1
Jun 02, 2016
Bajaj Corp Ltd
Consumer Staples-Household Products
Bajaj Corp Ltd
India Research - Stock Broking
BUY
Bloomberg Code: BJCOR IN
Recommendation (Rs.)
CMP (as on Jun 01, 2016) 394
Target Price 465
Upside (%) 18
Stock Information
Mkt Cap (Rs.mn/US$ mn) 58130 / 862
52-wk High/Low (Rs.) 522 / 356
3M Avg. daily volume (mn) 0.1
Beta (x) 0.6
Sensex/Nifty 26714 / 8180
O/S Shares(mn) 147.5
Face Value (Rs.) 1.0
Shareholding Pattern (%)
Promoters 66.9
FIIs 23.0
DIIs 3.9
Others 6.3
Stock Performance (%)
1M 3M 6M 12M
Absolute 2 2 (9) (12)
Relative to Sensex (3) (8) (12) (11)
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
Analyst Contact
Jagannadham Thunuguntla
040 - 3321 6296
jagannadham.t@karvy.com
In Pursuit of Excellence, with Almond Drops Hair Oil
Leading position in Light Hair Oil market and Well established brands
to surge revenue growth: Bajaj corp is one of the leading players in FMCG
sector in hair care category. Bajaj Almond Drops hair oil is market leader in the
light hair oil segment with more than 60% of market share and major revenue
contributor for the company. Despite the adverse market condition in the hair oil
industry, Bajaj corp managed to register 2.9% growth in the sales volume and
4.1% increase in realisation per case for Almond Drops Hair Oil (ADHO) brand.
However, the consumption demand is expected to improve considerably on the
back of expected good monsoons in FY17E, after two consecutive years of poor
rains. Good monsoons are likely to improve disposable incomes of rural India and
hence consumption demand would be boosted. This would help the company to
post moderate growth in coming years.
Increasing outlets to tap rural markets to push growth: Bajaj corp is
continuously focusing towards improving its presence and strengthening its
portfolio to drive higher revenue growth. At present, 42.0% of Bajaj Almond Drops
hair oil sales are from rural areas only and the company managed to capture 63.2%
market share in rural areas. Bajaj corp managed to come up with 0.89mn outlets
during FY16, out of which 0.43mn were opened in urban area and 0.46mn in rural
area.
Valuation and Outlook
Bajaj corp is market leader in Light Hair oil segment and more than 91% of its
revenues are coming from ADHO only. Bajaj corp, with its credentials of debt free,
healthy ratios and healthy cash ows, is currently trading at 20.3x FY18E EPS. We
value the company at 24.0x FY18E EPS and initiate the coverage on the company
with “BUY” rating, for a target price of Rs. 465, representing an upside of 18% for
a period of 9-12 months.
Key Risks
Fluctuations in raw material prices.
Depending on a single product ADHO.
Competition from existing and new entrants.
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 also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Net Sales 6717 8256 8764 9643 11088
EBITDA 1860 2392 2737 2937 3285
EBITDA Margin (%) 27.7 29.0 31.2 30.5 29.6
Net Prot 1489 1727 1964 2430 2859
EPS (Rs.) 10.1 11.7 13.3 16.5 19.4
RoE (%) 29.7 34.3 40.5 48.6 51.0
PE (x) 21.3 39.0 23.2 23.9 20.3
Source: Company, Karvy Research, *Represents multiples for FY14, FY15 & FY16 are based on historic market price
75
85
95
105
115
Jun-15
Jul-15
Aug -15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar
-16
Apr-16
May-16
Jun-16
Bajaj Cor p
Sensex
2
Jun 02, 2016
Bajaj Corp Ltd
Company Background
Bajaj Corp Limited (Bajaj corp), incorporated in the year 2006,
is a company engaged in the trading and manufacturing of
cosmetics, toiletries and other personal care products. Bajaj
corp has leadership position in hair care segment. Its brand
portfolio consists of Almond Drops hair oil, Amla hair oil,
Brahmi hair oil and Nomarks. The company’s principal product
is Almond Drops hair oil, which is the market leader with over
60% share in the Light hair oil market. Almond Drops is 2nd
largest brand in the overall hair oil segment. Bajaj corp is also
producing oral care products under the brand name Bajaj
Black Tooth powder. Bajaj corp has hair oil manufacturing
facilities in Himachal Pradesh, Uttarakhand, Rajasthan and
Guwahati. Bajaj corp has registered its brand Bajaj Nomarks
in international markets also like Gulf Cooperation Council
(GCC), Nepal, Malaysia, Australia, etc. Now the company is
delivering its products through 3.71mn retail outlets serviced
by 7392 distributors or stockists and more than 15,000
wholesalers.
