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Bajaj Corp: A strong start to FY14

Sep 5, 2013 | Updated on Oct 30, 2019

Bajaj Corp Limited has announced its first quarter financial results of 2013-2014 (1QFY14). The company has reported 23% YoY increase in sales and 25% YoY jump in net profits. Here is our analysis of the results.

Performance summary
  • Bajaj Corp Ltd (BCL) recorded a 23% rise in revenues in 1QFY14 led by 20% growth in volume terms.
  • Despite a steep rise in ad-spends and other expenditure, the company has been able to keep its operating margin in-tact aided by softening input prices.
  • Net profit increased by 25% on a 24% increase in operating profit and 34% jump in other income.

Financial performance snapshot
Rs(m) 1QFY13 1QFY14 Change
Revenues 1,382 1,702 23.1%
Expenditure 993 1,220 22.8%
Operating profit (EBDITA) 389 482 24.0%
EBDITA margin (%) 28.2% 28.3%  
Other income 90 121 33.8%
Interest 0.1 0.1 -32.1%
Depreciation 8 8 -0.6%
Profit before tax 471 595 26.3%
Extraordinary inc/(exp) - -  
Tax 95 125 31.4%
Profit after tax/(loss) 376 470 25.0%
Net profit margin (%) 27.2% 27.6%  
No. of shares (m)   147.5  
Diluted earnings per share (Rs)*   11.99  
Price to earnings ratio (x)*   20.4  

What has driven growth in 1QFY14?
  • BCL clocked a 23% increase in topline with its flagship Almond Drops Hair Oil (ADHO) witnessing a 15.5% growth in offtake. The growth in the company's overall volumes was a robust 20% during the quarter. The company derives 37% of its ADHO sales from rural India. In fact ADHO sales in rural India grew by 22% much ahead of 15.5% growth clocked from urban India during the quarter. With an aim to increase rural sales, the company has started van operations. Currently 120 vans reach out to 7611 towns and villages on a monthly basis. The ADHO brand saw its market share rise to 57% in volume terms and 58.4% in value terms. BCL's cooling hair oil; Kailash Parbat maintained its market share at around 3% for the quarter.

    Cost break-up
      1QFY13 1QFY14 Change in basis points
    Raw material 44.3% 39.9% -437.59
    Employee 5.0% 4.9% -13.19
    Advertisement 7.1% 8.8% 169.23
    Other expenditure 15.4% 18.0% 263.08

  • The company saw a 52.5% jump in ad-spends during the quarter. Even other expenses were up by a steep 44% during the quarter. However, easing price of inputs enabled the company to maintain its operating margin at 28%. The average price of a key ingredient Light Liquid Paraffin (LLP), having a 37% share in overall raw material expenses, fell by 8.5% whereas refined oil prices were down by 10% during the quarter. As a result the raw material to sales ratio dropped by 4.4% offsetting the rise in ad-spends and other expenses (both as a percentage of sales).

  • Net profits grew by 25% on a 24% rise in operating profit. The other income earned during the quarter was up by 33.8%.
What to expect?
Bajaj Corp's ADHO continued to drive growth in the light hair oil category. With robust growth from both rural and urban regions, the company has further consolidated its leadership position. BCL wants to increase market share of ADHO to 65%.

The company recently acquired NOMARKS brand from Ozone UK for an undisclosed amount. NOMARK is a niche brand in the anti marks category and has a product portfolio consisting of face wash, facial cream, facial soap, facial scrub and lotion based on Ayurvedic formulation. This acquisition gives BCL a foothold in the skin care category.

At the current price of Rs 244, the stock is trading at a multiple of 20 times its trailing twelve months earnings. WE had given a BUY recommendation on this stock which has already surpassed our target price. As valuations continue to remain high, we maintain a SELL view on the stock.

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Jun 18, 2021 (Close)


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