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Double Income Alert: A Brand-New Recommendation

Oct 16, 2019

The stock of Bajaj Consumer Care Ltd stood out in a volatile market today.

As I write this, the stock is up 20% and is effectively locked in upper circuit.

What is the trigger for this kind of optimism?

It's the prospect of near complete removal of the promoter pledge in the company.

As per reports doing the rounds, the promoters have sold nearly 22% of their stake in the company. They will use these funds to pay-off debt and remove the pledge on stake from the banks.

As on September 30, 2019, nearly two-thirds of the promoters' 60% stake in the company was pledged.

In fact, this was one of the main reasons for the stock to be in the bad books of investors.

Truth be told, the company is fundamentally rock solid. It has created a fantastic franchise out of a quintessential commodity.

Its flagship hair oil brand - Bajaj Almond Drops Hair Oil - has 2 main ingredients - light liquid paraffin and refined mustard oil.

The company has done a great job over the years turning these commodity ingredients into a premium almond hair oil.

The numbers don't lie...

  • An average Return on Equity (ROE) of almost 40% over the last 8 years.
  • An almost zero debt balance sheet.
  • A consistent average net profit margins of 25% over the last 8 years.
  • And last but not the least, an average dividend payout of 76% in the same period.

If these numbers are not those of a business with a great competitive advantage, I don't know what could be.

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Jul 6, 2020 (Close)

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