Buy Bajaj Consumer Care Ltd For Target Rs.715 by Choice Institutional Equities
Growth Momentum Continues
Q2FY27 result is ahead of expectation; led by continued strong momentum in Almond Drop Hair Oil (ADHO) portfolio (volume growth est. 11–12%) driven by strong growth in LUPs (~20% of the portfolio) and distribution expansion. EBITDA margin, despite decline in gross margin, was above expectations, owing to cost saving initiatives and operating leverage.
Key Management Guidance: Raw material price remained volatile and is at an elevated level at present. To mitigate the impact, BAJAJCON plans to implement another round of price hike in Q3FY27, amounting to ~5% at the consumer price level, comprising a 2–3% price increase and the remainder through grammage reduction. The company has also shifted to a short and lean raw material procurement strategy. Additionally, it plans to further rationalise non-media spends and implement other cost saving initiatives to protect EBITDA margin. The management has maintained its high teen revenue growth outlook for FY27 and reiterated its long term EBITDA margin guidance in the low-to-mid-20% range
Valuation & Rating: We remain constructive on Bajaj Consumer Care’s longterm growth strategy, driven by the sustained growth in ADHO, scaling up of the non-ADHO growth portfolio, premiumisation and Project Aarohan-led distribution expansion strategy. Sustained double digit growth and operating leverage are expected to drive Revenue/EBITDA/PAT CAGR of 15%/22%/21%, respectively, over FY26–29E. We have maintained our BUY rating and one-year DCF-based TP of INR 715, implying an upside of 51% from the CMP (implied P/E of 29.4x Sep-28E EPS and PEG of 2.2).
Q2FY27 Result: ADHO Continues to Drive Growth
* Revenue was up 25.5% YoY and down 2.6% QoQ to INR 3,328 Mn (vs. CIE estimate of INR 3,295 Mn). ADHO grew +30% YoY (double-digit volume growth)
* EBITDA was up 72.1% YoY and down 1.3% QoQ to INR 823 Mn (vs. CIE estimate of INR 787 Mn). EBITDA margin expanded by 671 bps YoY to 24.7% (vs. CIE estimate of 23.9%), supported by lower employee and other operating expenses as a percentage of sales. BAJAJCON plans to take another round of price hike of 5% in Q3FY27.
* PAT was up 65.9% YoY and down 0.8% QoQ to INR 702 Mn (vs. CIE estimate of INR 669 Mn).
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