Bajaj Corp - GST impacts reported results; Retail growth encouraging though - JM Financial

Bajaj Corp's 1QFY18 earnings report remained weak with sales down 3.6% - steeper sequentially (4QFY17 sales declined 1.9%). Its flagship Bajaj Almond Drops' (BAD) volumes fell 6.6%; EBITDA and adjusted net profit declined 14.5% and 10.5% respectively. The weak performance was completely attributable to GST led destocking, significantly in the wholesale channel; this is also corroborated by the sharp growth in net-realisation (4.1%) despite absence of any hike in retail selling prices (wholesale channel deals largely in lower priced SKUs). The company has thus far refrained from taking any price hikes as it expects the impact of GST being largely neutral on profits; there could be some near-term pressure from RM costs inflation, though. Key positive takeaway from the result was the retail volumes of Bajaj Almond Drops which grew at a healthy 12.4% rate signalling a possibility of consumer demand witnessing a sharp improvement – this augurs well for Bajaj Corp's volume growth trajectory, which could recover back to double-digit growth level as seen in the past. The stock quotes at a steep 45%+ discount to the sector's forward multiple (ex-ITC) and a recovery in volume momentum would be the much-needed catalyst for stock performance.

Shares of BAJAJ CORP LTD. was last trading in BSE at Rs.405 as compared to the previous close of Rs. 406.35. The total number of shares traded during the day was 14112 in over 837 trades.

The stock hit an intraday high of Rs. 406.1 and intraday low of 395. The net turnover during the day was Rs. 5655219.

Source : Equity Bulls

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