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Published on 20/09/2021 1:40:03 PM | Source: HDFC Securities

Update On Bajaj Consumer Care Ltd By HDFC Securities

Posted in Special Event Reports| #HDFC Securities #Company Result #Bajaj Consumer Care Ltd

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Our Take:

Bajaj Consumer Care Ltd. (BCCL) , part of the Shishir Bajaj group which has business interests varying from sugar to power infrastructure development, is one of the leading players in the hair oils market, with a strong niche in the light hair oil (LHO) segment. The LHO segment as a category has increased its salience in the overall hair oil industry and BCCL’s flagship brand, Bajaj Almonds Drops Hair Oil (ADHO) has been at the forefront of driving that change.

Even in the presence of much larger competitors, the company has doubled its market share over the last decade, thus displaying its strong brand equity. Relaunch of core brands supported by a multi-media approach and high on-ground visibility to increase penetration, new product addition to become a total hair oils player (with foray in coconut and Amla oil) while giving it an access to underpenetrated South India market and increasing share of direct presence would be levers for achieving sustained volume growth.

Redefined focus on becoming multi-product company, potential acquisition in hair care/personal category and higher dividend payout will be key re-rating factor for the stock going ahead. This along with better growth prospects and higher cash generation ability makes it an attractive pick in the small-cap FMCG space.

 

Valuation & Recommendation:

Post stellar run in first half of last decade where BCCL reported Sales/PAT CAGR growth of ~23%/16% (FY10-15), it could only manage ~3% CAGR sales growth over FY16-21 which can be attributed to liquidity crunch (caused by demonetisation, GST, etc) as it was highly dependent on wholesales channel in the past (>65% vs 36% currently), rural slowdown, lack of portfolio diversification or not ramping up international business/M&A. Promoter’s high personal debt also meant company adopting conservative approach (cash preservation, high dividends) rather than focusing on expansion.

However, the company in recent past has undergone series of structural changes. Firstly, the promoter’s pledge which was major overhang has been completely removed. Mr. Jaideep Nandi (> 30 year experience with Asian Paints and Berger Paints) has been appointed as the new MD which in our opinion can be a game changer. Besides, the company has beefed up its management team, hiring industry veterans across roles.

 

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