Bajaj Corp reported healthy numbers, broadly in-line with our estimates. Revenue grew by 12.2% yoy to Rs221.4cr, 3% higher than estimated, led by 8.7% yoy growth in the volumes. Gross margin expanded by 146bps yoy. EBITDA grew by 14% yoy to Rs69.1cr, in-line with estimate. EBITDA margin expanded marginally by 52bps yoy to 31.2% (estimate 32.2%). Other income during the quarter was Rs1.2cr (against Rs11.1cr, a high base in Q1FY18). Thus, net profit declined marginally by 2.1% yoy to Rs53.8cr.
Volume for the company grew by 8.7% yoy led by strong growth of 11% in the flagship product, Bajaj Almond Hair Oil.
No Marks was re-launched with a strong Ayurvedic positioning and new packaging aimed at conveying better efficacy and thus witnessed a strong growth of 41% during the quarter.
Domestic business grew by 17.5% yoy (ex-CSD 18.6% yoy) primarily driven by strong growth in modern trade channel (witnessed 2x growth vs. general trade).
However, the international business declined by 94% yoy as the company went for a full reboot. The company is targeting Rs100cr revenue from the international business by FY20E.
Company has highlighted strong recovery in the rural demand for the industry as a whole. The rural demand has grown at a faster pace than the urban demand, a trend seen in the last quarter also. Bajaj Almond Hair Oil registered 1.3x higher off-take growth in the rural vs. urban.
Wholesale channel continues to remain under pressure. The company has successfully lowered its wholesale contribution from 60% to 43% over past two years. Also, it has doubled its direct reach in past one year to 4.8 lakh outlets and plans to reach to 5.5 lakh outlets by FY19E.
Gross margin for the quarter expanded by 146bps despite inflation in crude oil related products, LLP and packaging material. The company is getting ~14% benefit in LLP costs, due to availability of input tax credits under GST.
EBITDA margin expansion was restricted to only 52bps yoy despite gross margin expansion due to higher employee cost.
Reported PAT declined by 2.1% yoy due to mark to market losses in treasury income during the quarter. In Q1FY18, company has reported other income of Rs11.1cr owing to mark to market gains. Adjusting for this impact, PAT grew by ~10% yoy, broadly in-line with our estimates.
The company will be hosting Q1FY19 conference call on Monday, July 19.
We continue to remain positive on the comapny as we beleive that the comapny would benefit from new launches, distributor additions and recovery in rural demand.
Bajaj Corp Ltd is currently trading at Rs. 410.25, down by 4.85 points or 1.17% from its previous closing of Rs. 415.10 on the BSE.
The scrip opened at Rs. 421.65 and has touched a high and low of Rs. 427.30 and Rs. 404 respectively. So far 2,56,674 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200 DMA.
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