Buy Bajaj Consumer Care; target of Rs 281: Sharekhan

Sharekhan's research report on Bajaj Consumer Care

BCC’s Q4FY2024 performance was affected by inventory correction at distributors’ level resulting in flat sales volumes, while value sales were down by 4% due to price cuts. Consolidated revenues decreased by 4% y-o-y to Rs. 240 crore. Gross margins rose by 83 bps y-o-y to 55.5% while OPM decreased by 225 bps y-o-y to 14.5% (lower than our expectation of 16.6%) due to higher other expenses and employee cost. Consolidated operating profit decreased by 16.7% y-o-y to Rs. 35 crore and reported PAT fell by 12.1% y-o-y to Rs. 36 crore. In FY2024, revenues grew by 2.4% y-o-y to Rs. 984 crore; OPM improved by ~110 bps y-o-y to 15.8% and PAT grew by 12% y-o-y to Rs. 155 crore. Volume growth in FY2024 stood at 6.2%. The board has declared a buyback of Rs. 166.5 crore at price Rs. 290 per share. The company will be buying back 57.41 lakh shares under the buyback scheme. Promoters will not participate in the buyback.

Outlook

With drivers in place, the management is confident of achieving steady earnings growth in the coming years with good recovery in the volume growth in ADHO portfolio, strong growth in the non-ADHO portfolio and OPM remaining at 16-18%. The company will continue to generate high cash flows, which will be utilised for investing in growth (striving for inorganic opportunities) and rewarding shareholders in the form of dividend payout going ahead. The stock has corrected by 11% from its highs and is currently trading at 20x/18x its FY2025E/26E EPS. We maintain our Buy on the stock with a revised price target of Rs. 281.