7-8 quarters regarding margin? Is it pricing-led, cost-led?"

Answer: We're aiming for operational efficiencies through premiumization and portfolio balance. These strategies should minimize the impact of pricing headwinds while improving our product mix. With ongoing efforts and improved efficiencies, we expect to achieve higher EBITDA margins in the next 7-8 quarters.

Question 5: "How is the premium portfolio in fans doing, and what's your outlook for B2C lighting pricing?"

Answer: Despite a challenging environment for fans, we've maintained significant growth in premium segments. For B2C lighting, there have been recent regulatory changes affecting pricing. We anticipate these impacts to stabilize prices, potentially allowing us to pass them on to consumers effectively.

Question 6: "What steps are you taking regarding the time frame for product dispatch to dealers in DTM markets?"

Answer: We're committed to optimizing our logistics and reducing dispatch times. We already have direct relationships in DTM markets and regularly engage with channel partners. I'll have Sambhav follow up on the specific feedback you provided to investigate any delays.

Question 7: "Regarding the demand trends for the upcoming summer products, how do you see the underlying demand?"

Answer: While we experienced a slow start due to variable weather, we're optimistic about the upcoming peak summer. Seasonal weather projections suggest consistent heat should drive demand robustly, particularly in regions that have recently experienced rises in temperature.

Question 8: "Could you share more about the cost-saving program you mentioned and its structure?"

Answer: The savings from our Sanchay program stem from a multi-faceted approach, encompassing raw material renegotiation and process improvements. It's a step-by-step methodology, and I'll ask Sambhav to provide further details since it's quite extensive.

These responses maintain important details and offer a concise overview of the company's strategic focus and expected performance.