[ Comment too short ]
The issue is not whether they will raise Rs.1,000 cr. or less. We need clarity on WHY they need additional capital, when the co is already sitting on on fairly large cash reserves, andearning sub-optimal returns on them.
thanks Ajit,
Key highlights of Con Call By Capital Mkt;
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The net sales for Q1 FY15 increased by 12% to Rs 191.07 crore while net profit declined by 16% to Rs 39.62 crore.The double-digit growth in the revenues was mainly on account of a higher sales realization in the flagship brand, Almond Drop Hair Oil (ADHO) and a contribution of Rs14 crore by Nomarks brand.
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The mgmt said that as per Nielsen, overall hair oils growth continues to witness deceleration across segments.The light hair oil (LHO) category declined by 5%. The LHO segment in the urban markets remained under pressure due to a decline in conversion from coconut oil to value-added oils in the recent past.
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The urban sales volume of ADHO declined by 9%. ADHO posted 4% growth in rural markets while urban and rural growth combined stood at negative 3%, indicating sharp decline in urban markets. Rural sales now account for ~40% of total sales for ADHO. Rural growth has picked up due to higher growth in sachets, indicative of down-trading. Sachets now contribute 19% of ADHO volumes. The company maintained its leadership position in the LHO category with a market share of 58.5%.
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Kailash Parbat Cooling Oil (KPCO) declined by 27%. The cooling hair oil market declined by 7%. KPCO’s volume market share sequentially declined by 50 bps to 2.4%.Bajaj Amla Shikakai, continued to gain good acceptance in the market and grew by 26% in volume terms during the quarter.The prices of LLP moved up by 17% in the quarter. The prices of glass bottles also surged by more than 5% during the quarter. Vegetable oil prices remained stable at Rs 70 per kg. Despite a 5% price increase, the company’s gross profit margin (GPM) declined by 81 bps to 59.2% during the quarter. The prices of most of the key inputs have remained stable in the recent months.
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The Nomarks brands (creams and face wash) are gaining good acceptance at the retailer as well as the wholesaler level in the domestic market. The brand contributed around Rs 14 crore of revenues in Q1 FY15, down from Rs16 crore in Q1 FY14. GPM increased by 300 bps to 59%.Nomarks brand is currently available in 3.5 lakh retail outlets and the number of outlets is expected to go up to 5 lakh retail outlets by the end of the current fiscal. The company expects the sales volume of its brands to improve in the coming quarter
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Number of stock days at distributor level has reduced from peak of 40-45 days to 30-32 days, at similar levels to Q4 FY14.The company’s present distribution reach stood at 2.71 million retail outlets serviced by 6964 distributors and 15122 wholesalers.
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Van operation, started in Q4 FY13 to increase the rural sales, now covers 6481 uncovered towns and villages on a monthly basis. In Q1, the sales from rural India stood at approximately 40%…
I too was negative given the Kushagra bajaj connection. However after digging deeper / speaking to professionals felt that it might be more of a perception issue.
I agree with Manish that many companies take approval not just for equity raise but also debt limits but in many cases never gets utilised. One way to get comfort on whether they would do the right thing is by analysing the nomarks acquisition - the strategic intent, valuation and whether they over-leveraged the balance sheet to do it.
Disc: waiting for some price correction to enter…might never happen and could result in another missed opportunity…one of many.
Let me share a few with limited knowledge. Please correct me if I missed something.
As per recent Investor Presentation the company clearly mentioned that there will not be any diversion of funds to/from group companies, which gives me some relief.
Probably the 1000 crore fund raising resolution has been made for future acquisition purposes. The cash on books may be in the range of Rs.350-400 crore roughly. Current market cap (full float) is around Rs.3900 crore. Assuming they acquire a 1000 crore company they will definitely need external funds. This should just be an enabling provision for future plans when it happens.
Even for NoMarks acquisition they took Rs.100 crore loan and paid it off in a short span as per their con. call statements.