Exhibit 2: Shareholding Pattern (%)
Source: BSE, Karvy Research
Exhibit 3: Revenue Segmentation (%)
Source: Company, Karvy Research
Promoters
66.9%
FIIs
23.0%
Others
6.3%
Hair Oil
92.5%
Soap
1.6%
Facewash
2.3%
Cream
3.0%
Others
0.6%
Balance sheet (Rs. Mn)
FY15 FY16 FY17E FY18E
Total Assets 5679 5659 6178 6940
Net Fixed assets 1424 972 823 868
Current assets 3818 4148 4811 5516
Other assets 437 539 544 556
Total Liabilities 5679 5659 6178 6940
Networth 4886 4808 5197 6015
Short Term Debt 0 100 100 100
Current Liabilities 788 744 873 816
Other Liabilities 5 7 8 9
Balance Sheet Ratios
RoE (%) 34.3 40.5 48.6 51.0
RoCE (%) 52.7 61.3 63.6 63.7
Debt/Equity 0.0 0.0 0.0 0.0
Equity/Total Assets 0.9 0.8 0.8 0.9
P/BV (x) 13.7 10.9 11.2 9.7
Source: Company, Karvy Research
Cash Flow (Rs. Mn)
FY15 FY16E FY17E FY18E
PBT 2188 2502 3000 3574
Depreciation 49 49 51 54
Interest (net) 1 2 2 2
Ta x (459) (538) (570) (715)
Changes in WC 135 (369) 37 (235)
Others 153 239 (65) (285)
CF from Operations 2067 1885 2455 2395
Capex (8) (66) (86) (99)
Investments & Others (187) (642) (160) (184)
CF from Investing (195) (708) (246) (283)
Change in Debt 0 100 0 0
Dividends & Other (2035) (2041) (2041) (2041)
CF from Financing (2035) (1941) (2041) (2041)
Change in Cash (164) (764) 168 70
Source: Company, Karvy Research
Company Financial Snapshot (Y/E Mar)
Profit & Loss (Rs. Mn)
FY15 FY16 FY17E FY18E
Net sales 8256 8764 9643 11088
Optg. Exp 5864 6027 6705 7803
EBITDA 2392 2737 2937 3285
Other & Exceptional Items (154) (184) 116 345
Depreciation 49 49 51 54
Interest 1 2 2 2
PBT 2188 2502 3000 3574
Ta x 462 538 570 715
Adj . PAT 1727 1964 2430 2859
Profit & Loss Ratios
EBITDA margin (%) 29.0 31.2 30.5 29.6
Net margin (%) 20.9 22.4 25.2 25.8
P/E (x) 39.0 23.2 23.9 20.3
EV/EBITDA (x) 24.3 20.4 18.8 16.9
Dividend yield (%) 2.9 2.9 2.9 2.9
Source: Company, Karvy Research
3
Jun 02, 2016
Bajaj Corp Ltd
Leading position in Light Hair Oil market and Well established brands to surge revenue growth:
Bajaj corp is one of the leading players in FMCG sector in hair care category. At present, the company is operating in three
verticals namely Hair care, Skin care and Oral care segments. Its brand portfolio includes ADHO, Amla Hair Oil (AHO), Brahmi
Hair Oil (BHO) and Nomarks. Bajaj Almond Drops hair oil is market leader in the light hair oil segment with more than 60% of
market share and major revenue contributor for the company. ADHO is 2nd largest brand in the overall hair oil segment and its
premium position commands one of the highest unit prices in the industry. ADHO is contributing more than 91% of total revenues
on the back of continuous investment in advertising and increasing distribution channels. The investment in advertising and
sales promotion has helped the company to gain market share and to remain second largest hair oil brand in the Indian hail oil
industry in terms of value. Despite the adverse market condition in the hair oil industry, Bajaj corp managed to register 2.9%
growth in the sales volume and 4.1% increase in realisation per case for ADHO brand. However, the consumption demand is
expected to improve considerably on the back of expected good monsoons in FY17E, after two consecutive years of poor rains.
