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SYNOPSIS

Bajaj Corp Ltd (BCL) is one of India’s leading FMCG Company with major brands in Hair care category & 3rd largest player in the overall hair oils segment.

Bajaj Almond Drops Hair Oil is a Market leader with over 54% market share of LHO (Light hair oil) market.

The company has launched a new product Bajaj Kailash Parbat Cooling Oil.

During the quarter ended, the Net profit of the company increased to Rs.340.48 millions and registering a growth of 26.64%.

The Company had declared an Interim Dividend of 400% (i.e. Rs.4/- per share on equity shares of the face value of Re.1/- each) for the financial year 2011-12.

Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 22% over 2011 to 2014E respectively.

Years Net sales (Rs. Mn)

EBITDA (Rs. Mn)

Net Profit (Rs. Mn)

EPS (Rs.) P/E

FY 12 4733.15 1540.15 1200.88 8.14 15.91

FY 13E 5395.79 1749.30 1371.24 9.30 13.94

FY 14E 5989.33 1929.39 1513.00 10.26 12.63

Stock Data:

Sector: FMCG

Face Value Rs. 1.00

52 wk. High/Low (Rs.) 140.85/95.10

Volume (2 wk. Avg.) 173000.00

BSE Code 533229

Market Cap (Rs.In mn) 19108.63 Share Holding Pattern

1 Year Comparative Graph

BSE SENSEX Bajaj Corp Ltd.

C.M.P: Rs. 129.55 Target Price: Rs. 145.00 Date: July 14th, 2012 BUY

BAJAJ CORP LTD. Result Update: Q4 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market Cap. (Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Bajaj Corp Ltd. 129.55 19108.63 8.14 15.91 4.47 400.00

Dabur India 114.25 199112.50 2.66 42.95 15.29 130.00

HUL 441.00 953351.20 12.75 34.59 27.14 750.00

Godrej Consumer

Products 571.70 194562.4 17.76 32.19 7.71 475.00

Investment Highlights

Q4 FY12 Results Update

BAJAJ CORP LTD. disclosed a phenomenon rise in standalone net profit for the

quarter ended March 2012. During the quarter, the profit of the company surged

26.64% to Rs 340.48 million from Rs 268.85 million in the same quarter previous

year. Net sales for the quarter rose 33.53% to Rs 1470.35 million from Rs 1101.12

million, when compared with the prior year period. It reported earnings of Rs 2.31

a share during the quarter, registering 26.64% increase over previous year period.

Quarterly Results - standalone (Rs in mn)

As At Mar-12 Mar-11 %change

Net sales 1470.35 1101.12 33.53%

PAT 340.48 268.85 26.64%

Basic EPS 2.31 1.82 26.64%

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Break up of Expenditure

Declared an Interim Dividend

The Company had declared an Interim Dividend of 400% (i.e. Rs.4/- per share on

equity shares of the face value of Re.1/- each) for the financial year 2011-12 and

the same shall be treated as Final Dividend for the financial year 2011-12.

Company Profile

Bajaj Corp Ltd (BCL) is one of India’s leading FMCG Company with major brands in

Hair care category. With brands that have been in the market for eight decades, it is

part of one of the oldest business houses of the country. This is 3rd largest player in

the overall hair oils segment.

Bajaj Corp Ltd is part of Shishir Bajaj Group of companies. The Shishir Bajaj Group

comprises of major companies like, Bajaj Hindustan Ltd, Bajaj Eco-tec Products Ltd,

Bajaj Infrastructure Development Company and Bajaj Corp Ltd.

The Bajaj Group is known for creating widely respected brands in Hair Oil category

and generating loyal base of consumers who are using our brands for years. The

Company has acquired the reputation for conducting our business with utmost

sincerity and gratitude towards our consumers, employees, our business partners &

society.

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The company is a subsidiary of Bajaj Resources Ltd. (BRL). BCL is the exclusive

licensee of brands owned by BRL. BCL has over the years created a strong distribution

network across 2.30 mn. Retail outlets serviced by 6093 direct distributors and 11548

wholesalers.

