Bajaj Corp - Voluminous growth; Buy - Anand Rathi

Bajaj Corp. reported healthy revenue growth of 32% with volumes growing 24% yoy. It also expanded value market share 60bps. Lower raw material prices led to margin expansion of 360bps and net profit was up 46%, yoy. We retain Buy with target price of Rs.295.

- Healthy revenue growth. Bajaj Corp. reported revenue growth of 32%, led by volume growth of ~24% and price hikes. It has expanded value market share 60bps to 54.6% and volume market share 100bps to 51.9%, yoy.

- Low input prices augurs well. EBITDA margin expanded 360bps due to lower raw material cost. LLP prices were down from Rs.82.86/Kg to Rs.79.1/Kg. Glass prices are up 8% and prices of most other raw materials have remained stable. Effective income tax rate is up 60bps to 19.8% and net profit is up 46%, yoy.

- Price hikes to expand margin. The company generally hikes prices 7-8% in April every year. We believe considering lower raw material prices and expected fall in inflation, the need of price hikes will be limited. However, price hike if any will lead to margin expansion in FY13. It will also help to increase brand building activities.

- Established in almond hair oil. Apart from Keo Karpin, 2 new players have entered the almond hair oil market. Dabur has gained market share of ~5%. HUL has also introduced Rose and Almond hair oil under the brand name of Dove Elixir. However, we believe Bajaj Corp. can continue to gain market share on the back of strong distribution, products at various price points and strong brand building.

- Valuation. We value the stock at target price of Rs.295 at PE of 24x on FY14e earnings. Risks. Keener competition and weaker response to new launches.

Source : Equity Bulls

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