1
May 31, 2018
Bajaj Corp Ltd
India Research - Stock Broking
HOLD
Recommendation (Rs.)
CMP (as on May 30, 2018) 465
Target Price 525
Previous Target Price 526
Upside (%) 13
Stock Information
Mkt Cap (Rs.mn/US$ mn) 67127 / 994
52-wk High/Low (Rs.) 525 / 341
3M Avg. daily value (Rs. mn)
25.2
Beta (x) 0.6
Sensex/Nifty 34906 / 10614
O/S Shares(mn) 147.5
Face Value (Rs.) 1.0
Shareholding Pattern (%)
Promoters 66.9
FIIs 25.1
DIIs 4.6
Others 3.4
Stock Performance (%)
1M 3M 6M 12M
Absolute (3) (3) (5) 33
Relative to Sensex (2) (5) (9) 19
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
For private circulation only. For important information about Karvy’s rating system and other disclosures
refer to the end of this material. Karvy Stock Broking Research is available on Thomson Reuters &
Bloomberg (Code: KRVY<GO>)
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18P FY19E FY20E
Net Sales 7997 7969 8285 8896 9797
EBITDA 2737 2636 2539 2741 3025
EBITDA Margin (%) 34.2 33.1 30.6 30.8 30.9
Net Prot 1964 2182 2111 2303 2539
EPS (Rs.) 13.3 14.8 14.3 15.6 17.2
RoE (%) 40.5 44.8 42.8 46.0 47.9
PE (x) 29.0 26.70 32.4 29.7 26.9
Source: Company, Karvy Research; *Represents multiples for FY16 - FY18 are based on historic market price
Sluggish Recovery in Rural Volumes, Stable Domestic
Volumes to Continue Further
Bajaj Corp has delivered steady revenue numbers during the quarter on the back
of 5.9% growth in overall volumes, led by 7.3% (during Q4FY18) volume growth in
Bajaj Almond Drops. The volume growth from rural areas has remained sluggish
during the quarter. However, for the light hair oil, the growth in volume has picked up
nicely in rural areas. Innovation center of the company has started delivering new
products and the company is planning to launch one new product every quarter. The
company has launched Bajaj Coco Jasmine during the quarter and Bajaj Brahmi
Amla launched during Q3FY18 has shown a 59% volume growth. Input cost of
the raw material i.e. Light Liquid Paran (LLP) during the quarter increased to Rs.
65.45 per Kg as compared to Rs. 61.22 per Kg during Q3FY18. The international
business of the company has declined by 32.9% due to the structural changes in
distribution. The company’s EBITDA margin during the quarter stood at 32.41% as
compared to 32.37% during Q4FY17 (YoY), on the back of rationalized spending of
Advertisement & Other expenses during the quarter.
Pilot project of Nomarks now extending to other states: The company has
implemented a pilot project for Nomarks in the state of Uttar Pradesh (UP), which
has shown robust growth in turnover for this brand on the back of the investment
in distribution as well as advertising. Now the company is expanding the product
to other states using an integrated marketing campaign to improve customer
awareness and preference for the brand.
Valuation and Risks
Bajaj Corp, with its shift in distribution plans and expansion plans to improve direct
reach to the customers, is planning to capture more market share. We have revised
our EBITDA margin estimates upwards on the back of rationalized spending of
Advertisement & Other expenses. Bajaj Corp, with its credentials of low debt,
healthy ratios and healthy cash ows, is currently trading at 26.9x FY20E EPS.
We value the company at 30.5x FY20E EPS (near 10 year average 1 year forward
P/E) with “HOLD” rating and maintain the target price of Rs. 525 with an upside of
13.4%. However, the increase in raw material prices and competition from existing
& new entrants will be the key risks to earnings growth.
Earnings Revision (%)
YE Mar FY19E FY20E
Sales (%) 0.0 0.9
EBITDA (%) 2.7 3.1
PAT (%) 0.5 1.4
Source: Karvy Research
L
L
L
L
L
L
Company Update
85
110
135
160
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Mar -18
Apr-18
May-18
Bajaj Cor p
Sensex
Bloomberg Code: CYL IN
Consumer Staples - Household & Personal Products
Bajaj Corp Ltd
Bloomberg Code: BJCOR IN
Analyst Contact
Vivek Ranjan Misra
040 - 3321 6270
vivekr.misra@karvy.com
2
May 31, 2018
Bajaj Corp Ltd
Key takeaways from quarterly earnings
Budgetary support announced by the Government of India has claimed as income
but the same has not yet been sanctioned.