� Brands:

• Bajaj Kailash Parbat Thanda Tel

• Bajaj Almond Drops Hair Oil

• Bajaj Brahmi Amla Hair Oil

• Bajaj Amla Shikakai Hair Oil

• Bajaj Jasmine Hair Oil

New Product Launch: Bajaj Kailash Parbat Cooling Oil

� Exports:

Today Bajaj Corp Ltd are exporting its brands to many countries including UAE,

Mauritius, Malaysia, Kuwait, Maldives, Oman, Kenya, Saudi Arabia, Uganda,

Singapore, Myanmar, Pacific Islands (New Zealand, Australia, Fiji Islands) West

Indies, Sri Lanka, Bangladesh, Afghanistan, Cambodia, Nepal and USA.

� Plant Locations

Company has five production facilities (including third party manufacturing

facility), of which units are situated in Himachal Pradesh (at Parwanoo & Paonta

Sahib) one is situated in Uttarakhand (Dehradun) for manufacturing of all variants

of hair oils and one unit is located at Udaipur, Rajasthan for the manufacturing of

our oral care product.

� Subsidiary Company

As on March 31, 2012, the Company had wholly owned subsidiary, which is

presently unlisted, namely: Uptown Properties and Leasing Private Limited.

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Future Outlook:

Company is presently experimenting with rural promotional and rural distribution

vans in West Bengal. This mode of creating awareness for the Company’s flagship

brand-Almond Drops Hair Oil has been encouraging. So the company plans to

replicate the above strategy in 5 additional states during financial year 2012-13.

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 3594.39 4733.15 5395.79 5989.33

Other Income 170.16 373.77 411.15 444.04

Total Income 3764.55 5106.92 5806.94 6433.37

Expenditure -2694.73 -3566.77 -4057.63 -4503.97

Operating Profit 1069.82 1540.15 1749.30 1929.39

Interest -1.06 -0.79 -0.81 -0.85

Gross profit 1068.76 1539.36 1748.49 1928.55

Depreciation -17.94 -25.99 -30.15 -32.56

Profit Before Tax 1050.82 1513.37 1718.34 1895.99

Tax -209.80 -312.49 -347.10 -382.99

Profit After Tax 841.02 1200.88 1371.24 1513.00

Equity capital 147.50 147.50 147.50 147.50

Reserves 3615.85 4131.02 5502.26 7015.25

Face value 5.00 1.00 1.00 1.00

EPS 28.51 8.14 9.30 10.26

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12E

Description 3m 3m 3m 3m

Net sales 1071.03 1124.95 1470.35 1352.72

Other income 98.89 79.02 100.45 105.47

Total Income 1169.92 1203.97 1570.80 1458.19

Expenditure -796.78 -838.51 -1130.69 -1015.89

Operating profit 373.14 365.46 440.11 442.30

Interest -0.23 -0.17 -0.18 -0.18

Gross profit 372.91 365.29 439.93 442.12

Depreciation -5.41 -7.77 -8.06 -8.22

Profit Before Tax 367.50 357.52 431.87 433.90

Tax -80.04 -68.77 -91.39 -88.08

Profit After Tax 287.46 288.75 340.48 345.81

Equity capital 147.50 147.50 147.50 147.50

Face value 1.00 1.00 1.00 1.00

EPS 1.95 1.96 2.31 2.34

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Key Ratios

Particulars FY11 FY12 FY13E FY14E

No. of Shares (in mn) 29.50 147.50 147.50 147.50

EBITDA Margin (%) 29.76% 32.54% 32.42% 32.21%

PBT Margin (%) 29.24% 31.97% 31.85% 31.66%

PAT Margin (%) 23.40% 25.37% 25.41% 25.26%

P/E Ratio (x) 4.54 15.91 13.94 12.63

ROE (%) 22.35% 28.07% 24.27% 21.12%

ROCE (%) 28.90% 36.60% 31.50% 27.39%

EV/EBITDA (x) 3.57 12.41 10.92 9.90

Book Value (Rs.) 127.57 29.01 38.30 48.56

P/BV 1.02 4.47 3.38 2.67

Charts:

Net sales & PAT

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P/E Ratio (X)

EV/EBITDA(X)

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P/BV Ratio

Outlook and Conclusion

At the current market price of Rs.129.55, the stock is trading at 13.94 x FY13E

and 12.63 x FY14E respectively.

