Accumulate Bajaj Consumer Care; target of Rs 359: Dolat Capital

Dolat Capital's research report on Bajaj Consumer Care

The company’s topline rose 8.5% in Q1FY20, driven by a 4.6% volume growth. The volume performance was impacted due to stress in the CSD channel. Excluding CSD volume, the domestic business’s volume rose 3.5%. The strong volume growth in modern trade (+13%) and multifold growth in IB sales helped it mitigate the negative impact of CSD decline. The company was able to expand GM by taking price hikes in the quarter. However, operating margin shrunk, due to a rise in A&P spends. The ADHO brand continued to gain volume and value market share. Going ahead, we believe that the rural areas should benefit from stimulus.

Outlook

However, new product launches may lead to a further rise in A&P spend. We maintain our FY20E and FY21E EPS at ` 16.5 and ` 17.9, respectively, as Q1FY20 results were in line with our estimate. We value the stock at 20x FY21E to arrive at a TP of ` 359. Maintain Accumulate.