Weekly Wrap
Investment Idea
January 09, 2015
Bajaj Corp
BUY
CMP `412
Bajaj Corp is a dominant player in high-growth Light Hair Oil
(LHO) segment in India with a strong 60%+ market share in its
flagship brand Bajaj Almond Drops hair oil (ADHO) contributing
~94% to revenues. The LHO market (largest non-coconut
hair oil segment) accounts for ~18% of the ~`81bn hair oil
market in India. With the changing hair styling trends and the
non-greasy benefit of light hair oil, LHO market is the fastest
growing segment in the hair oil industry. Bajaj Corp being the
market leader is expected to be the biggest beneficiary. The
company has witnessed revenue/earnings CAGR of ~22/31%
respectively over FY09-14 and is currently trading at cheap
valuations of 18.6x FY17E EPS of `19.9 compared to its peers in
the FMCG space. We recommend Buy.
Dominant player in light hair oil market
The LHO market (largest non-coconut hair oil segment)
accounts for ~18% of the ~`81bn hair oil market in India and
Bajaj Corp is well positioned with its undisputed leadership
position. The company dominates high-growth LHO segment
in India with a strong 60% market share in its flagship brand
Bajaj Almond Drops hair oil (ADHO, more than 3x market share
of its nearest competitor) contributing ~94% to revenues. The
company targets to increase its market share to 65% in the next
few years. Bajaj Corp’s dependence on a single product is seen
as a risk but high entry barriers in the hair oil industry gives
us comfort in the brand’s strength and undisputed leadership
position.
Revival in volume growth
Over the past four quarters, Bajaj Corp had witnessed subdued
volume growth in its ADHO brand with averaging decline of
2% due to inventory pile up with distributors on account of
slowdown in hair oil industry. However, Q2 FY15 has witnessed a
volume recovery with primary sales growing 4% and secondary
sales growing even faster at 7%. A revival in industry fortunes
and normalisation of trade inventory will aid the company in
clocking high single-digit volume growth for the coming few
quarters.
Light hair oil industry… the fastest growing segment
The LHO industry is the fastest growing segment of the ~`81bn
hair oil market in India and has witnessed 19% CAGR over FY0914 in value terms. It has grown at a faster rate compared to the
overall hair oil industry mainly due to the changing hair styling
trends and increased preference for light hair oil, which has
non-sticky, non-greasy benefits. Within the LHO market, the
almond hair oil segment has been growing strongly with 23%
revenue CAGR over FY10-14, where Bajaj Corp is a dominant
player with its key brand ADHO. Region- wise light hair oil sales
are skewed towards urban areas due to its higher cost and
urban consumers larger exposure to changing fashion trends.
Geographically, sales are skewed towards North India (50%
share) while western region (28% share) is the fastest growing
one due to higher urbanization rates.
Sector: FMCG
Sector View: Positive
Sensex:
52 Week h/l (`):
27,458
BSE code:
533229
375 / 200
NSE code:
BAJAJCORP
Market cap (`cr):
5,482
1
Share price chart
Share holding pattern
(%)
Jun14
Sep14
Dec14
Promoters
75.0
75.0
66.9
Institutions
16.6
17.1
25.6
8.4
7.9
7.6
Others
FV (`):
250
Bajaj Corp
Sensex
200
150
100
50
Jan-14
May-14
Sep-14
Jan-15
Bajaj Corp - largest player in light hair oil market
Others
13%
Bajaj Corp
(Almond
Drops)
60%
Deysmedical
(Keo Karpin)
13%
Marico (Hair
& Care)
14%
Financial summary
Y/e 31 Mar (` m)
FY14
FY15E
FY16E
FY17E
6,717
7,886
8,898
10,283
10.7
17.4
12.8
15.6
1,867
2,212
2,749
3,193
27.8
28.1
30.9
31.1
1,790
2,059
2,501
2,941
Reported PAT
1,504
1,589
2,031
2,757
yoy growth (%)
(10.1)
5.6
27.8
35.7
EPS (`)
12.1
14.0
17.0
19.9
P/E (x)
33.9
29.5
24.3
20.7
Price/Book (x)
11.6
11.0
10.1
8.9
EV/EBITDA (x)
31.8
26.7
21.3
18.3
RoE (%)
35.6
38.4
43.5
45.8
47.3
54.4
57.3
Revenues
yoy growth (%)
Operating profit
OPM (%)
Pre-exceptional PAT
RoCE (%)
44.3
Source: Company, India Infoline Research
India Infoline Weekly Wrap
Market Outlook
The much needed recovery witnessed on Thursday & Friday brought
the long losing spree to a halt. However it could not undo the
damage that was done at the start of the week as the major indices
closed lower by ~1.3%. The Euro tumbling to 9-year low vs the
dollar and worries that Greece may exit the euro zone were among
the major factors fuelling the correction of 250 points on Tuesday
for Nifty. Also, the month of Jan has historically given many jolts and
this year is no exception. January is also likely to see many Offer for
Sales issues, which could further suck out liquidity from the market.
