BAJAJ CORP
LTD.
Bajaj Corp incorporated on 25th April, 2006 but its products
have been in existence since 1953 and were sold by different Bajaj group
companies. The company is in manufacturing of hair-oils and its key products
are Bajaj Almond Drops, a premium brand that is currently the market leader in
the light hair oil segment.
The company manufactures its products at company-operated facilities in
Parwanoo, Dehradun and Paonta Sahib.
Industry
Overview
Company
Overview
Products
of Company
Source:
Company’s investors’ presentation
Investment Rationale
Ø
Increasing in rural wages: Wages in rural India have grown at fastest during 2008-13 at the annual
rate of 8%. Increase in rural income spending
of them increasing. Also urbanization of rural area helps to increase sales of
FMCG companies.
Source: CII rural report
Ø
Product Range: Company
has major hair oil products in its products portfolio and recently company
diversified it to face cream segment by acquisition of Nomarks brand.
Ø Increase market share in Bajaj Almond Drop, which is premium brand of the
company. For increasing market share, company never have to sacrifices its
pricing power. Nomarks brand also start contributing to revenue of the company,
and in FY14 Nomarks has contributed 2.4% to the company revenue.
Source:
Company’s investors’ presentation
Ø
Strong Performance: From
5 years, company has generated positive cash flow from operating activities. Company
has recorded CAGR Net Sales and Net Profit of 19.94% and 28.74% respectively in
last 5 years. Average 5 years ROE (%) of company is 98.05%. Cash Conversion
Cycle of Bajaj Corp is -6.97 days in FY13 which is low compare to Cash
Conversion Cycle of Marico and Dabur which is 38.91 days and 35.81 days
respectively.
Ø Total debt/Equity was 0 in FY13 and Interest coverage 2544.18x in FY13. Company
has taken nominal debt in FY14 for acquiring Nomarks brand.
Risks
Ø Strong Competition:
Company facing competition with Marico in Hair oil
segment. Parachute of Marico is leader in coconut hair oil, company also facing
competition with Dabur amla of Dabur India Ltd. Though strong competition in
hair oil segment, Bajaj Corp positioning leader market share in Light Hair Oil
segment.
Outlook
Ø
Bajaj Corp Ltd. has leading market
share in Almond drop hair oil and also leading market share in Light hair oil
segment. Company has included Nomarks brand in product portfolio which contributing
value to company’s revenue. After acquiring Nomarks brand company’s products
portfolio not only remain limited to hair oil segments.
Ø Currently company trading at TTM PE of 21.00x and TTM EPS of Rs.10.10,
and it’s expected that TTM PE of 22.40x and TTM EPS of Rs.10.78-11 so that
upside in this stock can be Rs.240-250 so accumulate “Bajaj Corp Ltd.” for the
horizon of 15-18 months.