In Feb 2014 con. call they mentioned “So, I do not see another acquisition coming our way for the next 12 months and possibly 24 months from now”
Reading in to this there is no possibility of acquisition till March 2015. After that its difficult to predict what might happen.
Currently Bajaj Corp’s topline is about 670 crore (FY 14), and by FY 15 it should easily surpass 750 crore (including NoMarks numbers). If they want to grow and leverage their distribution network they will have to have new products/offerings. So they may have a long term target of reaching close to $1 billion by the end of this decade. This is just my guess and speculation - pls do your own analysis and checks.
Disc: Not holding now but may consider on price correction.
Recent BSE announcements show that two directors have resigned recently. Does anyone have an idea about the reasons for the same?
Hi,
Bajaj Corp seems to be forming a good Cup and Handle pattern.
If it holds these levels then we could see another 80-90 rs movement in the stock.
I am trying to attach the chart.
Would appreciate if somebody could help me with attaching the chart.
The image is now on a word document. But I am unable to upload it.
Bajaj Corp - Cup and Handle pattern chart attached
80 rupees on the upside or the downside ?
Sales up 18.55 %. Profitability intact. Not much impact in PAT due to higher exceptional item.
Dividend increased from Rs 6.50 to Rs 11.50. This means a div yield of greater than 4%.
Last time at price of 202 it bottomed out at 3.25% div yield.
If the trend continues the stock should perform well.
Sales up 18.55 %. Profitability intact. Not much impact in PAT due to higher exceptional item.
Dividend increased from Rs 6.50 to Rs 11.50. This means a div yield of greater than 4%.
Last time at price of 202 it bottomed out at 3.25% div yield.
If the growth trend continues the stock should perform well. Dividend yield will give downside protection.
Really sorry for repetition. First time I got error 503 but it seems the message had been posted.
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Key highlights by Cpital Mkt;
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Key highlights of Con Call by Capital Mkt;
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Key highlights by Capital Mkt;
The net sales for Q4 FY15 increased by 28% to Rs 236.17 crore while net profit inclined by 42% to Rs 54.42 crore. OPM improved by 279 bps to 31.4% due to fall in raw material cost.
As per AC Nielsen report, overall hair oil volume declined by 6.1% between April to Feb. 2014-15 and while increased by 6.4% in value term during same period. Light hair oil volume declined by 2.3% between April to Feb. 2014-15 and while increased by 2.5% in value term during same period. Almond Drop hair oll volume declined by 0.7% between April to Feb. 2014-15 and while increased by 4.4% in value term during same period.
The company’s market share in LHO category volume wise is 58.8% and value wise is 60.5% during April to Feb. 2014-15 period, as per AC Nielsen report.
During as during April to Feb. 2014-15 period, Bajaj Almond Drop hair oll (ADHO) got 39.7% of its sales from rural region. Rural region grew by 5.6%while urban region showed a negative growth. Market share in rural region is 62.9%.In Q4, Volume grew by 23% and by 14% for FY15.ADHO grew by 28% to Rs 211.32 crore in Q4 with 24% volume growth.
Nomark has grown by 58% to Rs 16.59 crore in Q4 with volume growth of 39%.
Nomark cream offtake has grown by 27% and facewash by 58% during April â Feb 2014-15. The company is no.2 player in facewash with market share of 6%.
ADHO is present in 2.87 mn outlets. The company added 116000 outlets in last 1 year.
The company has taken price hike of 5% in ADHO and 6.8% in Normark in March.
Secondary sales grew by 13% in Q4.20% of sales is from Re. 1 sachet for ADHO in Q4. Sachet grew by 32% in Q4.Gross margin in sachet is less than bottle for ADHO. Gross margin of Nomark is more than ADHO.
During the quarter average price of LLP decreased to Rs 62.38/Kg from Rs 78.81/Kg in corresponding quarter of previous year and average price of LLP during the whole year was Rs. 75.62 /kg against Rs. 75.75/ kg in the previous year. Current landed price of LLP is Rs 61/Kg. The company has procured for LLP for Q1 FY16.