Trend in global markets, movement of rupee against the dollar, and
crude oil price will dictate near-term trend. All eyes are of course
on the earnings season now and going forward the activities will
mostly be stock-specific depending on the report card.
Infosys’ volume growth of 4.2% qoq in a seasonally weak quarter
and a sequential 60bps margin expansion were material positive
surprises in its Q3 FY15 performance. Though growth momentum
is expected to moderate a bit Q4, it seems that company would
likely converge with industry growth rate in FY16 against earlier
expectation of FY17. Post this strong show, Infosys’ earnings
estimates are likely to be upgraded and valuation could get re-rated.
FIIs/MFs activity
800
Technical View
Nifty saw a smart recovery in last two trading sessions, building
on the gap-up opening seen in Thursday’s trade. It is important
for Index to cross and sustain above 8,450 in order to resume
its medium term uptrend. Till then, we are likely to trade in
the range between 8,050-8,450. Structure of higher bottom is
suggesting that the Index has build a base around 8,050 and a
pullback below the same looks unlikely.
F&O View
Volatility resurfaced for nifty, seen sharp reversal from the lows
of 8100 back towards 8325 at the end of the week, Index futures
continued to see long unwinding from the FII’s, with long/short in
index future came down to 4.8x levels from 7.78x at start of week.
Maximum OI build up is seen at 8000 puts and 8400 calls indicating
the trading band. Defensive stocks have seen long buildup. Results
and global cues likely to keep markets volatile ahead.
Advance/Decline
1,500
(Rs cr)
(No of stocks)
Advance
Decline
400
1,200
0
900
(400)
(800)
600
Net FIIs inflow
Net MFs Inflows
(1,200)
300
(1,600)
0
(2,000)
31-Dec
1-Jan
2-Jan
5-Jan
6-Jan
31-Dec 1-Jan 2-Jan 5-Jan 6-Jan 7-Jan 8-Jan 9-Jan
7-Jan
Global performance
Sectoral performance
Dow Jones
0.4
(%)
Hangseng
0.3
Nasdaq
0.2
Nifty
Auto
(0.0)
Health Care
(0.2)
(0.8)
Oil & Gas
(1.0)
(1.2)
BSE-200
(1.9)
Capital Goods
(1.3)
(2.2)
Banks
Realty
(1.5)
Sensex
0.8
0.3
IT
Small Cap
(1.2)
Nikkei
FMCG
(2.5)
(2.6)
Power
Shanghai
(2.5)
2
(1.9)
(2.0)
(%)
Metals (4.4)
(1.5)
(1.0)
(0.5)
0.0
0.5
(5.0)
(4.0)
(3.0)
(2.0)
(1.0)
0.0
1.0
2.0
India Infoline Weekly Wrap
Technical Check
Nifty 50 & CNX 500 top 10 Losers
Nifty 50 & CNX 500 top 10 gainers
NSE Nifty
Company
HUL
865
Kotak Bank
1,361
BPCL
NSE Nifty
CNX 500
CMP
(`)
679
%
Chg Company
CMP
(`)
14.4 Rei Agro
7.0 Can Fin Hom.
5.4 HUL
%
Chg
Company
2
19.2
NMDC
657
17.9
BHEL
14.4
SSLT
865
CNX 500
CMP
(`)
%
Chg Company
CMP
(`)
%
Chg
135
(7.9) BF Utilities
613
(8.2)
255
(7.5) NALCO
51
(8.3)
208
(6.5) NMDC
135
(7.9)
4.8 Educomp
28
12.2
PNB
207
(6.0) Idea
148
(7.7)
Maruti Suzuki
3,465
3.1 Brigarde
167
11.8
ICICI Bank
342
(5.6) BHEL
255
(7.5)
Infy
2,074
3.0 BBMH
472
11.4
JSPL
66
(7.2)
Tech M
2,680
2.8 GSPL
125
10.4
HDFC
2.1 NOCIL
40
9.9
Tata Power
59
9.9
SBI
303
(3.8) Ramco Cement.
