Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Volume momentum strong after price increases, conversion from other hair
oils drives growth
Bajaj Corp (BJCOR) posted 20% volume growth in 1QFY12 in its brand Bajaj Almond
Drops hair oil. Towards the end of the quarter, the company raised prices by ~8%.
Demand has thus far not been impacted and volume growth momentum has been
maintained in 2QFY12, as well.
Growth in Almond Drops is being driven by consumers converting from other hair
oils. The management indicated that with coconut oil players increasing prices by
~30% the gap between coconut oils and value added oils has fallen, facilitating
conversion.
BJCOR launched a cooling oil variant in the summer called Kailash Parbat Cooling
Oil. The management believes growth in hair oils will be a function of taking share
from players rather than expanding the market after 5-7 years.
Margins to recover from 2QFY12; Price increases, softer crude-related inputs
to help
In 1QFY12 BJCOR's margins declined by 1,000bp to 25.1% due to the full impact of
input costs increases and a lag in price increases.
The management expects that with the price increases and likely softening in LLP
prices (linked to crude, 35% of RM) margins are likely to gradually recover from
2QFY12.
Cautious international acquisition strategy
BJCOR has INR4b cash on its books, which it plans to use to expand its portfolio
through acquisition. Its balance sheet allows it to look at acquisitions worth INR8b-
9b.
The management indicated it would adopt a cautious approach while acquiring
companies and its first acquisition was likely to be small.
The promoter stake in the company is 85%, which will eventually have to be reduced
to 75% (per RBI regulations), which will be another fund-raising avenue, if need be.
Valuation and view
BJCOR is well placed in the value-added hair oil space with its brand being the
market leader in almond oils and posting strong growth. However, being a single
brand company poses risks to growth and profitability and BJCOR will need to
accelerate new product launches and build a diversified portfolio over the next few
years.
The stock trades at 21.6x FY11 EPS of INR5.4. Not Rated.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Volume momentum strong after price increases, conversion from other hair
oils drives growth
Bajaj Corp (BJCOR) posted 20% volume growth in 1QFY12 in its brand Bajaj Almond
Drops hair oil. Towards the end of the quarter, the company raised prices by ~8%.
Demand has thus far not been impacted and volume growth momentum has been
maintained in 2QFY12, as well.
Growth in Almond Drops is being driven by consumers converting from other hair
oils. The management indicated that with coconut oil players increasing prices by
~30% the gap between coconut oils and value added oils has fallen, facilitating
conversion.
BJCOR launched a cooling oil variant in the summer called Kailash Parbat Cooling
Oil. The management believes growth in hair oils will be a function of taking share
from players rather than expanding the market after 5-7 years.
Margins to recover from 2QFY12; Price increases, softer crude-related inputs
to help
In 1QFY12 BJCOR's margins declined by 1,000bp to 25.1% due to the full impact of
input costs increases and a lag in price increases.
The management expects that with the price increases and likely softening in LLP
prices (linked to crude, 35% of RM) margins are likely to gradually recover from
2QFY12.
Cautious international acquisition strategy
BJCOR has INR4b cash on its books, which it plans to use to expand its portfolio
through acquisition. Its balance sheet allows it to look at acquisitions worth INR8b-
9b.
The management indicated it would adopt a cautious approach while acquiring
companies and its first acquisition was likely to be small.
The promoter stake in the company is 85%, which will eventually have to be reduced
to 75% (per RBI regulations), which will be another fund-raising avenue, if need be.
Valuation and view
BJCOR is well placed in the value-added hair oil space with its brand being the
market leader in almond oils and posting strong growth. However, being a single
brand company poses risks to growth and profitability and BJCOR will need to
accelerate new product launches and build a diversified portfolio over the next few
years.
The stock trades at 21.6x FY11 EPS of INR5.4. Not Rated.
No comments:
Post a Comment