Target: ₹247

CMP: ₹137.25

We recently met Bajaj Consumer to check the business momentum. The management cited hair oil category has seen persistent decline till May’22 in volume (-4.5 per cent) and value (-3.1 per cent). However slower growth in value add hair oils segment resulted in weak rural performance, yet coconut hair oils remained flat. That said, Bajaj’s secondary sales was higher than primary as company maintained its ad-spends and added new products such as Coco-onion, Natyv Soul, and Moisturising soap.

Moreover, modest pickup in wholesale channel seen as demand was hit harder in core Hindi speaking markets. Management said urban GT channel has recovered well coupled with good sales in MT/Ecom channels.

Bajaj Consumer has expanded its hair oil portfolio participating in about 85 per cent of ₹13,000 crore hair oil category. With clear focus on ramping wholesale channel and retail footprint coupled with improved execution we expect sustained performance. Though margins could be under pressure in the short term given no respite from sticky inflation. That said, we remain positive expecting strong recovery in hair oil category.

We expect strong recovery in revenues ahead and retain BUY, with a DCF-based TP of ₹247 (15.5x FY24 EPS).