Bajaj Corp: Target Price- Rs 800/share

Bajaj Corp Limited

Bajaj Corp is involved in manufacturing and selling of FMCG products. Bajaj Corp owns brands like Bajaj Almond Hair Oil, NoMarks, Kailash Parbat and other Bajaj range of hair oils.

The Company is a debt-free Company. The Composition of Total Liabilities of the Company for the financial year ending March 2015 is shown below.

The composition of Total Assets of the Company for the financial year ending March 2015 is shown below.

Since 2011, Bajaj Corp is having a Sales CAGR of 23.11% till March 2015. The Company did a Sales of Rs. 825.62 crores in March 2015 for the full financial year. The Company might fall short of crossing Rs. 1,000 crores of Sales in the financial year 2015-16. The December quarter which is historically a strong quarter displayed dismal growth. It has been doing so for the past two financial years.

The Company has excellent EBIDTA margins. In the financial year ended March 2015, the Company had an EBIDTA of 32.80%. In the current financial year, the Company is maintaining average EBIDTA margin of 31.15% which is more or less the same. In terms of PAT, the Company had PAT margins of 21% in the financial year ending March 2015. Currently, the Company is maintaining average PAT margin of 22.53% during this financial year.

For the year ending March 2015, the Company displayed an RoCE of 48.10% which is an all-time high in the history of this Company and this includes Cash of Rs. 134 crores in the base. The Company has a negative Cash Conversion Cycle of 4 days which is quiet positive for the Company.

Challenges going forward

It is quiet visible that the great Indian consumption story is slowing down. And it has impacted Bajaj Corp too. Despite new brand addition of NoMarks, the sales have not picked up. The Company has brought changes in marketing strategy of NoMarks which can take some time to yield fruit. The Company has also entered a foreign market in Bangladesh which might take some time to show results. The hopes are high on NoMarks brand and Bangladesh market to show growth.

Something special!

The Company has a great track record in doling out dividends for its shareholders. In the financial year ending March 2015, the Company blessed its shareholders by distributing 90% of its PAT as dividends. And despite that, it sits on Rs. 134 crores of cash.

Also, the Company is amortising 11.74 crores every quarter for the acquisition of brand NoMarks. This expense will go away in  results of  December quarter of year 2017 which will expand the profit margins greatly by another 5.50% thus taking the profit margins to 30%.

Valuation

Despite hiccups, we expect Bajaj Corp to give a decent growth of 20% and more. We carried out the Discounted Cash Flow valuation technique on Bajaj Corp and came out with a valuation target of Rs. 800 per share.

Disclaimer

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisers to determine the merits and risks of such an investment.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidelines only.