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BAJAJ CORP LIMITED
Result Update (PARENT BASIS): Q2 FY15
BUY
CMP
287.65
Target Price
316.00
OCTOBER 22nd 2014
ISIN: INE933K01021
Index Details
SYNOPSIS
Stock Data
Sector
BSE Code
Face Value
52wk. High / Low (Rs.)
Volume (2wk. Avg. Q.)
Market Cap (Rs. in mn.)
Bajaj Corp Limited is one of India’s leading FMCG
Company with major brands in ‘Bajaj Almond Drop
hair oil’ is the 2nd largest brand in the overall hair
oils segment and it is a market leader with over
60% market share of LHO market.
FMCG
533229
1.00
298.90/198.00
19000
42428.38
In Q2 FY15, Revenue rose by 18.69% y-o-y to Rs.
1880.09 mn from Rs. 1584.01 mn, when compared
with the prior year period
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS
FY14A
6717.26
2267.80
1504.44
10.20
28.20
Net Sales
EBITDA
Net Profit
EPS
P/E
FY15E
7926.37
2578.65
1634.80
11.08
25.95
FY16E
During the 2nd quarter of FY15, Operating profit
grew by 13.96% to Rs. 603.94 mn from Rs. 529.94
mn in the corresponding quarter ending of previous
year.
8837.90
2830.83
1823.02
12.36
23.27
In Q2 FY15, Net profit grew by 3.94% y-o-y of
Rs.374.35 mn compared to Rs. 360.16 mn in Q2
FY15.
Shareholding Pattern (%)
The Company has recommended an Interim
Dividend at the rate of 1150% i.e., Rs. 11.50/- per
share on face value of Rs. 1.00/- each for the
financial year 2014-15.
BCL has over the years created a strong distribution
network across 2.74 mn retail outlets serviced by
7092 distributors and 15122 wholesalers.
1 Year Comparative Graph
During H1 FY15, Bajaj Almond Drops Hair Oil got
39.8 % of its sales from Rural India with Volume
Growth in Rural India – 5.0% and Market share in
Rural India – 63.1%.
The total cash balance with the company as on 30th
Sept, 2014 is Rs. 3646.30 mn.
BAJAJ CORP LIMITED
Net Sales and Net Profit of the company are
expected to grow at a CAGR of 13% and 3% over
2013 to 2016E respectively.
BSE SENSEX
PEER GROUPS
CMP
MARKET CAP
EPS
P/E (X)
P/BV(X)
DIVIDEND
Company Name
(Rs.)
Rs. in mn.
(Rs.)
Ratio
Ratio
(%)
287.65
205.70
300.80
926.90
42428.38
361283.50
193977.80
315556.60
10.20
3.90
9.05
16.99
28.20
52.74
33.24
54.56
8.13
18.98
9.83
10.43
650.00
175.00
400.00
0.00
Bajaj Corp Ltd.
Dabur India Ltd
Marico Ltd
Godrej Consumer Products Ltd
Analysis & Recommendation – ‘BUY’
For 2nd Quarter of FY15, Revenue rose by 18.69% to Rs. 1880.09 mn from Rs. 1584.01 mn, when compared
with the prior year period. During Q2 FY15, Operating profit grew by 13.96% to Rs. 603.94 mn from Rs. 529.94
mn in the corresponding quarter ending of previous year. In Q2 FY15, Net profit grew by 3.94% y-o-y of
Rs.374.35 mn compared to Rs. 360.16 mn in Q2 FY15. The main impact of reduce in net profit is due to
exceptional items, the company has acquired NOMARKS brand on August 22, 2013 and has also entered into a
non compete agreement with the seller for a period of 3 years. The acquisition cost of Brand & Non Compete
will be amortized over the estimated useful life of 3 years.