321
(7.0)
3,202
9.5
Axis Bank
495
(3.8) GE Ship
350
(6.8)
Asian Paints
813
Tata Motors
522
United Spirits
2,857
1.6 Ashok Ley.
M&M
1,238
1.1 BEL
Technically strong
Company
Cipla
Ultratech
153
(5.6) Jain Irrigation
1,113
80
(5.0) Hubtown
104
(7.1)
(4.3) Apar Ind.
386
(7.1)
Technically weak
CMP
(`)
10 days
Moving
Average (`)
Total
Traded Qty
(lacs)
10 days
Average
Traded Qty
(lacs)
632
623
23.6
9.4
Mcleod Russ.
Company
CMP
(`)
10 days
Moving
Average (`)
Total
Traded Qty
(lacs)
10 days
Average
Traded Qty
(lacs)
223
228
5.4
3.3
84.6
2,717
2,676
3.4
1.7
ICICI Bank
342
351
152.3
Ranbaxy
631
622
7.1
4.0
Hindzinc
163
167
10.8
9.1
Century
528
523
7.0
6.1
Jindal Saw
89
91
22.3
20.0
DLF
138
137
90.5
72.6
Hero Moto
2,992
3,073
3.8
3.0
Bulk deals
Book closure and record date
Qty
(lacs)
Price
(`)
Company
Date
Purpose
SRSREAL
14 Jan 2015
BONUS 1:1
S
1.6
165.0
CLNINDIA
19 Jan 2015
2nd Interim Dividend
Cera Sanitaryware
B
0.7
1,839.0
IFCI
Shiv-Vani Oil
S
2.5
6
Europacific
Growth Fund
Bajaj Auto
S
29.5
2,449.0
Date
Institution
Scrip name
5-Jan
Blackrock Sec
Gayatri Projects
6-Jan
Morgan Stanley
6-Jan
8-Jan
B/S
Nifty Future VWAP
Bank Nifty Future VWAP
Nifty Futs Close
8500
Nifty Vwap
Bank Nifty Futs Close
Bank Nifty Vwap
19200
8450
19100
8400
19000
8350
18900
18800
8300
18700
8250
18600
8200
18500
8150
18400
18300
8100
5-Jan
6-Jan
7-Jan
8-Jan
9-Jan
5-Jan
6-Jan
7-Jan
8-Jan
9-Jan
3
India Infoline Weekly Wrap
Commodity Corner
Base metals
Precious metals
Base metals, barring Nickel struggled as Chinese manufacturing
activity continues to decelerate, with the official manufacturing
PMI reading in December coming in at a year low of 50.1, down
from November’s 50.3. The broader trend in the pack remains
fragile as there are no signs of improvement in broader economic
activity. Meanwhile, Nickel prices remain supported by y supply
side concerns emanating from Indonesia where export ban on
nickel ore is intact for the past twelve months. Initially, Chinese
supply was adversely impacted by the ban. However, the supply
tightness seems to be easing recently after Chinese traders
managed to source nickel ores from Philippines and in the
process have counterbalanced the prevalent supply constraints
in Indonesia. Nickel markets are not as tight as the markets have
factored in the prices recently. Although Indonesian shipments
of nickel ores remain halted, several players have already started
building smelting capacity in order to process the ores and export
it in the form of refined metal or semi-products. This flow of
metal will probably start at the end of 2015.
Precious metals surprisingly notched handsome gains, with gold prices
moving beyond US$1,200/oz, while silver regaining US$16/oz levels.
The pack has managed to withstand the buoyancy in the US dollar.
In this respect, the greenback has maintained its ascent against other
major currencies, with US dollar index advancing above 92 levels.
Euro is under immense pressure, with values with values well around
ten year low against the greenback. At the current juncture, gold
prices are maintaining gains as political uncertainty in respect with
Greece elections have underpinned the safe haven appetite. There
is a growing perception that Greeks may elect the opposition party,
which in the process may lead the country to exit the European Union.
Although the opposition party is not clearly in favour of leaving the
euro, it wants to redefine the austerity measures associated with its
bailout.
The pack has been the victim of a fierce selloff in the energy
markets. Market participants in the non-ferrous markets are
now dwelling on the perception that the cost of production
for most of the metals will decline and in the process will
discourage producers of metals like Aluminium from shutting
down the excess capacity.
On outlook, the yellow metal may hold ground as minutes of the
FOMC meeting during December conveyed the Fed will be patient
with the monetary policy and will hike interest rates during the
end of this year. The central bank is also concerned with low
inflation, which can aggravate further considering the recent
slump in energy prices. Meanwhile, the focus will be accentuated
on US employment numbers, wherein estimates indicate that
US economy probably added 240,000 jobs during the month of
December.
