Bajaj Corp Posts Healthy Q3FY13 Numbers
DSIJ Intelligence / 14 Jan 2013
Bajaj Corp has come out with a robust set of Dec 2012 quarter numbers. The company’s topline grew by 31.82% to Rs 148.28 crore and the bottomline grew at a handsome rate of 46% to Rs 42.2 crore on a YoY basis.
The markets gave a thumbs-up to the result, which helped the stock price to move up 4.2% on Friday (Jan 11, 2013). Today (Jan 14, 2013) too, it has extended its gains up 0.24% to Rs 255.60 per share, marking a new 52-week high.
The following table provides an overview of the company's performance in Q3FY12:
| Bajaj Corp Dec 2012 Quarter Numbers | |||
|---|---|---|---|
| Particulars | 12-Dec | 11-Dec | % Change |
| Operating Income | 148.28 | 112.49 | 31.82 |
| Raw Materials Consumed | 51.81 | 40.95 | 26.52 |
| Advertisement Expenses | 9.93 | 9.38 | 5.86 |
| Total Expenses | 105.29 | 83.85 | 25.57 |
| EBITDA | 42.99 | 28.64 | 50.1 |
| Depreciation | 0.84 | 0.77 | 9.09 |
| Interest | 0.01 | 0.01 | 0 |
| Tax | 10.44 | 6.87 | 51.97 |
| Net Profit | 42.2 | 28.87 | 46.17 |
| EPS | 2.86 | 1.96 | 45.92 |
| Particulars | 12-Dec | 11-Dec | Change BPS |
| Raw Material-to-Sales Ratio (%) | 34.94 | 36.4 | -1.46 |
| Advertisement-to-Sales Ratio (%) | 6.7 | 8.34 | -1.64 |
| EBITDA Margins (%) | 28.99 | 25.46 | 3.53 |
| Net Profit Margins (%) | 28.46 | 25.66 | 2.8 |
Lower input costs and advertisement expenses helped the company's margin to improve. The raw material costs increased by 27% to Rs 52 crore on a YoY basis, but the raw material-to-sales ratio declined by 146 basis points to 34.94%, which is positive for the company. This was after the prices of light liquid paraffin (which accounts for around 37% of the total cost) decreased by 4.53% on a YoY basis.
Further, the advertisement-to-sales ratio decreased by 164 basis points for a quarter to touch 6.7% on a YoY basis. We believe that the company is not following the prevailing industry trend, as some of its peers are expected to spend more on the advertising front. With growing competition, there is a possibility that it may lose some of its shares and hence, would incur higher ad spends in the coming months. At present, its premium brand Bajaj Almond Drops has a market share of 54%.
Both the aforementioned factors have helped the company's EBITDA margin to improve. For Q3, its EBITDA increased by 50% to Rs 43 crore while the EBITDA margin increased by a whopping 353 basis points to 28.99%. Its Net Profit margin also increased by 280 basis points to 28.46%, which is among the best in the FMCG industry.
Bajaj Corp’s management is focussing on rural penetration, which will drive growth going ahead. We believe that this space presents a huge untapped growth opportunity, and with rising disposable incomes of individuals, there is going to be huge consumption demand from here. As part of its growth strategy, the management would also seek inorganic growth opportunities in the FMCG and hair oil market.
We had recommended Bajaj Corp as a Muhurat Buy in DSIJ’s Diwali 2012 issue (Vol 27, Issue No. 24 dated Nov 18, 2012) at Rs 186 per share and at the current market price of Rs 255.60 per share, it has yielded handsome returns of 37% in less than 2 months. The Board of Directors has also recommended an interim dividend of Rs 6.50 per share, which results in an attractive dividend yield of 2.5%. On the valuations front, the company is currently available at a TTM price-to-earnings multiple of 25x, which we believe is still attractive. We reiterate a ‘buy’ on the counter, as it seems all set to grow handsomely going ahead.
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