The total cash balance with the company as on 30th Sept, 2014 is Rs. 3646.30 mn. This has been invested in
Bank Fixed Deposits Rs. 1425.00 mn, Certificate of Deposits of Banks Rs. 1194.80 mn , PSU Bonds Rs. 836.50
mn and Liquid MFs Rs. 190.00 mn. Company is a Debt free company. Over the years, BCL has over the years
created a strong distribution network across 2.74 mn retail outlets serviced by 7092 distributors and 15122
wholesalers which can be optimally utilized by introducing new products. Bajaj Corp with its sound financials,
strong brands and high cash reserves will outperform the market in the long run. Over FY2013-16E, we expect
the company to post a CAGR of 13% and 3% in its Net sales and Net profit respectively. Thus we recommend
‘BUY’ for ‘Bajaj Corp Ltd’ with a target price of Rs. 316.00 medium to long term investment.
QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q2 FY15,
Rs. in million
SEP-14
SEP-13
% Change
Net Sales
1880.09
1584.01
18.69
PAT
374.35
360.16
3.94
EPS
2.54
2.44
3.94
603.94
529.94
13.96
EBITDA
The company’s Revenue for the 2nd quarter of FY15 rose by 18.69% to Rs. 1880.09 mn from Rs. 1584.01 mn,
when compared with the prior year period. Net profit Jumps to Rs. 374.35 mn from Rs. 360.16 mn in the
corresponding quarter ending of previous year, an increase of 3.94% y-o-y. Profit before interest, depreciation
and tax grew by 13.96% y-o-y and stood at Rs. 603.94 mn as against Rs. 529.94 mn in the corresponding period
of the previous year. Reported earnings per share of the company stood at Rs. 2.54 a share during the quarter,
registering 3.94% increase over previous year period.
Break up of Expenditure:
Break up of Expenditure
(Rs. in mn)
Q2 FY15
Q2 FY14
Cost of Material Consumed
604.26
561.16
Purchase of Stock-in-trade
160.32
112.32
Employee Benefit Expenses
94.63
86.68
Depreciation & Amortization.
12.51
9.68
Advertisement
123.83
125.97
Other Expenditure
416.69
317.08
Latest Updates
•
During the quarter average price of LLP increased to Rs 84.27/Kg from Rs 75.33/Kg in corresponding
quarter of previous year.
•
The company aims for a market share of 65% from other hair oil segments by the year 2015-16.
•
During the quarter Prices of Refined Oil decreased to Rs 69.99/Kg from Rs 70.85/Kg in corresponding
quarter of previous year.
•
The total cash balance with the company as on 30th Sept, 2014 is Rs. 3646.30 mn. This has been invested in
Bank Fixed Deposits Rs. 1425.00 mn, Certificate of Deposits of Banks Rs. 1194.80 mn , PSU Bonds Rs. 836.50
mn and Liquid MFs Rs. 190.00 mn. Company is a Debt free company.
•
BCL has over the years created a strong distribution network across 2.74 mn retail outlets serviced by 7092
distributors and 15122 wholesalers which can be optimally utilized by introducing new products.
•
During H1 FY15, Bajaj Almond Drops Hair Oil got 39.8 % of its sales from Rural India with Volume Growth in
Rural India – 5.0% and Market share in Rural India – 63.1%.
COMPANY PROFILE
Bajaj Corp Ltd is one of India’s leading FMCG Company with major brands in Hair care category. With brands,
such as Bajaj Almond Drops, Bajaj Brahmi Amla, Bajaj Amla Sheekakai, and Bajaj Kailash Parbat that have been in
the market for eight decades and it is part of one of the oldest business houses of the country.
Bajaj Corp Limited is part of Bajaj Group which has business interests in varied industries including sugar,
consumer goods, power generation & infrastructure development. The companies brand Bajaj Almond Drop Hair
Oil is the third largest brand in the overall hair oil. BCL has over the years created a strong distribution network
across 2.71 mn retail outlets serviced by 6964 direct distributors and 15122 wholesalers which can be optimally
utilized by introducing new products.