If the turnover was to be compared on a like-to-like basis (considering the impact of
GST), the growth in this quarter is at 10.12%.
Rural volume growth of light hair oil has increased to 5.3% during the quarter. This
has led to the volume growth of complete light hair oil segment.
Volume market share of Bajaj Almond Drops brand has improved to 60.1% and
Value market share has improved to 62.7% in the month of March.
Modern trade has shown a 24.0% volume growth and CSD business has shown a
5.6% volume growth during this quarter.
Slow recovery in rural
volumes aected the top
line.
Improvement in rural
volumes can signicantly
benet the company to
improve their value growth.
Exhibit 2: Q4FY18
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ % Q4FY17 YoY %
Turnover 2216 2081 6.5 2045 8.3
Expenditure 1498 1402 6.8 1383 8.3
EBITDA 718 678 5.9 662 8.5
Depreciation 18 19 (3.5) 14 31.1
Interest 4 3 35.7 3 -
Other Income 9 45 (80.9) 15 (41.1)
PBT 705 701 0.5 660 6.8
Ta x 151 150 0.5 142 6.0
Adjusted PAT 554 552 0.5 518 7.0
EBITDA Margin (%) 32.4 32.6 (20) bps 32.4 4 bps
EBIT Margin (%) 32.0 33.8 (188) bps 32.4 (43) bps
Net Prot Margin (%) 25.0 26.5 (151) bps 25.3 (32) bps
Source: Company, Karvy Research
Exhibit 3: Overall Hair Oil Market
Source: Bloomberg, Karvy Research
197000
214000
236000
238000
247000
269000
255000
254000
264000
44980
50440
57280
69810
78670
86760
93900
99280
112000
0
70000
140000
210000
280000
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Volume (KLtr)
Value (Rs. Mn)
3
May 31, 2018
Bajaj Corp Ltd
We value the stock at near
its last 5 year average 1yr
forward P/E.
Exhibit 4: Light Hair Oil Market
Source: Company, Karvy Research
Exhibit 5: Almond Drops Hair Oil Market
Source: Company, Karvy Research
Exhibit 7: 5 year PE Band
Source: Bloomberg, Karvy Research
Exhibit 8: S&P BSC GIP Index - 10 year PE Valuation
Source: Bloomberg, Karvy Research
Exhibit 6: Change in Earnings Estimates
YE Mar - Standalone (Rs. Mn)
FY19E FY20E
Old New % Change Old New % Change
Net Sales 8895 8896 0.0 9713 9797 0.9
EBITDA 2669 2741 2.7 2933 3025 3.1
EBITDA Margin (%) 30.2 30.8 62 bps 30.2 30.9 68 bps
Adj. PAT 2292 2303 0.5 2505 2539 1.4
EPS (Rs.) 15.5 15.6 0.7 17.0 17.2 1.3
Source: Karvy Research
19900
22400
26800
30000
31900
31300
32200
33100
7100
8310
10800
13110
14740
15020
15760
16390
17440
0
7950
15900
23850
31800
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Volume (KLtr)
Value (Rs.Mn)
9600
11000
13900
16300
18100
18100
18800
19200
3600
4410
5940
7460
8610
9060
9620
9940
10690
0
5000
10000
15000
20000
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Volume (KLtr)
Value (Rs. Mn)
0
100
200
300
400
500
600
700
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep
-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Price (Rs.)
42.5x
36x
29.5x
23x
16.5x
0
5000
10000
15000
20000
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
Dec-17
May-18
Price (Rs.)
