Bajaj Consumer rides high on strong Q3, new launches

Synopsis

Bajaj Consumer Care stock shows resilience. Its flagship Almond Drops hair oil is driving double-digit volume growth. The company is investing in brands and distribution. Analysts are positive, retaining a 'Buy' rating. Input costs remain a watch point amid global tensions. The company is focused on rebuilding profitability in other segments.

ET Intelligence Group: Bajaj Consumer Care has shown resilience on bourses from the middle of February, losing 3.6% over the past two weeks compared with a 5% drop in the Nifty FMCG index. Its shares have gained over 50% since January 21 after the company declared stellar December quarter performance. A revival in the demand for flagship Almond Drops hair oil (ADHO) and favourable input costs aided double-digit revenue growth and two-fold jump in Ebitda year-on-year. While input prices have remained range-bound so far, a spike in the near term cannot be ruled out amid rising conflict in the West Asia. This may affect the company's guidance of maintaining Ebitda margin at around 18% in the medium term. Analysts have retained a 'Buy' rating on the stock after raising earnings estimates by 6-16% for FY26-28.

Bajaj Consumer experienced a bounce back in rural markets after a weak first half, while urban continued to deliver strong traction. The ADHO portfolio, contributing nearly 80% to Bajaj Consumer's business delivered double-digit volume growth. The growth was across both low-unit price sachets and mid-to-large packs helped by influencer campaigns and better distribution. Advertising and sales promotion expenses grew to 15.3% of revenue in the December quarter from 14.6% a year ago. The higher spend is likely to sustain ADHO's volume growth momentum.

Agencies

Double-digit volume gains, improved margins boost performance; dependence on single brand, commodity inflation among key risks

Outside its flagship brand, the company is following a brand-led rather than price-led strategy. In coconut oil, Bajaj has reduced its long-standing discount to rebuild portfolio profitability, even if it means absorbing some short-term volume softness. Early traction for the newly launched Bajaj Gold Enriched Coconut Hair Oil has been encouraging, and the brand will be scaled gradually. Meanwhile, Banjara, acquired through Vishal Personal Care is being rolled out state by state and delivered 15% year-on-year growth in the quarter, with steady mid-teen margins.

On input costs front, copra prices softened sequentially in the third quarter, refined mustard oil eased, while light liquid paraffin (LLP) rose modestly; the company expects copra to remain benign, helping hold the gross margin as it keeps investing behind brands. However, commodity prices may flare-up given geopolitical tension and test margin guidance.

Elara Capital has upgraded the stock to 'Buy' from 'Accumulate', citing an expected strong volume growth over the next few quarters. The stock price of 360.4 at the end of Wednesday's trading session has already crossed target prices of some of the brokerages.

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