Note: This market commentary is written at 12:00 PM IST
LME prices
Weekly inventory update
Base Metals (US$/ton)
High
Low
LTP*
Chg(%)
Copper
6,304
6,092
6,104
(2.4)
Nickel
15,590
14,625
15,550
4.9
Zinc
2,214
2,130
2,160
(2.0)
Aluminium
1,861
1,773
1,832
-
Lead
1,880
1,824
1,851
(1.0)
Tons
Abs Chg.
Chg (%)
Copper (LME)
179,225
2,200
1.2
Nickel (LME)
415,842
942
0.2
676,375
(14,450)
(2.1)
4,175,750
(29,475)
(0.7)
Zinc (LME)
Aluminium (LME)
Lead (LME)
Tin (LME)
Precious Metals (US$/ounce)
Gold
Silver
* Last Traded Price
High
Low
LTP*
Chg(%)
1,223
1,168
1,211
1.9
Shanghai Zinc
16.7
15.5
16.3
3.6
Shanghai Aluminium
LME Copper
10500
Shanghai Copper
221,975
-
-
12,165
30
0.2
112,666
751
0.7
87,090
3,619
4.3
202,328
(5,100)
(2.5)
COMEX Gold
US$/ ton
2050
Copper (LME)
US$/ ounce
Gold
1900
9500
1750
8500
1600
1450
7500
1300
6500
4
Sep-14
Dec-14
Jun-14
Dec-13
Mar-14
Jun-13
Sep-13
Dec-12
Mar-13
Jun-12
Sep-12
Dec-11
Mar-12
Jun-11
Sep-11
Mar-11
Sep-10
1000
Dec-10
Sep-14
Dec-14
Jun-14
Dec-13
Mar-14
Jun-13
Sep-13
Dec-12
Mar-13
Jun-12
Sep-12
Dec-11
Mar-12
Jun-11
Sep-11
Mar-11
Sep-10
Dec-10
5500
1150
7
0
6
(2)
5
110
100
30
(%)
Six core Ind.
(INR/EURO)
(INR/USD)
(INR/GBP)
(INR/JPY)
IIP and Six core Industries
IIP
130
12
8
4
0
(4)
Currency Movements
90
80
60
50
120
40
70
Jun-12
Nymex Crude
Dec-12
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
10yr Gsec yield
3mth CP rate
Sep-13
Jun-13
Mar-13
4
Sep-12
6
Dec-11
8
Mar-12
12
Jun-11
10
(%)
Sep-11
13
Mar-11
14
Dec-10
MFG Products
Sep-10
Nov-14
Aug-14
May-14
Feb-14
Monthly Inflation
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
12
(%)
May-12
Feb-12
Nov-11
Aug-11
14
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
2
May-11
Inflation
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
(8)
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
16
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
India Infoline Weekly Wrap
Chartbook
Interest Rate
5yr AAA bond yield
11
10
9
8
Crude (Brent/ Nymex)
Brent Crude
110
100
90
80
70
60
50
Dollar Index
95
Dollar Index
90
70
85
80
40
75
Source: Bloomberg
5
6
Source: Bloomberg
1,580
25
1,575
20
1,570
15
1,565
10
1,560
Sensex PE Band
70,000
22.0
60,000
20.0
29x
50,000
24x
40,000
18x
30,000
20,000
10,000
13x
7x
0
PE (x)
Cur. Yr
Nasdaq
30
Mexico Bolsa
1,585
(Rs)
Sensex
VIX
S&P 500
35
Dow Jones
1,590
Straits
Volatility Index
FTSE
250
Taiwan
40
DAX
300
Shanghai
PE Comparision
1-Yr Fwd
18.0
16.0
14.0
12.0
10.0
8.0
6.0
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
50
Dec-10
60
Mar-11
China
1-Nov
3-Nov
5-Nov
7-Nov
9-Nov
11-Nov
13-Nov
15-Nov
17-Nov
19-Nov
21-Nov
23-Nov
25-Nov
27-Nov
29-Nov
1-Dec
3-Dec
5-Dec
7-Dec
9-Dec
11-Dec
13-Dec
15-Dec
17-Dec
PMI
Hang Seng
US
Nov-14
Germany
Nov-13
Euro Zone
Oct-12
India
Oct-11
Sep-10
Sep-09
Aug-08
40
Aug-07
Jul-06
Jul-05
(%)
Jun-04
Jun-03
May-02
May-01
Apr-00
45
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
65
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
India Infoline Weekly Wrap
Chartbook...
