Bajaj Corp Ltd. - Q3 FY14 Result Update - CMP Rs.208 - Maintain BUY for the Target Price of Rs.285 - INVESt VISTa - Sushil Finance

BAJAJ CORP LTD. - Q3 FY14 RESULT QUICK VIEW - CMP Rs.208, Maintain BUY

During Q3 FY14, Bajaj Corp. Ltd. (BCL) registered a top-line growth of 6.9% YoY to Rs.1,585.8.0 mn and reported a bottom-line of Rs.408.5 mn. The board of directors has recommended a dividend of Rs.6.50 per share.

Q3 FY14 Result Highlights

- During Q3 FY14, BCL's net sales grew 6.9% YoY to Rs.1,582.1 mn; the EBITDA remained flattish at Rs.427.8 mn as compared to Rs.429.9 mn in Q3 FY13. However, the EBITDA margin registered a marginal improvement as a result of decrease in raw material costs, as a percentage of revenue. The EBITDA and EBITDA margin stood flat on sequential basis as well. The net profit during Q3 FY14 fell substantial 31.1% from Rs.422.2 mn in Q3 FY13 to Rs.291.0 mn in Q3 FY14 primarily due to an exceptional item of Rs.117.5 mn adjusting to which, the net profit stood at Rs.408.5 mn, marginally lower as compared to the corresponding quarter of previous fiscal and flattish on sequential basis. The increase in interest expense on account of acquisition of 'No Marks' also impacted the bottom line. The adjusted net profit margin stood at 25.8% as against 26.0% in Q2 FY14 and 28.5% in Q3 FY13. During the quarter, the adjusted earnings per share was recorded at Rs.2.77 while it was Rs.8.75 for 9M FY14 as compared to Rs.2.86 in Q3 FY13 and Rs.8.02 in 9M FY13.

Product-wise Volume

- The flagship product of the company Almond Drops Hair Oil (ADHO) for the first time in several quarters experienced a fall during Q3 FY14; the volume declined 1.5% y-o-y and 6.0% q-o-q to 1.03 mn. In addition, the growth in the seasonal product, Bajaj Kailash Parbat Cooling Oil grew 41.1% on an annual basis, however, sequentially it was down in light of winters, which is unfavorable season for the product. Furthermore, Brahmi Amla registered a decline on an annual basis while , Amla Shikakai and others registered an improvement on an annual basis.

Other Updates

- Till December 2013, BCL managed a market share of 57.4% in terms of volumes and 58.8% in terms of value in the Light Hair Oil (LHO) category. In Q3 FY14, ADHO got 39.4% of its sales from rural parts of the country.

- The Company had initiated Van Operations during the current fiscal, under which it piloted 39 vans during the recent quarter. Currently, the Company operates 91 vans for sales and 6 video vans for promotions; the vans covers 6481 uncovered towns and villages on a monthly basis.

- During the quarter, the price of key raw material light liquid paraffin (LLP) has gone up but the Company was benefitted from the low-cost-inventory, which will be over by February 2014. The Company will accordingly take a price-hike in Q1 FY15 to pass on the high-raw material costs. Nevertheless, the Company recorded an additional gain on account of lower cost raw-material for LLP and Oil prices stood at Rs.7.95 mn and Rs.2.77 mn, respectively.

- The Company re-launched NoMarks as Bajaj NoMarks in October 2013 across the country; it is currently distributed through 2.7 lac outlets. During the quarter, the brand registered a sales volume of 28,565 units achieving a sales of Rs.57.6 mn.

- As on December 31, 2013, the total cash balance with the Company stood at Rs.4,086.4 mn which has been invested in Bank Fixed Deposits, Certificates of Deposits of Banks, PSU Bonds and Liquid Mutual Funds and there has been no investment done in any corporate deposit. The existing loan of Rs.1,000 mn raised for the acquisition of No Marks will be repaid without any pre-payment penalty after February 22, 2014.

Going forward, we maintain our BUY recommendation for the stock as we continue to believe that the business is currently going through a temporarily weak phase while absorbing the acquisition of the brand 'No Marks' and lacklustre volume growth which according to the Management reflects the reduction in stock at the retail and distributor levels; this happens in all FMCG categories during the slowdown. Once there is an uptick in demand, stock correction normally takes place first at the distributor level and then at the retail level. Hence, we recommend a BUY at current price levels with the long-term horizon.

Source : Equity Bulls

Keywords