The company acquired in September 2011 (Uptown Properties) owns a piece of land and building in Worli,
Mumbai. Uptown Properties was previously owned by the C.K. Raheja Group (i.e. Mr. Chandu Raheja). The
corporate Headquarters of Bajaj Corp Ltd will be constructed on this land. The Construction is expected to be
completed by mid 2015.
Bajaj Corp Limited acquires NOMARKS brand:
The acquisition of the NOMARKS brand by Bajaj Corp is a strategic move as its presence in the personal care
market and gives an entry in to the skin care category. It widens the Company’s position in the personal care
sector as Bajaj Almond Drop Hair Oil is already the third largest brand in the overall hair oil category and in
addition NOMARKS brand gives an opportunity to play in an additional Rs 8500 crore Personal Care space
besides the Rs 5222 crore non coconut hair oil market. The profitability of the company depends directly on the
revenue generation of this premium brand. NOMARKS has a small export sale, through which enhance several
times in the next couple of years by leveraging export infrastructure in the GCC, SAARC and the ASEAN region.
FINANCIAL HIGHLIGHT (PARENT BASIS)
(A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March31st, 2013 -2016E
Bajaj Corp Ltd.
I
FY-13A
FY-14A
FY-15E
FY-16E
Share Capital
147.50
147.50
147.50
147.50
Reserves and Surplus
4690.56
5073.31
6062.61
6881.06
4838.06
5220.81
6210.11
7028.56
Long term borrowing
0.00
0.00
0.00
0.00
Deferred Tax Liability (net)
12.56
0.00
0.00
0.00
Sub Total Non Current Liabilities
12.56
0.00
0.00
0.00
Trade payables
493.02
405.16
364.64
335.47
Other Current liabilities
216.62
190.93
210.02
226.82
Sub Total Current Liabilities
709.64
596.09
574.67
562.30
Total Liabilities (A + B + C )
5560.26
5816.90
6784.77
7590.85
444.02
476.15
497.58
512.50
Intangible assets
1.45
1125.71
1002.55
1072.73
Capital Work in Progress
12.98
7.01
5.05
3.43
a) Sub Total Fixed Assets
458.45
1608.87
1505.17
1588.66
b) Non Current Investments
522.52
538.86
549.64
555.13
c) Long Term loans and advances
265.43
262.05
269.91
275.31
1246.40
2409.78
2324.72
2419.11
Current Investment
1832.36
1568.35
2289.79
2720.72
Inventories
358.51
394.52
453.70
508.14
Trade receivables
99.71
83.71
98.78
113.59
1889.85
1289.91
1496.30
1651.00
Short-terms loans & advances
19.14
26.73
45.98
68.04
Other current assets
114.29
43.90
75.51
110.24
Total Current Assets
4313.86
3407.12
4460.05
5171.74
Total Assets (D+E)
5560.26
5816.90
6784.77
7590.85
SOURCES OF FUNDS
Shareholder's Funds
A)
Sub Total Net worth
Non Current Liabilities
B)
Current Liabilities
C)
II
APPLICATION OF FUNDS
D)
Non-Current Assets
Fixed Assets
Tangible assets
Total Non-Current Assets
E)
Current Assets
Cash and Bank Balances
Annual Profit & Loss Statement for the period of 2013 to 2016E
Value(Rs.in.mn)
FY13A
FY14A
FY15E
FY16E
Description
Net Sales
12m
6067.19
12m
6717.26
12m
7926.37
12m
8837.90
Other Income
400.51
401.25
371.16
391.57
Total Income
6467.70
7118.51
8297.52
9229.47
Expenditure
-4339.01
-4850.71
-5718.87
-6398.64
Operating Profit
2128.69
2267.80
2578.65
2830.83
-0.82
-58.84
-20.59
-23.68
Gross profit
2127.87
2208.96
2558.06
2807.15
Depreciation
-32.84