US Initial Jobless Claims
550
500
Initial Jobless Claims ('000)
55
450
400
350
Sensex Earning Estimates
FY15
India Infoline Weekly Wrap
News Recap
The Finance Minister has said infrastructure sectors such as coal,
power and cement have been recording double digit growth in
the last few months while growth in the manufacturing sector
is still patchy. (BL)
The Maharashtra Food & Drug Administration has issued an
order to suspend two drug licenses of Dr Reddy's Laboratories for
violations and serious lapses at its storage premises at Bhiwandi
near Thane. (BS)
Gearing up to enter new segments this year, an upbeat Maruti
Suzuki India says that the price hikes following the withdrawal of
excise duty sops will not affect auto sales. (BS)
Shareholders of Kotak Mahindra Bank gave their approval to
merge ING Vyaya Bank with itself. (BS)
Reliance Industries has finalised its 2015 gasoil and jet fuel term
contracts at lower premiums than last year. (BL)
Suzlon Energy said that the wind turbine maker was in talks with
potential buyers for an about $2.5bn sale of its German unit was
"baseless and false". (ET)\
The Government will go for its stake sale in ONGC after finalising
a new subsidy sharing formula as it would help in fetching better
price in the market. (BL)
Godrej Appliances and Panasonic have hiked prices of their
products by 3-5%, becoming the first among their ilk to hike
prices after excise duty was raised by 2% from 1 January. (BS)
Hero MotoCorp said the strike by transporters in Haryana has hit
half of its despataches from Gurgaon and Dharuhera plants. (BS)
Five months after the formal announcement, Adani Power's
`.60bn acquisition of Lanco Infratech's 1200-mw thermal power
plant in Udupi seems to have run into rough weather and delays.
(ET)
The National Stock Exchange has given clearance to the `.1820mn
merger of Gurgaon-based Satyam Cineplexes Ltd with multiplex
chain Inox Leisure. (BS)
Godrej Consumer Products Ltd said it had acquired 100% in
South African hair extension firm Frika Hair for an undisclosed
amount. (BL)
Apollo Hospitals acquires Nova Speciality in a `.1450mn deal.
(BL)
The government decision to permit 100% foreign direct
investment in medical devices will take effect from January 21,
the Commerce and Industry Ministry said. (BS)
Moody's has upgraded Tata Steel Ltd’s corporate family rating to
Ba1 with a stable outlook. (BS)
Vegetable prices in wholesale markets in the national capital
have risen by at least 50% in last one week due to export of key
vegetables to Pakistan, says an APMC member. (ET)
An inter-ministerial panel has requested the Telecom Regulatory
Authority of India to take up the role or suggest if there is a need
for a separate regulator for e-commerce. (BS)
Coal India Ltd has placed immediate priorities on output rampup and supply increase as well as unlocking of undeveloped
reserves in the immediate future. (BL)
Coal India Ltd struggled to produce and ship less than half of its
daily target on the first day of a five-day worker strike hampering
government efforts to reform the country's coal industry and
ease its power crisis. (BS)
NTT DoCoMo Inc has filed a request for arbitration with Tata
Sons Limited to find a buyer for the Japanese company's stake in
Tata Teleservices Limited. (BS)
After Reliance Industries demanded interest on KG-D6 gas
payments flowing into gas pool account operated by GAIL, the
state-owned firm has agreed to invest the receivables in shortterm interest bearing deposits with public sector banks. (BS)
Deepak Fertilisers sells 2.2% stake in Mangalore Chemicals. Post
the sale, Deepak Fertilisers' stake has come down to 29.05%. (BS)
Honda Cars India increased the prices of its vehicles by up to
`.60,000 following the expiry of reduced excise duty concessions
and also to offset the rising input costs. (BL)
Event Calendar
Period: 12th Jan – 16th Jan 2015
US
• Jan Empire Manufacturing (15 Jan)
Europe
• Nov Trade Balance (15 Jan)
•
Dec CPI YoY (16 Jan)
•
Dec CPI YoY (16 Jan)
•
Dec Industrial Production MoM (16 Jan)India
•
Dec EU27 New Car Registrations (16 Jan)
•
Dec CPI Core YoY (16 Jan)
IIFL, IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel (W), Mumbai 400 013
The information in this newsletter is generally provided from the press reports, electronic media, research, websites and other media. The information also includes information from interviews
conducted, analysis, views expressed by our research team. Investors should not rely solely on the information contained in this publication and must make their own investment decisions based on their
specific investment objectives and financial position and using such independent advisors as they believe necessary. The materials and information provided by this newsletter are not, and should not be
construed as an advice to buy or sell any of the securities named in this newsletter. India Infoline may or may not hold positions in any of the securities named in this newsletter as a part of its business.
Past performance is not necessarily an indication of future performance. India Infoline does not assure for accuracy or correctness of information or reports in the newsletter.
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