During the quarter average price of Refined Oil decreased to Rs 74.03/kg from Rs 75.64/kg in corresponding quarter of previous year and average price of Oil during the whole year was Rs. 71.53/kg against Rs.73.58/ kg in the previous year.
ASP has increased from 15.5% in Q4 FY14 to 17.4% in Q4 FY15 due to rise in gross margin. The spend on promotion is more than as advertisement has reached its peak level.
The company is focusing on growing international business. It contributed 3% to the total sales in FY15. It has grown by 55% in FY15. The company will future invests in international business. The company is looking to enter Africa continent specially for Nomark products.The company is looking for acquisition, preferably Indian company, if valuation is right.Tax rate for FY16 ~ 20-21%.
BAJAJ CORP reported a strong set of numbers for 4QFY15 â revenues, EBITDA and PAT grew 28%, 40% and 32%, respectively. The company enters FY2016E with robust volume momentum and favorable RM tailwinds â a combination that should drive strong EBITDA and EPS growth. We reiterate our BUY rating on the stock with a revised target price of 540 (from510), valuing the stock at 24X FY2017E EPS.
Strong volume momentum sustained partly aided by low base; ADHO volumes up 23.9% yoy
Bajaj Corp (BJCOR) delivered another strong quarter â revenues were 2.35 bn (up 28% yoy; KIE:2.42 bn), EBITDA was 734 mn (up 40% yoy; KIE:762 mn) and recurring PAT came in at 662 mn (up 32% yoy; KIE:684 mn). Marginal miss in our estimates was primarily due to a 3% miss in revenues on account of lower realization growth (up 3% yoy versus our estimate of ~5% growth on account of higher sachet sales). NOMARKS revenues for the quarter were 166 mn, up 58% yoy and 22% qoq â in line with our estimate. Overall volume growth (including NOMARKS) stood at 23% yoy. BJCORâs recently launched low-cost Amla offering, Bajaj Amla, reported14 mn revenues (two months of sales) â we note Bajaj Amla is competitively priced at 20 for 80 ml SKU similar to Shanti Amla (recently reduced prices from23 for 80 ml SKU to `20, perhaps in response to Bajaj Amla launch).
Margins inch up to multi-quarter high aided by lower LLP prices
EBITDA margin expanded 270 bps yoy to a multi-quarter high of 31.2%, in line with our estimates, largely driven by 370 bps expansion in GMs and 50 bps yoy dip in staff costs. GM expansion was led by lower LLP prices â declined 17% qoq/21% yoy to `62.4/kg. BJCOR invested part of the GM gains into higher A&SP â up 190 bps yoy; however, it has cut A&SP qoq by 220 bps from historical high levels of 19.6% in 3QFY15 to 17.4% in 4QFY15 (as percent of sales) as incremental investments in advertising have become suboptimal, as per the management.
We remain positive; retain BUY rating and raise TP to 540 (from510)
We model 28.9% yoy growth in PAT in FY2016E aided by â (1) 18% yoy growth in ADHO revenues (14% volume growth and ~4% weighted-average realization growth) and (2) 240 bps jump in GMs to 64% aided by 20% dip in LLP prices; we note BJCOR has locked in LLP for 1QFY16. While we expect A&SP to jump 70 bps yoy to 18.3%, we expect the bulk of increase to be driven by higher promotional expenses (especially at consumer levels in form of freebies).
We remain bullish on BJCOR driven by
- Robust volume momentum
- Strong earnings growth visibility
- Modest valuations (P/E of 21X FY2017E EPS; at ~40% discount to sector multiples ex-ITC); retain BUY rating with revised target price of
540 (from510) based on P/E multiple of 24X (~30% discount to sector multiples ex-ITC)
Management highlighted â
- Strong volume growth in 4QFY15 was partially aided by low base and higher promotional spends,
- Rural growth continues to outpace urban growth by 9.6% points; urban off-take declined 5.7% in 4QFY15 in volume terms for the LHO category, as per Nielsen, and
- Overall category volume growth remains weak as per Nielsen â overall hair oil volumes declined 6.1% and LHO volumes declined 2.3% for 11MFY15. However, the management did indicate that secondary volume growth remains healthy at 13%.
