IGI Logo

Renewed focus on core and improving margin

We met CEO Naveen Pandey, Bajaj Consumer Care (BAJAJCON IN) recently. He said there is an increased focus on reviving Almond Drop Hair Oil (ADHO), the core of the company (80%+ share of revenue). The scale of ADHO would provide the necessary muscle to expand into new variants in hair oil and personal care categories. Management aims to grow revenue in the double digits, led by premiumization in ADHO, distribution expansion, and product diversification with an EBITDA margin closer to 20%. We believe improvement in earnings growth can rerate P/E. We reiterate Accumulate with a higher TP of INR 313 on 22x March 2027E P/E, due to an improved growth outlook

Double-digit revenue growth guidance; ADHO a key driver: For the past few years, ADHO revenue has been muted and focus has been on expanding product offering to reduce dependence on it. However, under the new leadership, focus is on reviving sales growth, which enjoys a strong brand equity. The company has raised prices in ADHO and additional initiatives to drive ADHO include: 1) higher spend on advertising and marketing vs trade scheme and promotion, and 2) premiumization of ADHO. Net sales grew 13.4% YoY to INR 2.65bn in Q2 (organic growth at 7%), driven by acquisition of Banjara, aided by full-quarter impact of Q1 pricing and better mix. Management expects a 3% revenue loss, due to GST transition. ADHO posted double-digit value growth, driven by pricing, even as volume remain flat. Demand revival was visible across packs — price-point packs (INR 1 sachets/10/20) grew in the high single digits while larger packs outperformed with strong double-digit growth. The new acquisition, Banjara, reported 11.5% growth; full integration benefits are likely by next year after ongoing multi-state integration work. The international business declined 26% YoY, dragged by distributor transition in (GCC) markets and external headwinds in RoW markets; Bangladesh grew 8%, Nepal declined in the high teens, due to political instability. BAJAJCON reiterated its aspirations for double-digit revenue CAGR in the medium term, with sustained 8-10% annual distribution expansion.

Distribution reset on track; value-added innovation gains traction: BAJAJCON plans to consolidate recent launches, and FY27 would witness increased frequency in launches. Recently, the company launched Bajaj Gold Enriched Coconut Oil to offset copra price volatility and capture consumer shift toward value-added. Rural markets remains work in progress (WIP) with Aarohan-led GTM changes, and a 600-700bp rural–urban gap is set to narrow once execution stabilizes. General trade (GT) grew 5% YoY, led by strong urban recovery, while wholesale and direct retail improved meaningfully. Organized trade delivered strong double-digit growth, with modern trade (MT) and eCommerce up 20%, led by ADHO and Bajaj CNO.

Reiterate Accumulate with a higher TP of INR 313: Management expects the RM basket to remain range-bound for the next few quarters. For the medium to long term, the company aims to operate at category-level margin of ~20% EBITDA. We raise our earnings by 30% for FY26E, 34% for FY27E and 37% for FY28, primarily to factor in higher margin. We reiterate Accumulate with a higher TP of INR 313 from INR 190 on 22x (from 18x) March 2027E P/E.

Please refer disclaimer at Report
SEBI Registration number is INH000000933