-36.75
-43.48
-50.00
Exceptional Items
0.00
-285.96
0.00
-469.80
Profit Before Tax
2095.03
1886.25
2514.58
2287.35
Tax
-421.21
-381.81
-504.17
-464.33
Net Profit
1673.82
1504.44
2010.41
1823.02
Equity capital
147.50
147.50
147.50
147.50
Reserves
4690.56
5073.31
6062.61
6881.06
Face value
1.00
1.00
1.00
1.00
EPS
11.35
10.20
13.63
12.36
Interest
Quarterly Profit & Loss Statement for the period of 31st MAR, 2014 to 31st DEC, 2014E
31-Mar-14
30-Jun-14
30-Sep-14
31-Dec-14E
3m
3m
3m
3m
1845.13
1913.15
1880.09
1917.69
Other income
82.77
90.71
82.79
79.15
Total Income
1927.90
2003.86
1962.88
1996.84
Expenditure
-1317.46
-1376.25
-1358.94
-1388.41
Operating profit
610.44
627.61
603.94
608.43
Interest
-16.48
-0.17
-0.12
-0.08
Gross profit
593.96
627.44
603.82
608.35
Depreciation
-9.63
-8.53
-12.51
-12.76
Exceptional Items
-117.45
-117.45
-117.45
-117.45
Profit Before Tax
466.88
501.46
473.86
478.14
Tax
-83.74
-105.31
-99.51
-96.58
Net Profit
383.14
396.15
374.35
381.56
Equity capital
147.50
147.50
147.50
147.50
Face value
1.00
1.00
1.00
1.00
EPS
2.60
2.69
2.54
2.59
Value(Rs.in.mn)
Description
Net sales
Ratio Analysis
Particulars
Charts
FY13A
FY14A
FY15E
FY16E
EPS (Rs.)
11.35
10.20
11.08
12.36
EBITDA Margin (%)
35.09
33.76
32.53
32.03
PBT Margin (%)
34.53
28.08
25.80
25.88
PAT Margin (%)
27.59
22.40
20.62
20.63
P/E Ratio (x)
25.35
28.20
25.95
23.27
ROE (%)
34.60
28.82
26.32
25.94
ROCE (%)
44.68
44.14
42.22
40.99
EV/EBITDA (x)
18.18
17.45
14.99
13.44
Book Value (Rs.)
32.80
35.40
42.10
47.65
P/BV
8.77
8.13
6.83
6.04
OUTLOOK AND CONCLUSION
At the current market price of Rs. 287.65, the stock P/E ratio is at 25.95 x FY15E and 23.27 x FY16E
respectively.
Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.11.08 and
Rs.12.36 respectively.
Net Sales and Net Profit of the company are expected to grow at a CAGR of 13% and 3% over 2013 to 2016E
respectively.
On the basis of EV/EBITDA, the stock trades at 14.99 x for FY15E and 13.44 x for FY16E.
Price to Book Value of the stock is expected to be at 6.83 x and 6.04 x respectively for FY15E and FY16E.
We recommend ‘BUY’ in this particular scrip with a target price of Rs.316.00 for Medium to Long term
investment.
Industry Overview
The overall fast moving consumer goods (FMCG) market is expected to increase at a compound annual growth
rate (CAGR) of 14.7 per cent to US$ 110.4 billion during 2012–2020, with the rural FMCG market expected to
increase at a CAGR of 17.7 per cent to US$ 100 billion during 2011–2025.
Rising incomes and growing youth population have been key growth drivers for the sector. Brand consciousness
has also aided demand. It is estimated that First Time Modern Trade Shoppers (FTMTS) spend will reach US$ 1
billion by 2015.
The Government of India's policies and regulatory frameworks such as relaxation of license rules and approval of
51 per cent foreign direct investment (FDI) in multi-brand and 100 per cent in single-brand retail are some of the
major growth drivers in this sector. The government has also amended the Sugarcane Control Order, 1966, and
replaced the Statutory Minimum Price (SMP) of sugarcane with Fair and Remunerative Price (FRP) and the State
Advised Price (SAP).