GMs to improve led by lower LLP prices and price hike.
LLP prices (key input; constitutes ~35-40% of raw material costs) have corrected further from 3QFY15 consumption average of 75/kg to62.4/kg (4QFY15 average); this can act as a key margin tailwind in the near term. We note BJCOR has locked in its LLP requirements for 1QFY16 at current levels. The management also highlighted that it has taken a weighted average price hike of ~5% effective April 2015 in ADHO.
Part of GM gains to get reinvested in higher A&SP; more âPâ.
The management guided that it will continue to reinvest part of GM gains into higher A&SP, especially higher promotional spends as incremental investment in advertising would yield suboptimal results; however, it will not discount (run price-offs) the core ADHO brand and would run promotional offers in form of freebies (e.g. it is currently offering toothpaste free with 500 ml SKU of ADHO and NOMARKS soap free with 300 ml SKU). The management indicated that A&SP (as % of sales) will remain in the range of 17-18%.
Update on NOMARKS.
NOMARKS continues to register good growth and registered revenues of `582 mn in FY2015 led by better traction in both creams and facewash. The management highlighted that NOMARKS has become the largest-selling antiseptic cream after two years with 17% market share and is now the second-largest anti-blemish facewash with 6% market share. While creams portfolio registered 27% yoy growth in off-take, facewash registered a solid 58% yoy growth in off-take during 11MFY15, as per Nielsen.
Update on international business.
The international business contributed 3% to total revenues in FY2015 and registered 55% yoy growth. BJCOR is planning to increase its focus in international markets like Nepal, Bangladesh, UAE and Africa; we note BJCOR has four dedicated country managers across key geographies and is planning to set up a manufacturing (third-party) facility in the UAE.
Other takeaways.
- Tax rate to remain at MAT level in FY2016E and will inch up marginally in FY2017E as benefits expire; however, BJCOR will get offset due to MAT credits accumulated, and
- Sachet accounted for 20% of sales in 4QFY15 and registered a growth of 32% yoy.
BAJAJ CORP reported a strong set of numbers for 4QFY15 â revenues, EBITDA and PAT grew 28%, 40% and 32%, respectively. The company enters FY2016E with robust volume momentum and favorable RM tailwinds â a combination that should drive strong EBITDA and EPS growth. We reiterate our BUY rating on the stock with a revised target price of 540 (from510), valuing the stock at 24X FY2017E EPS.
Strong volume momentum sustained partly aided by low base; ADHO volumes up 23.9% yoy
Bajaj Corp (BJCOR) delivered another strong quarter â revenues were 2.35 bn (up 28% yoy; KIE:2.42 bn), EBITDA was 734 mn (up 40% yoy; KIE:762 mn) and recurring PAT came in at 662 mn (up 32% yoy; KIE:684 mn). Marginal miss in our estimates was primarily due to a 3% miss in revenues on account of lower realization growth (up 3% yoy versus our estimate of ~5% growth on account of higher sachet sales). NOMARKS revenues for the quarter were 166 mn, up 58% yoy and 22% qoq â in line with our estimate. Overall volume growth (including NOMARKS) stood at 23% yoy. BJCORâs recently launched low-cost Amla offering, Bajaj Amla, reported14 mn revenues (two months of sales) â we note Bajaj Amla is competitively priced at 20 for 80 ml SKU similar to Shanti Amla (recently reduced prices from23 for 80 ml SKU to `20, perhaps in response to Bajaj Amla launch).