64.4x
50.7x
37x
23.3x
9.6x
4
May 31, 2018
Bajaj Corp Ltd
Financials
Exhibit 9: Income Statement
YE Mar (Rs. Mn) FY16 FY17 FY18P FY19E FY20E
Revenues 7997 7969 8285 8896 9797
Growth (%) (3.1) (0.4) 4.0 7.4 10.1
Operating Expenses 5260 5333 5746 6155 6772
EBITDA 2737 2636 2539 2741 3025
Growth (%) 14.4 (3.7) (3.7) 8.0 10.3
Depreciation & Amortization 49 53 74 71 69
Other Income 287 394 244 257 269
EBIT 2975 2977 2710 2927 3225
Exceptional Items 470 184 0 0 0
Interest Expenses 2 10 12 12 11
PBT 2503 2782 2698 2915 3214
Tax 539 600 587 612 675
Adjusted PAT 1964 2182 2111 2303 2539
Growth (%) 13.8 11.1 (3.3) 9.1 10.3
Source: Company, Karvy Research
Exhibit 10: Balance Sheet
YE Mar (Rs. Mn) FY16 FY17 FY18P FY19E FY20E
Cash & Bank Balances 603 124 134 327 664
Sundry Debtors 254 274 324 309 281
Inventory 502 425 466 494 526
Loans & Advances 4 12 16 19 23
Gross Block 1012 1239 1229 1198 1169
Net Block 963 1186 1155 1127 1099
CWIP 9 0 149 149 149
Miscellaneous 3329 3874 3831 3693 3752
Total Assets 5662 5895 6075 6117 6494
Current Liabilities & Provisions 744 796 1008 903 891
Debt 100 150 135 110 90
Other Liabilities 8 8 7 7 7
Total Liabilities 852 953 1151 1020 988
Shareholders Equity 148 148 148 148 148
Reserves & Surplus 4663 4794 4777 4950 5358
Total Networth 4811 4942 4925 5097 5506
Total Networth & Liabilities 5662 5895 6075 6117 6494
Source: Company, Karvy Research
5
May 31, 2018
Bajaj Corp Ltd
Exhibit 11: Cash Flow Statement
YE Mar (Rs. Mn) FY16 FY17 FY18P FY19E FY20E
PBT 2503 2782 2698 2915 3214
Depreciation 49 53 74 71 69
Tax Paid (532) (585) (587) (612) (675)
Inc/dec in Net WC (276) 71 (152) (134) (35)
Other Income (252) (280) 0 0 0
Other non cash items 437 78 0 0 0
Cash ow from operating activities 1929 2120 2032 2240 2573
Inc/dec in capital expenditure (170) (361) (191) (43) (42)
Others 230 208 312 154 (44)
Cash ow from investing activities 60 (153) 120 110 (86)
Inc/dec in borrowings 98 42 (15) (25) (20)
Dividend paid (2041) (2042) (2130) (2130) (2130)
Cash ow from nancing activities (1943) (2000) (2145) (2155) (2150)
Net change in cash 46 (33) 7 195 337
Source: Company, Karvy Research
Exhibit 12: Key Ratios
YE Mar FY16 FY17 FY18P FY19E FY20E
EBITDA Margin (%) 34.2 33.1 30.6 30.8 30.9
EBIT Margin (%) 37.2 37.4 32.7 32.9 32.9
Net Prot Margin (%) 24.6 27.4 25.5 25.9 25.9
Dividend Payout Ratio (%) 86.4 77.7 83.9 76.9 69.7
Net Debt/Equity (x) (0.1) 0.0 0.0 (0.0) (0.1)
RoE (%) 40.5 44.8 42.8 46.0 47.9
RoCE (%) 61.3 60.9 54.8 58.3 60.7
Source: Company, Karvy Research
Exhibit 13: Valuation Parameters
YE Mar FY16 FY17 FY18P FY19E FY20E
EPS (Rs.) 13.3 14.8 14.3 15.6 17.2
DPS (Rs.) 11.5 11.5 12.0 12.0 12.0
BVPS (Rs.) 32.6 33.5 33.4 34.6 37.3
PE (x) 29.0 26.7 32.4 29.7 26.9
P/BV (x) 11.8 13.8 13.9 13.4 12.4
EV/EBITDA (x) 19.6 24.8 25.8 23.9 21.6
EV/Sales (x) 6.7 6.9 8.0 7.4 6.7
Source: Company, Karvy Research; *Represents multiples for FY16 - FY18 are based on historic market price
6
May 31, 2018
Bajaj Corp Ltd
Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
Connect & Discuss More at
1800 419 8283 (Toll Free) research@karvy.com Live Chat
f
in
You
Tube
Disclaimer
Analyst certication: The following analyst(s), Vivek Ranjan Misra, who is (are) primarily responsible for this report and whose name(s) is/are mentioned
therein, certify (ies) that the views expressed herein accurately reect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no
part of his (their) compensation was, is or will be directly or indirectly related to the specic recommendation(s) or views contained in this research report.