Good monsoons are likely to improve disposable incomes of rural India and hence consumption demand would be boosted.
This would help the company to post moderate growth in coming years.
Bajaj corp is continuously improving its market share in the
light hair oil category in terms of volume and at the same time
in terms of value also. Its market share in terms of volume
stood at 38.4% in FY08 and the same increased to 57.9% by
FY16 grown at a CAGR of 5.3%. And market share in terms
of values stood at 40.3% in FY08 and the same increased to
60.2% by FY16 grown at a CAGR of 5.1%.
Exhibit 4: Almond Drops Hair Oil sales volumes
Source: Company, Karvy Research
Exhibit 6: Almond Drops Hair Oil Market in India - Volumes
Source: Company investor presentation, Karvy Research
Exhibit 8: Market Share Trends in the Light Hair Oil Category
Source: Company investor presentation, Karvy Research
Exhibit 5: Almond Drops Hair Oil sales value
Source: Company, Karvy Research
Exhibit 7: Almond Drops Hair Oil Market in India - Value
Source: Company investor presentation, Karvy Research
49.1%
51.9%
54.4%
56.6%
57.7%
57.9%
53.0%
55.0%
56.9%
58.4%
59.7%
60.2%
-5%
5%
15%
25%
35%
45%
55%
65%
FY11
FY12
FY13
FY14
FY15
FY16
Volume (%)
Value (%)
2886237
3459764
4212487
4379529
4879921
5021571
18.3%
19.9%
21.8%
4.0%
11.4%
2.9%
0%
5%
10%
15%
20%
25%
0
1000000
2000000
3000000
4000000
5000000
6000000
FY11
FY12
FY13
FY14
FY15
FY16
Sales volumes (No.of cases)
Growth (%)
3432
4443
5771
6298
7372
7900
26.1%
29.4%
29.9%
9.1%
17.1%
7.2%
0%
10%
20%
30%
0
2000
4000
6000
8000
FY11
FY12
FY13
FY14
FY15
FY16
Sales value (Rs. Mn)
Growth (%)
11006
13895
16298
18076
17883
18716
15.1%
26.2%
17.3%
10.9%
-1.1%
4.7%
-10%
0%
10%
20%
30%
0
4000
8000
12000
16000
20000
FY11
FY12
FY13
FY14
FY15
FY16
Volume (KLtr)
Growth (%)
4410
5940
7460
8610
8970
9640
22.5%
34.7%
25.6%
15.4%
4.2%
7.5%
0%
10%
20%
30%
40%
0
2000
4000
6000
8000
10000
12000
FY11
FY12
FY13
FY14
FY15
FY16
Value (Rs. Mn)
Growth (%)
4
Jun 02, 2016
Bajaj Corp Ltd
Increasing outlets to tap rural markets to push growth:
Exhibit 10: Number of stockists/distributors
Source: Company investor presentation, Karvy Research
Exhibit 12: Rates of Light Liquid Paraffin (LLP)
Source: Company investor presentation, Karvy Research
Exhibit 9: Rural-Urban break-up of Light Hair Oil market
Source: Company investor presentation, Karvy Research
Exhibit 11: Retail Outlets (in Mn.)
Source: Company investor presentation, Karvy Research
Exhibit 13: Advertisement and publicity (Rs. Mn)
Source: Company, Karvy Research
1863
1756
1707
1637
4830
5208
5514
5739
0
2000
4000
6000
8000
FY13
FY14
FY15
FY16
Urban Distribution
Rural Distribution
1.1
1.1
1.1
1.5
1.6
1.6
1.7
2.2
0
1
2
3
4
FY13
FY14
FY15
FY16
Urban Distribution
Rural Distribution
Bajaj corp is continuously focusing towards improving its
presence and strengthening its portfolio to drive higher
revenue growth. Penetration into rural markets will oer a huge
growth opportunity and Bajaj corp is well handling to capture
the market share. At present, the brand is presented through
more than 7392 distributors and is now available in more than
3.71mn outlets. Bajaj corp also started new initiation called,
Rural Van operations to cover more rural areas and to increase
its brand reach. At present, Bajaj corp is operating 102 vans to
cover 7765 uncovered towns and villages on a monthly basis.