Margins inch up to multi-quarter high aided by lower LLP prices
EBITDA margin expanded 270 bps yoy to a multi-quarter high of 31.2%, in line with our estimates, largely driven by 370 bps expansion in GMs and 50 bps yoy dip in staff costs. GM expansion was led by lower LLP prices â declined 17% qoq/21% yoy to `62.4/kg. BJCOR invested part of the GM gains into higher A&SP â up 190 bps yoy; however, it has cut A&SP qoq by 220 bps from historical high levels of 19.6% in 3QFY15 to 17.4% in 4QFY15 (as percent of sales) as incremental investments in advertising have become suboptimal, as per the management.
We remain positive; retain BUY rating and raise TP to 540 (from510)
We model 28.9% yoy growth in PAT in FY2016E aided by â (1) 18% yoy growth in ADHO revenues (14% volume growth and ~4% weighted-average realization growth) and (2) 240 bps jump in GMs to 64% aided by 20% dip in LLP prices; we note BJCOR has locked in LLP for 1QFY16. While we expect A&SP to jump 70 bps yoy to 18.3%, we expect the bulk of increase to be driven by higher promotional expenses (especially at consumer levels in form of freebies).
We remain bullish on BJCOR driven by
- Robust volume momentum
- Strong earnings growth visibility
- Modest valuations (P/E of 21X FY2017E EPS; at ~40% discount to sector multiples ex-ITC); retain BUY rating with revised target price of
540 (from510) based on P/E multiple of 24X (~30% discount to sector multiples ex-ITC)
Management highlighted â
- Strong volume growth in 4QFY15 was partially aided by low base and higher promotional spends,
- Rural growth continues to outpace urban growth by 9.6% points; urban off-take declined 5.7% in 4QFY15 in volume terms for the LHO category, as per Nielsen, and
- Overall category volume growth remains weak as per Nielsen â overall hair oil volumes declined 6.1% and LHO volumes declined 2.3% for 11MFY15. However, the management did indicate that secondary volume growth remains healthy at 13%.
GMs to improve led by lower LLP prices and price hike.
LLP prices (key input; constitutes ~35-40% of raw material costs) have corrected further from 3QFY15 consumption average of 75/kg to62.4/kg (4QFY15 average); this can act as a key margin tailwind in the near term. We note BJCOR has locked in its LLP requirements for 1QFY16 at current levels. The management also highlighted that it has taken a weighted average price hike of ~5% effective April 2015 in ADHO.
Part of GM gains to get reinvested in higher A&SP; more âPâ.
The management guided that it will continue to reinvest part of GM gains into higher A&SP, especially higher promotional spends as incremental investment in advertising would yield suboptimal results; however, it will not discount (run price-offs) the core ADHO brand and would run promotional offers in form of freebies (e.g. it is currently offering toothpaste free with 500 ml SKU of ADHO and NOMARKS soap free with 300 ml SKU). The management indicated that A&SP (as % of sales) will remain in the range of 17-18%.
Update on NOMARKS.
NOMARKS continues to register good growth and registered revenues of `582 mn in FY2015 led by better traction in both creams and facewash. The management highlighted that NOMARKS has become the largest-selling antiseptic cream after two years with 17% market share and is now the second-largest anti-blemish facewash with 6% market share. While creams portfolio registered 27% yoy growth in off-take, facewash registered a solid 58% yoy growth in off-take during 11MFY15, as per Nielsen.
Update on international business.
The international business contributed 3% to total revenues in FY2015 and registered 55% yoy growth. BJCOR is planning to increase its focus in international markets like Nepal, Bangladesh, UAE and Africa; we note BJCOR has four dedicated country managers across key geographies and is planning to set up a manufacturing (third-party) facility in the UAE.
Other takeaways.
- Tax rate to remain at MAT level in FY2016E and will inch up marginally in FY2017E as benefits expire; however, BJCOR will get offset due to MAT credits accumulated, and
- Sachet accounted for 20% of sales in 4QFY15 and registered a growth of 32% yoy.