There is a lot of scope for growth in the FMCG sector from rural markets with consumption expected to grow in
these areas as penetration of brands increases. Also, with rising per capita income, which is projected to expand
at a CAGR of 7.4 per cent over the period 2013-19, the FMCG sector is anticipated to witness some major growth.
The industry has witnessed healthy foreign direct investment (FDI) inflow, as the sector accounted for 3 per cent
of the country’s total FDI inflow in the period April 2000 to October 2013. Organised retail share is expected to
double to 14–18 per cent of the overall retail market by 2015.
The FMCG market is set to treble US$ 33.4 billion in 2015. Penetration level as well as per capita consumption in
most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped
market potential.
The Indian FMCG industry represents nearly 2.5% of the country’s GDP.
The industry has tripled in size in past 10 years and has grown at ~17%CAGR in the last 5 years driven by
rising income levels, increasing urbanization, strong rural demand and favourable demographic trends.
The sector accounted for 1.9% of the nation’s total FDI inflows in April 2000- September 2012. Cumulative
FDI inflows into India from April 2000 to April 2013 in the food processing sector stood at Rs. 9,000.3 crore,
accounting for 0.96% of overall FDI inflows while the soaps, cosmetics and toiletries, accounting for 0.32% of
overall FDI at Rs. 3,115.5 crore.
Food products and personal care together make up two-third of the sector’s revenues.
Rural India accounts for more than 700 mn consumers or 70% of the Indian population and accounts for
50% of the total FMCG market.
With changing lifestyle and increasing consumer demand, the Indian FMCG market is expected to cross $80
bn by 2026 in towns with population of up to 10 lakh.
India's labor cost is amongst the lowest in the world, after China & Indonesia, giving it a competitive
advantage over other countries.
Household care
The fabric wash market size is estimated to be ~USD 1 billion, household cleaners to be USD 239 million, with
the production of synthetic detergents at 2.6 million tonnes. The demand for detergents has been growing at an
annual growth rate of 10 to 11% during the past five years
Personal Care (HPC)
The personal care products (PCP) market in India is estimated to be worth ~USD 4 bn p.a. Personal hygiene
products (including bath and shower products, deodorants etc.), hair care, skin care, colour cosmetics and
fragrances are the key segments of the personal care market.
Food & Beverages
Food processing industry is one of the largest industries in India, ranking fifth in terms of production, growth,
consumption, and export. The total value of Indian food processing industry is expected to touch USD 194 billion
by 2015 from a value of USD 121 billion in 2012, according to Indian Council of Agricultural Research (ICAR).
Conclusion
While the rural market certainly offers a big attraction to marketers, it would be naïve to think that any company
can enter the market without facing any problems and walk away with a sizable share. Distribution is the most
important variable in the marketing plans of most consumer goods manufacturers, because managing such a
massive sales and distribution network is in itself a huge task.
This sector will continue to see growth as it depends on an ever-increasing internal market for consumption, and
demand for these goods remains more or less constant, irrespective of recession or inflation. Hence this sector
will grow, though it may not be a smooth growth path, due to the present world-wide economic slowdown, rising
inflation and fall of the rupee. This sector will see good growth in the long run and hiring will continue to remain
robust.
As people are demonstrating an increasing interest in online shopping, future prospects pose a tremendous
growth opportunity for retail and FMCG players alike.
The market size of the Indian FMCG sector is expected to reach US$ 135 billion by 2020 from US$ 44.9 billion in
2013. It is also the fourth largest sector in the Indian economy and has grown at an annual average of about 11
per cent over the last decade. Food products, the leading market segment with 43 per cent of the overall market
revenue together with personal care at 22 per cent make up two-thirds of the sector's revenue.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – info@firstcallindia.com
C.V.S.L.Kameswari
Pharma
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Capital Goods
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Auto, IT & FMCG
M. Vinayak Rao
Diversified
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Diversified
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