Bajaj Consumer Q1 Review - Scope For Further Gross Margin Expansion; Upgrade To Accumulate: Dolat Capital
Results in line with estimate.
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Dolat Capital Report
Bajaj Consumer Care Ltd.’s Q1 FY24 results were in line with our estimate. While overall hair oil market grew by 3.7/2.8% in value/volume terms in Q1 FY24, the company witnessed a healthy 7.1/8%+ value/volume growth.
As urban markets have maintained growth pace and rural growth remained muted, go-to-market remained flat but grew in single digit sequentially.
E-com reported 55% growth, higher than any other channel. Modern trade also posted sales growth of 34% during Q1 FY24.
As the commodity prices have softened sequentially, there is a scope for improvement in gross margin. The company’s advertising and promotion spends are likely remain reasonable at 16-18%, enough to support new product launches.
We have increased our earnings per share estimates for FY24/25E by 5.1/2.4% to factor in gross margin expansion scope. Though we remain cautious on the premium hair oil category considering its discretionary nature and increased competitive intensity, new product development is likely to help increase sales growth.
Valuing the stock at 20 times FY25E EPS, we arrive at target price of Rs 256. We have increased valuation to factor in Bajaj Consumer’s focus on new products. Upgrade to 'Accumulate'.
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