Call was addressed by Mr. Sumit Malhotra MD.Key Highlights by Capital MKt;
Hair Oil industry overall still under stress and down by about 8% from Jan to May 2015, a 5 months period. This is largely due to the fact that volumes in coconut oil industry are not growing. Light Hair Oil segment market has infact grown by about 5% in this 5 months period ended June 2015.
Company’s Bajaj Almond Drops Hair Oil holds a 60% market share in light Hair Oil segment.
Net sales of the company in Q1 FY’16, grew by about 14.29% value wise and 12.11% volume wise on YoY basis. Almond Drop Hair Oil constitute about 90.6% of total sales value wise and 91.26% on volume wise basis for Q1 FY’16.During June’15 quarter, average price of LLP, key raw material decreased to Rs 59.51/kg from Rs 86/kg on YoY basis. While during June’15 quarter, the average price of Refined Oil increased to Rs 73.15/kg from Rs 70.17/kg on YoY basis.
Whatever benefits the company received on lower raw material costs, a portion was seen in higher Ebidta margin and other portion was used in higher advertisement and promotion activities. As per the management, since the market per se is not growing as per the desired level, sales and promotion activities will be going on and will be increased going forward.
Another worry for the management is rural slowdown. Rural consumption for company’s products have grown by only 8% on QoQ basis compared to around 13% for March’15 quarter on QoQ basis. If the monsoon remains favorable in July’15, things will pick up gradually in the coming quarters.
As per the management, 2nd phase of integration of brands of Nomark and Kailash Parbat into Bajaj corp. portfolio has been started. The company aims to migrate the Nomark brand category which is more into a problem solving brand to personal care brand. Products are rationalized, distribution is more focused, stockings been changed. Infact there has been some 10% drop in sales of these products due to more product rationalization and reduction of old stocks. As per the management, this exercise will continue for couple of more quarters.
The EO of Rs 11.75 crore relates to Trademark and IP related amortization amount.
Total cash and equivalent as on June’15 stood at around Rs 345 crore. Funds have been parked in FD, PSU Bonds, Gsec’s and Liquid MF’s. No investments made in any ICD.
The corporate headquarter of Bajaj Corp will be constructed and completed by mid of 2015-16.
In international business, the Nepal massive earthquake has hit the company’s sales to certain extent, while rest of the geographies including Bangladesh have grown better.
Overall, as per the management, not much improvement happening at ground level and sales promotions will remain higher in FY’16.
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- On November 7, 2014, Bajaj Resources Ltd. transferred 29131250 equity shares to KNB Enterprises LLP through an off-market transaction.
- In June quarter KNB Enterprises LLP has pledged 22085000 shares against 13990000 shares in March - 2015. Bajaj Resources has reduced pledged shares from 11500000 shares in March-2015 to 11000000 shares in June -2015. During the FY15, SKB Roop Commercial LLP has reduced its holding from 151.25 lacs to 31.25 lacs.
- Mr. Kushagra Bajaj is the director of the Bajaj Corp and also the director of the KNB Enterprises LLP. Rajiv Chandanlal Gandhi is a director in both companies which are in promoters of Bajaj Corp (KNB Enterprises LLP. And SKB Roop Commercial LLP). KNB Enterprises LLP. And SKB Roop Commercial LLP are subsidary company of Bajaj Resources Ltd.
- Company sells its 8% stake to Baytree Investments Mauritius Private Limited (subsidiary of Singapore headquartered Temasek).
- Company having Rs.134.18 cr of Cash and Rs.183.66 cr of current investment on FY15.
Questions
- What company has done with fund receive from selling 8% stake to Baytree Investments Mauritius Private Limited (subsidiary of Singapore headquartered Temasek)?
- Why company has transfer share to KNB Enterprises LLP?
- Why promoters have put their stake on pledge(Is company need fund for expansion?, company having Rs.134.18 cr of Cash and Rs.183.66 cr of current investment on FY15. and no debt.)?
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