Company Introduction: Bajaj Corp. is part of Shishir Bajaj Group of companies. The Company's brands include Bajaj Kailash Parbat Thanda Tel, Bajaj Almond Drops Hair Oil, Bajaj Brahmi Amla Hair Oil, Bajaj Amla Shikakai Hair Oil and Bajaj Jasmine Hair Oil. The Company has five production facilities.
Investment Arguments Rs. 70bn Indian hair oils market emerged as one of the fastest growing segments in the Indian FMCG industry and amongst it, Light Hair Oils (LHO) lead the pack. We expect hair oil market to touch Rs100bn by FY15, indicating a 13% CAGR over the next three years. The LHO category has managed to grow at a CAGR of 28.3% over the past four years versus 21.3% growth in the total hair oils market. Bajaj Corp Ltd. (BCL), maker of ‘Bajaj Almond Drops’ emerged as the dominant player in the growing LHO category and enjoys market leadership with a share of 54%.
Expected Value: 247 Sector -FMCG
BCL’s net cash balance stood at Rs3.4bn in FY12 which placed BCL strongly to leverage on inorganic growth opportunities. Over the period, BCL has developed strong distribution networks which spread across India. The company enjoys deep distribution networks in both, the urban and rural India. Currently, BCL‘s products reach to over 2.16mn retail outlets across India. As on Sep, 2012, BCL has 6036 direct distributors and 11,258 wholesalers, both at the rural and urban markets.
Valuation
Most of the FMCG companies are quoting around 20-25x for FY 15 PE multiple. However Bajaj Cor. is attractively valued in-spite of its attractive growth. We valued the stock at 18x for FY15 earning 20% discount to sector median P/E. We value the stock at Rs. 247, at a target PE of 18x FY15e earnings.
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