Considering the importance of rural market in its strategy, the
34
36
35
36
38
66
64
65
64
62
0
20
40
60
80
100
FY12
FY13
FY14
FY15
FY16
Rural
Urban
company is planning to tap the increase in disposable income of rural India and to convert rural consumer from unbranded to
branded products. At present, 42.0% of Bajaj Almond Drops hair oil sales are from rural areas only and the company managed
to capture 63.2% market share in rural areas. Bajaj corp managed to come up with 0.89mn outlets during FY16, out of which
0.43mn were opened in urban area and 0.46mn in rural area. Market share of Light Hair Oil from rural area is 38% and it is 62%
from urban areas on the back of relatively high pricing.
Decline in raw material prices to boost EBITDA margins:
As a result of sharp decline in the crude oil prices, the prices of Light Liquid Paran also declined drastically which is key raw
material/input of the product. EBITDA margins are improved on the back of decrease in the cost of material consumed. Cost of
raw materials as a percentage of total revenue is decreased by 289 basis points to reach 28.0% in FY16 from the levels of 30.9%
in FY15. We expect the raw materials prices continue to fall for FY17E and remain constant at those levels in FY18E, which
aects EBITDA margins to reach 30.5% for FY17E and 29.6% in FY18E. Bajaj corp is also incurring more than 17% of its total
revenues on Advertising and Sales Promotions, which could help the company to create more brand value.
647
879
1133
1468
13.7%
14.5%
16.9%
17.8%
10%
13%
16%
19%
0
500
1000
1500
FY12
FY13
FY14
FY15
Advertisement and Sales Promotion
As a % of Total Revenues
67
84
78
76
76
55
49.5%
25.6%
-6.1%
-3.4%
-0.2%
-27.2%
-50%
-30%
-10%
10%
30%
50%
0
20
40
60
80
100
FY11
FY12
FY13
FY14
FY15
FY16
Rates of Light Liquid Paraffin (Rs. Per kg)
Growth (%)
5
Jun 02, 2016
Bajaj Corp Ltd
Exhibit 14: Brandwise Sales Break-Up (%)
FY11 FY12 FY13 FY14 FY15 FY16
Almond Drops Hair Oil 95.7 94.1 95.3 93.9 90.0 91.2
Nomarks 0.0 0.0 0.0 2.4 7.1 4.5
Amla Hair Oil 0.0 0.0 0.0 0.0 0.2 1.9
Brahmi Amla Hair Oil 2.8 2.0 1.5 1.1 1.3 1.4
Others 1.5 3.9 3.2 2.6 1.4 1.0
Source: Company, Karvy Research
Exhibit 15: Comparative Prices of Different Brands for 100 ml in the Hair Oil Segment (MRP of 100ml (Rs.))
Source: Company investor presentation, Karvy Research
25
42
60
60
33
45
45
42
50
65
5
25
45
65
Amla Hair
Oil
Brahmi Amla
Hair Oil
Almond
Drops Hair
Oil
Kailash
Parbat Hair
Oil
Parachute
Keo Karpin
Dabur Vatika
Dabur Amla
Hair & Care
Navratna
Almond Drops has created a unique positioning for itself through initiatives like product dierentiation (Almond based), focused marketing,
unique packaging (glass vs. plastic used by competition etc.)
Competitor Brands (Rs.)Own Brands (Rs.)
Growth in the FMCG sector will be the key driver:
India is one of the largest populated countries in the world with more than 1.2 Bn people. India’s population is growing at a
rate of 1.41% annually. It is a young country with almost 65% of the population below the age of 30 years. The consumption of
goods will therefore be driven by younger and more auent consumers. Rising incomes, growing youth population and brand
consciousness have been key growth drivers of the sector. Low penetration levels in rural market oer room for growth. The
overall market size of FMCG in India is estimated to grow at a CAGR of 17% from US$47.3 Bn in 2015 to US$103.7 Bn in 2020E.
