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JMFL
Bajaj Corp (Buy)
CMP: ₹384.1
Target: ₹400
Bajaj Corp reported an in-line result clocking domestic volume growth of 7.3 per cent and earnings growth of 17.7 per cent on adjusted basis. Volume growth recovered well from flattish trend clocked in 2Q (Flagship Bajaj Almond Drops was undergoing re-launch) but still remains below the double-digit mark which use to be comfortably achieved historically during times of healthy consumer demand. Interestingly, the results continue to diverge from the retail offtakes trend, as per Nielsen, which implies a 20 per cent+ volume growth for the months of October-November 2018.
The strong results as per retail offtakes has also helped strengthen its market position in Light Hair Oil space with further gains in market share in value/volume terms for BAD. NoMarks is now showing some signs of sustainable recovery with 49 per cent growth in offtakes in 3Q after 32 per cent seen in 2Q — a key positive as it could help diversify its revenue stream. Operating margin also turned out to be more resilient aided by price hikes (5 per cent taken on Bajaj Almond Drops) and cost efficiencies (other expenses declined 5 per cent). With volume growth recovery now in sight and crude price turning deflationary, we expect double-digit earnings growth clocked in 3QFY19 to be sustained in the near-term.
We maintain our positive bias given improvement in earnings growth trajectory coupled with reasonable valuations.
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