At a time when interest rates are expected to trend higher, there are select stocks that are expected to benefit thanks to their strong balance sheets. Bajaj Consumer Care manufactures the Bajaj Almond Drops, Bajaj Amla etc., and the stock has dived to a 52-week low recently.
Products of Bajaj Consumer: Gaining markets
The company recently apart from manufacturing and marketing the above two also launched Bajaj Coconut oil and has received good response for the same.
As far as Bajaj Amla Aloe Vera Hair Oil is concerned the company has constantly been gaining market share. From 1.6% in q2 2021 the market share in this segment for the company has now jumped to 3%. Few states in North have done well reaching market shares greater than 5%. The newly launched Bajaj Coconut Oil is expected to gather momentum in the coming months.
Sales Value - Q2 & H1 FY22 - Standalone
|Hair oil||Rs 214 crores||Rs 209.4 crores|
|Non Hair Oils||Rs 7.8 crores||Rs 2.8|
|Overall||Rs 221.8||Rs 212.2|
Financial performance for the second quarter FY 2022
The hair oil business saw a fall in sales value from Rs 214 crores in the previous quarter to Rs 209 crores in Q2 FY 2022. The net profits after tax fell to Rs 47.3 crores from Rs 57.3 crores in the previous quarter. In spite of demand slowdown, rural remained flat due to expansion of rural network in select states. The company's UAE and Africa had a sharp decline due to travel restrictions. However, the company is now seeing closer partnerships with top e-retailers, Amazon and Flipkart resulting in high growth.
Strategic SKUs for the e-commerce channel (650ml ADHO, BAHO) have become lead contributors to sales and growth for the company.
Buy the stock of Bajaj Consumer Care at its 52-week low
The stock of Bajaj Consumer Care has fallen from 52-week highs of Rs 323 to Rs 182 on the NSE. The company last year declared an interim dividend of Rs 6 and a final dividend of Rs 4 per share, which is a total of Rs 10 for the year ending March 31, 2021. This translates into a dividend yield of more than 5% on the current market price of Rs 182.
We see limited downside risks to the stock. One of the reasons we are recommending to buy the stock of Bajaj Consumer is that exports are likely to pick up as economies open after the Covid. If it's business as usual the company may stand to gain. The newly launched Bajaj 100% coconut oil is also likely to give a boost to revenues as well. The company has also created a strong brand equity for products like Bajaj Almond and Bajaj Amla. With a good dividend yield, strong balance sheet and the stock at 52-week low, it makes sense to buy the stock. When we strong balance sheet we imply strong holdings in liquid assets and investments, which can more than handle the liabilities and leave surplus cash.
Defensive stocks may do well should there be a decline
Should there be a sharp slide in the markets defensive stocks like Bajaj Consumer Care could do well. Remember, pharma and some FMCG stocks like Bajaj Consumer Care are defensives and may do well going forward in case there is a sudden slide in the markets.
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