The urban segment is the largest contributor to the sector, accounting for more than 60% of total revenue and had a market size
of around US$ 28.38 Bn in 2015. Semi-urban and rural segments are growing at a rapid pace; they currently account for 40%
of revenues. The rural FMCG market expected to increase at a CAGR of 18.1% to US$100 Bn during FY12-FY25E. The overall
rural FMCG consumption continues to grow at 12.5% during FY14. Total consumption expenditure to reach nearly US$3.6 Tn
by 2020 from US$1.3 Tn in 2012. India has 70% of its population living in rural areas. With rising urbanization, more people will
have exposure to modern products and brands; and thus shift to branded and packaged goods and products.
Exhibit 16: FMCG market (US$ Bn)
Source: India Brand Equity Foundation (IBEF), Karvy Research
Exhibit 17: Urban/Rural industry break-up (2015)
Source: IBEF, Karvy Research
Urban
60%
Rural
40%
18
21
24
30
35
37
45
47
104
0
22
44
66
88
110
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY15
FY20E
6
Jun 02, 2016
Bajaj Corp Ltd
FMCG market
size:
US$47.3 Bn
2015
FMCG market
size:
US$103.7 Bn
2020E
Growing demand:
1. Rising incomes and growing youth
population have been key growth drivers of
the sector. Brand consciousness has also
aided demand.
2. Tier II/III cities are witnessing faster growth in
modern trade.
Higher investments:
1. Many players are expanding into new
geographies and categories.
2. Organized retail share is expected to double
to 14-18% of the overall retail market by
2015.
Attractive opportunities:
1. Low penetration levels in rural market oer
room for growth.
2. Disposable income in rural India has
increased due to the direct cash transfer
scheme.
3. Growing demand for premium products.
Policy support:
1. Investment approval of up to 100% foreign
equity in single brand retail and 51% in
multi-brand retail.
2. The minimum capitalization for foreign FMCG
companies to invest in India is US$100Mn.
Advantage
Indian
Source: IBEF, Karvy Research
Hair oil market in India:
Source: Company investor presentation, Karvy Research
Shampoo
Rs. 56.8 Bn
(30%)*
Perfumed Oil
Rs. 64.1 Bn
(28%)*
Coconut Based
Oil Rs. 34.8 Bn
(24%)*
Hair Conditioners
Rs. 4.6 Bn
(2%)*
Hair Dyes
Rs. 30.4 Bn
(16%)*
Coconut based
Oils (46.5%)**
Amla based Oils
(15%)**
Light Hair Oils
(16%)**
Cooling Oils
(9%) **
Others
(13.5%)**
FMCG: Rs. 2581.2 Bn
Hair Care: Rs. 190.6 Bn
Hair Oil Market
Perfumed Hair Oil Segment
7% CONTRIBUTION
Hair oil market size in India is pegged at around Rs.99133 Mn with coconut-based oils accounting for 46.5% which comes to
Rs.46097 Mn. Non-coconut or perfumed oil segment, in which Bajaj corp operates, has a market size of Rs.53036 Mn. Among
all, Light Hair Oil is the fastest growing segment and around 38% of the light hair oil sale comes from the rural market. For FY16,
volume for Light Hair Oil has witnessed 4.4% growth rate and value has grown at 6.6% to reach Rs.16020 Mn. Volume in the
case of Overall Hair oil has witnessed 0.5% growth rate and value has grown at 6.6% to reach the current levels.
