Bajaj Consumer's revenue momentum remained subdued in Q3 due to slowdown in urban consumption while rural has outperformed. We expect, mid-single digit volume growth led by bounce back in Almond Drop Hair Oil portfolio in FY26 whereas Non-ADHO portfolio continued to perform better led by Coconut and Amla portfolio.
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Bajaj Consumer Care Ltd.'s revenue/Ebitda/PAT declined by 2.4%/32.4%/30.4% YoY. Almond Drop Hair Oil volume in Q3 declined by low single digit, yet ADHO's large packs continue to perform better than sachets. General trade channel declined in high single digit while alternative channel grew 22% in Q3. International business grew 23%, driven by strong performances in Bangladesh followed by ROW (+12%) and Nepal (+5%), while GCC and Africa witnessed steady growth.
Gross margins declined to 52.0% (-149 bps) on lower margin in the coconut oil portfolio. Ebitda margins to 9.8% (-432 bps) due to higher employee cost (+9.5%) and other expenses (+2.8%).
Bajaj Consumer has acquired Banjara's -south India based brand in Personal Care for Rs 1.2 billion (two times on trailing twelve months EV/sales) with major rationale are:
Wider portfolio with strong play in Naturals Hair & Skin Care (1.5x growth on BPC);
Distribution Synergy –as Bajaj Consumer has been relatively weak in South India while Banjara's products could help penetrate the HSM market; and
Scaling up Banjara's products by leveraging Bajaj Consumer's expertise.
With weaker 9M FY25, we cut earnings and retained Buy with revised DCF-based target price Rs 200 (implying 19.2x on FY27E EPS).
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