Disclaimer: Karvy Stock Broking Limited [KSBL] is registered as a research analyst with SEBI (Registration No INH200003265). KSBL is also a SEBI
registered Stock Broker, Depository Participant, Portfolio Manager and also distributes nancial products. The subsidiaries and group companies including
associates of KSBL provide services as Registrars and Share Transfer Agents, Commodity Broker, Currency and forex broker, merchant banker and
underwriter, Investment Advisory services, insurance repository services, nancial consultancy and advisory services, realty services, data management,
data analytics, market research, solar power, lm distribution and production, proling and related services. Therefore associates of KSBL are likely to have
business relations with most of the companies whose securities are traded on the exchange platform. The information and views presented in this report are
prepared by Karvy Stock Broking Limited and are subject to change without any notice. This report is based on information obtained from public sources , the
respective corporate under coverage and sources believed to be reliable, but no independent verication has been made nor is its accuracy or completeness
guaranteed. The report and information contained herein is strictly condential and meant solely for the selected recipient and may not be altered in any
way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of KSBL. While we would endeavor to update the information herein on a reasonable basis, KSBL is under no obligation to update or keep the information
current. Also, there may be regulatory, compliance or other reasons that may prevent KSBL from doing so. The value and return on investment may vary
because of changes in interest rates, foreign exchange rates or any other reason. This report and information herein is solely for informational purpose and
shall not be used or considered as an oer document or solicitation of oer to buy or sell or subscribe for securities or other nancial instruments. Though
disseminated to all the customers simultaneously, not all customers may receive this report at the same time. KSBL will not treat recipients as customers by
virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or
strategy is suitable or appropriate to your specic circumstances. This material is for personal information and we are not responsible for any loss incurred
based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment
decisions based on their specic investment objectives and nancial position and using such independent advice, as they believe necessary. While acting
upon any information or analysis mentioned in this report, investors may please note that neither KSBL nor any associate companies of KSBL accepts any
liability arising from the use of information and views mentioned in this report. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Past performance is not necessarily a guide to future performance. Forward-looking statements
are not predictions and may be subject to change without notice. Actual results may dier materially from those set forth in projections.
Associates of KSBL might have managed or co-managed public oering of securities for the subject company or might have been mandated by the subject
company for any other assignment in the past twelve months.
Associates of KSBL might have received compensation from the subject company mentioned in the report during the period preceding twelve months from
the date of this report for investment banking or merchant banking or brokerage services from the subject company in the past twelve months or for services
rendered as Registrar and Share Transfer Agent, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory
services, insurance repository services, consultancy and advisory services, realty services, data processing, proling and related services or in any other
capacity.
KSBL encourages independence in research report preparation and strives to minimize conict in preparation of research report.
Compensation of KSBLs Research Analyst(s) is not based on any specic merchant banking, investment banking or brokerage service transactions.
KSBL generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a nancial interest in the securities or derivatives of
any companies that the analysts cover.
KSBL or its associates collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the
last day of the month preceding the publication of the research report.
KSBL or its analysts did not receive any compensation or other benets from the companies mentioned in the report or third party in connection with
preparation of the research report and have no nancial interest in the subject company mentioned in this report.
Accordingly, neither KSBL nor Research Analysts have any material conict of interest at the time of publication of this report.
It is conrmed that KSBL and Research Analysts, primarily responsible for this report and whose name(s) is/ are mentioned therein of this report have not
received any compensation from the subject company mentioned in the report in the preceding twelve months.
It is conrmed that Vivek Ranjan Misra, Research Analyst did not serve as an ocer, director or employee of the companies mentioned in the report.
KSBL may have issued other reports that are inconsistent with and reach dierent conclusion from the information presented in this report.
Neither the Research Analysts nor KSBL have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on KSBL by any Regulatory Authority impacting Equity Research Analyst activities.
Karvy Stock Broking Limited
Plot No.31, 6th Floor, Karvy Millennium Towers, Financial District, Nanakramguda, Hyderabad, 500 032, India
Tel: 91-40-2331 2454; Fax: 91-40-2331 1968
For More updates & Stock Research, visit www.karvyonline.com