7
Jun 02, 2016
Bajaj Corp Ltd
Exhibit 18: Light Hair Oil Market Volume in India
Source: Company investor presentation, Karvy Research
Exhibit 20: Overall Hair Oil Market Volume in India
Source: Company investor presentation, Karvy Research
Exhibit 19: Light Hair Oil Market Value in India
Source: Company investor presentation, Karvy Research
Exhibit 21: Overall Hair Oil Market Value in India
Source: Company investor presentation, Karvy Research
22406
26768
29958
31949
30969
32317
12.5%
19.5%
11.9%
6.6%
-3.1%
4.4%
-5%
0%
5%
10%
15%
20%
25%
0
7000
14000
21000
28000
35000
FY11
FY12
FY13
FY14
FY15
FY16
Volume (KLtr)
Growth (%)
8310
10800
13110
14740
15030
16020
17.0%
30.0%
21.4%
12.4%
2.0%
6.6%
-5%
5%
15%
25%
35%
0
4000
8000
12000
16000
FY11
FY12
FY13
FY14
FY15
FY16
Value (Rs. Mn)
Growth (%)
235539
238283
247478
269016
251407
252761
10.1%
1.2%
3.9%
8.7%
-6.5%
0.5%
-10%
-5%
0%
5%
10%
15%
200000
220000
240000
260000
280000
FY11
FY12
FY13
FY14
FY15
FY16
Volume (KLtr)
Growth (%)
57280
69810
78670
86756
92777
98860
13.6%
21.9%
12.7%
10.3%
6.9%
6.6%
0%
5%
10%
15%
20%
25%
0
20000
40000
60000
80000
100000
120000
FY11
FY12
FY13
FY14
FY15
FY16
Value (Rs. Mn)
Growth (%)
Exhibit 22: Business Assumptions
Y/E Mar (Rs. Mn) FY15 FY16E FY17E FY18E Comments
Revenue 8256 8764 9643 11088
We expect the revenue to grow on the back of good
monsoons in FY17E and improved disposable
incomes of Rural India.
Revenue Growth (%) 22.9 6.2 10.0 15.0
EBITDA 2392 2737 2937 3285
EBITDA is likely to grow from Rs.2392mn in FY15
to Rs.3285mn in FY18E. We expect the EBITDA
margins to be stable by FY18E.
EBITDA Margins (%) 29.0 31.2 30.5 29.6
PAT (normalized) 1727 1964 2430 2859
PAT margins are expected to reach 25.8% in
FY18E.
EPS (Rs.) 11.7 13.3 16.5 19.4
Capex (8) (66) (86) (99)
Net CFO 2067 1885 2455 2395
Net Debt (1342) (478) (646) (717)
Free Cash Flow 2059 1819 2369 2295
Source: Company, Karvy Research
8
Jun 02, 2016
Bajaj Corp Ltd
Exhibit 23: Revenue Growth
Source: Company, Karvy Research
Exhibit 26: PAT Margins to improve
Source: Company, Karvy Research
Exhibit 24: EBITDA margins
Source: Company, Karvy Research
Exhibit 25: EBIT Margins
Source: Company, Karvy Research
Exhibit 27: Healthy Return Ratios
Source: Company, Karvy Research
Bajaj corp registered revenue growth rate of 6.2% in FY16, which is
lower than earlier years due to the adverse market condition in the hair oil
industry, despite the same they managed to register 2.9% growth in the
sales volume and 4.1% increase in realisation per case for ADHO brand.
We expect the revenues to grow better on the back of expected good
monsoons in FY17E and improved disposable incomes of Rural India.
Revenues were grown at a CAGR of 16.7% for FY12-16 and we expect
revenues will grow at a CAGR of 12.5% over FY16-18E.
PAT for Bajaj corp grew at a CAGR of 13.1% during FY12-16 to reach
Rs.1964 Mn by FY16 from Rs.1201 Mn in FY12. Prots are likely to jump
from Rs.1964 mn in FY16 to Rs.2859 mn in FY18E as amortization of
patents/trademarks may complete in FY17E. PAT is expected to grow at a
CAGR of 20.7% over FY16-18E.
Bajaj corp is consistent in maintaining its EBITDA margins and EBIT margins every year. EBITDA margins and EBIT margins
were at 31.2% and 33.9% respectively by FY16 and margins were expected to taper a little on the back of uctuations in raw
material prices to reach 29.6% and 32.3% by FY18E. EBITDA and EBIT were stood at Rs.2737 Mn and Rs.2974 Mn respectively
in FY16 and were expected to reach Rs.3285 Mn and Rs.3576 Mn respectively by FY18E.
We expect the RoE and RoCE to reach 51.0% and 63.7% respectively by
FY18E. RoE & RoCE have been healthy for the last 4 years and is expected
to grow further in the next couple of years. RoE will be improved on the
back of increasing PAT margins. RoE and RoCE were stood at 40.5% and
61.3% respectively in FY16.
