Buy Bajaj Consumer Care: target of Rs 340: Sharekhan

Sharekhan's research report on Bajaj Consumer Care

The stock‘s valuation is attractive at 14x its FY23E EPS versus the five-year historical average of 23x and peer average of 33x. Promoter has released all of its pledged shares a year ago, ending a major overhang. Enhanced focus on becoming multi-product company with regular new launches and higher dividend payout would help reduce valuation gap with close peers. BCCL has strong cash generation ability with negative working capital. Cumulative FCF is likely to be at Rs. 885 crore over FY2020-23 (22% of market capitalisation), which will be utilised for higher media/promotional activities of brands and potential acquisitions in hair care category. With redefined strategies supported by a strong balance sheet, BCCL is well-poised to achieve revenue and earning CAGR of 11.5% and 13.5% over FY2020-23.

Outlook

We re-initiate coverage on Bajaj Consumer Care Limited (BCCL) with a Buy and a price target of Rs. 340.