Hold Bajaj Corp; target of Rs 271: Ventura Securities

Ventura Securities recommended hold rating on Bajaj Corp with a target price of Rs 271 in its January 14, 2013 research report.

“Bajaj Corp Ltd (BCL) continued to post a robust volume growth of 23.4% in its flagship brand ADHO (Almond Drops Hair Oil) primarily driven by rural penetration (increased distribution reach). We have incorporated FY15 forecasted financials from this quarter and accordingly expect revenues to grow at a CAGR of 24.7% to Rs 916.9 crore over the forecast period of FY13-15 on the back of steady volume growth (~20% avg.) and sustained leadership position in its flagship brand Almond Drops.”

“BCL yet again reported a robust top-line growth of 31.8% YoY to Rs 148.1 crore in Q3FY13 as against Rs 112.3 crore in Q2FY12 primarily led by volume growth of ~23.4% YoY from its flagship brand (Almond drops). The growth is also attributable to the rural penetration on the back of increased distribution reach (2.54 mn retail outlets vs. 2.43 mn in Q2FY13). The company reported net profit at Rs 42.2 crore in Q3FY13 as against Rs 28.9 crore in Q3FY12 (+46.2% YoY) partially attributable to the price hike (~8.5%) taken in April 2012 and softening raw material prices (benefit of ~Rs 1.85 crore in Q3FY13).”

“At a CMP of Rs 253, Bajaj Corp is trading at 19.6x and 17.7x its estimated earnings for FY14 and FY15. Given the stretched valuations, we reiterate a hold on the stock with the revised price target of Rs 271 (as against our revised target of Rs 209) representing a limited potential upside of ~6.2%. However, prospective inorganic growth, strong cash availability (~Rs 477 crore) and potential new product launches is an added attraction,” says Ventura Securities research report.

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