1860
2392
2737
2937
3285
27.7%
29.0%
31.2%
30.5%
29.6%
24%
26%
28%
30%
32%
0
1000
2000
3000
4000
FY14
FY15
FY16
FY17E
FY18E
EBITDA (Rs. Mn)
EBITDA Margins (%)
2218
2659
2974
3187
3576
33.0%
32.2%
33.9%
33.0%
32.3%
30%
32%
34%
36%
500
1500
2500
3500
FY14
FY15
FY16
FY17E
FY18E
EBIT (Rs. Mn)
EBIT Margins (%)
1489
1727
1964
2430
2859
22.2%
20.9%
22.4%
25.2%
22.8%
15%
19%
23%
27%
300
900
1500
2100
2700
FY14
FY15
FY16
FY17E
FY18E
PAT (Rs. Mn)
PAT Margins (%)
29.7
34.3
40.5
48.6
51.0
44.2
52.7
61.3
63.6
63.7
0
20
40
60
80
FY14
FY15
FY16
FY17E
FY18E
RoE (%)
RoCE (%)
6067
6717
8256
8764
9643
11088
28.2%
10.7%
22.9%
6.2%
10.0%
15.0%
0%
10%
20%
30%
0
3000
6000
9000
12000
FY13
FY14
FY15
FY16
FY17E
FY18E
Revenue ( Rs. Mn)
Revenue Gr owth ( %)
9
Jun 02, 2016
Bajaj Corp Ltd
Exhibit 30: Company Snapshot (Ratings)
Low High
1 2 3 4 5
Quality of Earnings
Domestic Sales
Exports
Net Debt/Equity
Working Capital Requirement
Quality of Management
Depth of Management
Promoter
Corporate Governance
Source: Company, Karvy Research
Exhibit 28: Dividend Payout
Source: Company, Karvy Research
Exhibit 29: Healthy operating and Free cash flows
Source: Company, Karvy Research
At present, the company is paying Rs.11.5/- dividend per share and
dividend payout has been more than 50% on an average. The company
has good track record of regularly paying dividends and we expect
consistency going forward.
Bajaj corp managed to generate better operating cash ows on the back of
consistent revenue growth and better margin expansions. Operating cash
ows and Free cash ows are likely to be stabilized for the coming years
also.
64.4%
98.2%
86.4%
69.8%
59.3%
50%
70%
90%
110%
FY14
FY15
FY16
FY17E
FY18E
Dividend Payout Ratio ( %)
1259
2067
1885
2395
-208
2059
1819
2369
2295
-600
400
1400
2400
FY14
FY15
FY16E
FY17E
FY18E
Operating cash flows (Rs. Mn)
Free cash flows (Rs. Mn)
10
Jun 02, 2016
Bajaj Corp Ltd
Valuation & Outlook
Bajaj corp is market leader in Light Hair oil segment and more than 91% of its revenues are coming from ADHO only. Bajaj
corp, with its credentials of debt free, healthy ratios and healthy cash ows, is currently trading at 20.3x FY18E EPS. We value
the company at 24.0x FY18E EPS and initiate the coverage on the company with “BUY” rating, for a target price of Rs. 465,
representing an upside of 18% for a period of 9-12 months.
Exhibit 31: PE Band
Source: Prowess, Karvy Research
Exhibit 33: EV/EBITDA
Source: Prowess, Karvy Research
Exhibit 32: PB Band
Source: Prowess, Karvy Research
0
10
20
30
40
50
Aug -12
Apr-13
Dec-13
Aug -14
Apr-15
Dec-15
PE
Aver ag e
SD1
SD2
-1SD
0
5
10
15
20
Aug -12
Apr-13
Dec-13
Aug -14
Apr-15
Dec-15
PB
Aver ag e
SD1
SD2
-1SD
0
5
10
15
20
25
30
35
Aug -12
Dec-12
Apr-13
Aug -13
Dec-13
Apr-14
Aug -14
Dec-14
Apr-15
Aug -15
Dec-15
Apr-16
EV/EBITDA
Aver ag e
SD1
SD2
-SD1
Key Risks
Fluctuations in raw material prices.
Depending on a single product ADHO.
Competition from existing and new entrants.
