Buy Bajaj Consumer Care; target of Rs 185: Sharekhan

Sharekhan's research report on Bajaj Consumer Care

Bajaj Consumer Care registered resilient sales performance in Q2FY2023 with revenue growing by 7% y-o-y (driven by 5.8% volume growth) to Rs. 230.3 crore. Higher inflation and ad-spends led to a 933 bps y-o-y decline in OPM. PAT declined by 33% y-o-y to Rs. 32 crore. ADHO sales volume marginally declined, affected by double-digit drop in rural markets; urban market continues to grow in double digits, restricting the sharp fall in ADHO sales. New product launches contributed Rs. 58 crore in H1. Rural demand recovery will help the ADHO segment bounce back, while higher media spends would support new launches and key products. Expansion on the digital platform and widening distribution reach will drive growth in the medium term. OPM will be lower at 17-18% in the near term, but management targets it to improve to 20% in the medium term.

Outlook

The stock has underperformed in the past year and trades at discounted valuations of 16.6x/13.1x its FY2023E/FY2024E EPS. We maintain our Buy rating on the stock with a revised PT of Rs. 185, as strategies in place will drive improved earnings growth in the medium term.

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