Shares of Bajaj Consumer Care Ltd hit a new 52-week high for the second consecutive day on NSE on Thursday in early deals. The company announced better than expected December quarter results on Wednesday during market hours. So far, the company’s shares have increased by around 30% in the past two days.
Bajaj Consumer’s board also recommended an interim dividend for financial year 2021. “Interim dividend (announcement) of ₹6 per share somewhat allays consensus concerns on cash utilization,” said analysts from ICICI Securities Ltd in a report on 4 February.
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Bajaj Consumer’s standalone revenues saw almost 17% year-on-year growth to ₹247.3 crore in the December quarter. “This can be attributed to improvement in hair oil offtake with increasing mobility,” said Dolat Capital Market Pvt. Ltd analysts in a note on 3 February. ICICI Securities analysts said, “Domestic volume growth (+18% – our estimate) was driven by 1) distribution drive, 2) continuous media presence and 3) launch of relevant SKUs.”
Bajaj Consumer said in its investor presentation that the hair oil market recovered significantly from Q1 decline of 25.3% to a decline of 1% and 1.4% respectively for Q2 and Q3, respectively. Urban markets continue to remain subdued whereas rural markets have performed relatively better. General trade revenues, which account for 84% of Bajaj Consumer’s overall revenues increased by 17% year-on-year, driven by rural growth of 37% and urban growth of 7%.
Higher input costs weighed on profitability though. Bajaj Consumer’s gross profit margin contracted about 356 basis points to 64.1%. One basis points is one-hundredth of a percentage point. Even so, the company was able to curb its Ebitda margin drop to 13 basis points. Ebitda is earnings before interest, depreciation, tax and amortization; a key measure of profitability. Lower Ebitda margin decline was helped by slower rate of increase in employee costs and other expenditure. Overall, Bajaj Consumer’s net profit stood at Rs58 crore, representing 16% growth, in line with the growth in Ebitda.
Meanwhile, after the substantial jump in the Bajaj Consumer shares in the past two days, the stock trades at about 18 times estimated earnings for financial year 2022, based on Bloomberg data. “Sustainability of volume growth and market share gains in Almond Oil and trajectory of diversification are essential ingredients of sustained stock rerating,” said ICICI Securities analysts.