11
Jun 02, 2016
Bajaj Corp Ltd
Financials
Exhibit 34: Income Statement
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Revenues 6717 8256 8764 9643 11088
Growth (%) 10.7 22.9 6.2 10.0 15.0
Operating Expenses 4857 5864 6027 6705 7803
EBITDA 1860 2392 2737 2937 3285
Growth (%) 7.8 28.6 14.4 7.3 11.8
Depreciation & Amortization 43 49 49 51 54
Other Income 401 316 286 300 345
EBIT 2218 2659 2974 3187 3576
Exceptional Item 286 470 470 184 0
Interest Expenses 59 1 2 2 2
PBT 1873 2188 2502 3000 3574
Tax 384 462 538 570 715
Adjusted PAT 1489 1727 1964 2430 2859
Growth (%) (10.4) 15.9 13.7 23.8 17.6
Source: Company, Karvy Research
Exhibit 35: Balance Sheet
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Cash & Bank Balances 1292 1342 578 746 817
Sundry Debtors 84 133 254 275 321
Inventory 395 393 502 555 660
Loans & Advances 45 53 152 161 177
Gross Block 1972 1465 1021 874 922
Net Block 1929 1417 972 823 868
CWIP 7 7 0 0 0
Miscellaneous 2042 2335 3202 3618 4097
Total Assets 5793 5679 5659 6178 6940
Current Liabilities & Provisions 597 788 744 873 816
Debt 0 0 100 100 100
Other Liabilities 4 5 7 8 9
Total Liabilities 600 794 851 981 925
Shareholders Equity 148 148 148 148 148
Reserves & Surplus 5045 4738 4660 5050 5868
Total Networth 5192 4886 4808 5197 6015
Total Networth & Liabilities 5793 5679 5659 6178 6940
Source: Company, Karvy Research
12
Jun 02, 2016
Bajaj Corp Ltd
Exhibit 36: Cash Flow Statement
YE Mar (Rs. Mn) FY14 FY15 FY16E FY17E FY18E
PBT 2159 2658 2972 3184 3574
Depreciation 43 49 49 51 54
Tax Paid (393) (459) (538) (570) (715)
Inc/dec in Net WC (150) 135 (369) 37 (235)
Other Income (330) (253) (229) (246) (283)
Other non cash items (71) (62) 0 0 0
Cash ow from operating activities 1259 2067 1885 2455 2395
Inc/dec in capital expenditure (1467) (8) (66) (86) (99)
Others 1502 (187) (642) (160) (184)
Cash ow from investing activities 35 (195) (708) (246) (283)
Inc/dec in borrowings 0 0 100 0 0
Dividend paid (1122) (2035) (2041) (2041) (2041)
Cash ow from nancing activities (1122) (2035) (1941) (2041) (2041)
Net change in cash 172 (164) (764) 168 70
Source: Company, Karvy Research
Exhibit 37: Key Ratios
YE Mar FY14 FY15 FY16 FY17E FY18E
EBITDA Margin (%) 27.7 29.0 31.2 30.5 29.6
EBIT Margin (%) 33.0 32.2 33.9 33.0 32.3
Net Prot Margin (%) 22.2 20.9 22.4 25.2 25.8
Dividend Payout Ratio (%) 64.4 98.2 86.4 69.8 59.3
Debt/Equity (x) 0.0 0.0 0.0 0.0 0.0
RoE (%) 29.7 34.3 40.5 48.6 51.0
RoCE (%) 44.2 52.7 61.3 63.6 63.7
Source: Company, Karvy Research
Exhibit 38: Valuation Parameters
YE Mar FY14 FY15 FY16 FY17E FY18E
EPS (Rs.) 10.1 11.7 13.3 16.5 19.4
DPS (Rs.) 6.5 11.5 11.5 11.5 11.5
BV (Rs.) 35.2 33.1 32.6 35.2 40.8
PE (x) 21.3 39.0 23.2 23.9 20.3
P/BV (x) 6.1 13.7 10.9 11.2 9.7
EV/EBITDA (x) 13.5 24.3 20.4 18.8 16.9
EV/Sales (x) 4.6 8.0 6.3 5.7 5.0
Source: Company, Karvy Research; *Represents multiples for FY14, FY15 & FY16 are based on historic market price
13
Jun 02, 2016
Bajaj Corp Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : <5%
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