Earning per share (EPS) of the company for the earnings for FY13E and FY14E

is seen at Rs.9.30 and Rs.10.26 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 19% and

22% over 2011 to 2014E respectively.

On the basis of EV/EBITDA, the stock trades at 10.92 x for FY13E and 9.90 x

for FY14E.

Price to Book Value of the stock is expected to be at 3.38 x and 2.67 x

respectively for FY13E and FY14E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.145.00 for Medium to Long term investment.

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Industry Overview

The year 2011 saw the FMCG industry clock a growth of 15.1% and reach Rs.16,

70,640 million (as per Nielsen). During the year the industry has seen inflationary

pressures on margins; however the volume growths in most FMCG categories have

been good. Most sectors in the FMCG industry have seen players taking a large price

hike to accommodate (in some cases partially) the negative impact of spiraling raw and

packaging material prices.

FMCG industry provides a wide range of consumables and accordingly the amount of

money circulated against FMCG products is also very high. The competition among

FMCG manufacturers is also growing and as a result of this, investment in FMCG

industry is also increasing, specifically in India, where FMCG industry is regarded as

the fourth largest sector with total market size of US$13.1 billion.

Common FMCG products

Some common FMCG product categories include food and dairy products, glassware,

paper products, pharmaceuticals, consumer electronics, packaged food products,

plastic goods, printing and stationery, household products, photography, drinks etc.

and some of the examples of FMCG products are coffee, tea, dry cells, greeting cards,

gifts, detergents, tobacco and cigarettes, watches, soaps etc.

Some of the well known FMCG companies are Sara Lee, Nestlé, Reckitt Benckiser,

Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi and

Mars etc.

Growth

The growth of the Indian hair oil industry has slowed down during the FY 12. Hair oils

grew by 1.2% in volume terms. However due to the multiple price increases taken by

all major players in the hair oil market the industry grew by 22.0% in value terms.

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Light hair oils again became the fastest growing segment within the hair oil Industry

with a 17.1% volume and 27.1% value growths. Bajaj Almond Drops was again one of

the fastest growing brands in the hair oil market and grew 21.3% by volume and

29.5% by value.

The key to growth of light hair oils is getting the consumer to shift from other hair oils.

Since one of the largest segments of hair oil users (around 31%) is currently using

unbranded hair oils, all companies target this segment. The consumers of unbranded

hair oils are mainly from the lower income strata as well as from the rural areas. With

the growing disposable income in the rural areas, brands with good penetration and

low unit selling price packs have benefited the most. The disposable income has grown

mainly on account of Rural Income Promotion schemes run by the Government of

India. Despite a stagnation of spends, on this account during FY12, the disposable

incomes of the rural population continues to grow due to remunerative crop prices.

Some of the merits of FMCG industry, which made this industry as a potential one are

low operational cost, strong distribution networks, presence of renowned FMCG

companies. Population growth is another factor which is responsible behind the

success of this industry.

Outlook

India is under changing phase as more women are joining India's workforce, FMCG

players are finding opportunities to introduce products in the convenience and health

foods segments. While spending on women's personal care products is also becoming

far more acceptable. Distribution of smaller pack sizes, innovations like single use

sachets to reach out to the rural and lower section of the economy is gaining demand.

Innovative products to cater to regional or local tastes and the needs of niche

consumers is also benefiting in growth of the industry.

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Key growth drivers to the Industry are as follows

• Robust growth in India’s GDP

• Growing urbanization

• Evolving consumer life style

• Increased income in rural areas

• Spending Pattern

• Changing Profile and Mind Set of Consumer

• Growth of modern retail

The FMCG sector has a great opportunity for growth in the country, with the growing

population, the rising disposable incomes, education, urbanization, the advent of

modern retail, and a consumption-driven society. There is a potential for all the FMCG

companies as the per capita consumption of almost all products in the country is very

low compared to world standards, thee exists there huge untapped opportunities.

India's fast-moving consumer goods, or the FMCG sector, has been able to weather the

impact of an economic slowdown and rising input costs yet another quarter, as firms

led by HUL beat street expectations both on top line and bottom line growth.

A study of the aggregate financial performance of the leading 10 FMCG companies

over the past eight quarters shows that the industry has grown at an average 16-21%

in the past two years with average operating margins being 22%.

________________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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