Bajaj Corp’s Q1 revenue and PAT came in line with our estimates. Key positives were: (a) 10.6% y-o-y volume growth in Almond Drop Hair Oil on a base of 1% y-o-y decline (23.9% y-o-y in Q4FY15); (b) multi-year high gross margin at 64.7% (up 550 bps y-o-y ) led by 30.8% y-o-y fall in LLP prices; and (c) 222-bps y-o-y rise in Ebitda margin to 30.3% (second highest in 20 quarters).
Key negatives were: (a) 29.8% y-o-y and 30.9% y-o-y fall in Nomarks sales and volumes, respectively; and (b) continued disappointment in Kailash Parbat Cooling Oil (KPCO); volumes plummeted 53% y-o-y (73% y-o-y fall in Q4FY15).
We remain concerned on change in Nomarks strategy — from problem solving (primary reason for acquisition) to a personal care brand. Maintain ‘hold’.
Market share in BADO stood at all time high 61% (value) and 59% (volume). Overall volume grew 12% y-o-y, helped by the launch of Bajaj Amla Oil and 45.5% y-o-y surge in Brahmi Amla Hair Oil volumes. Nomarks disappointed as sales slipped 29.8% y-o-y to R9.92 crore and volume fell 30.9% y-o-y.
Overall hair oil industry volumes declined 8.6% y-o-y in January-May 2015 with noticeable slowdown in the coconut hair oil category; light hair oil category volumes rose 5% y-o-y. Rural growth is decelerating (8% in Q1FY16; 14% in Q4FY15) with higher impact in North and West than in the East.