Bajaj Corp (BJCOR) reported a disappointing quarter on all fronts — Adho volumes declined on account of general market weakness as well as some market share loss, Nomarks performance deteriorated further and profits were flat y-o-y despite sharp GM expansion. FY16 EPS growth of 11% was decent despite a subdued second half. We await management commentary on the earnings concall before reviewing our forecasts and view on the stock.
BJCOR’s 4QFY16 results were weak overall and below expectations (hit by high base and rural weakness) — revenues were 2.28 billion (-3%; 2.42 billion), EBITDA 750 million (+2% y-o-y; 812 million) and recurring PAT came in at 658 million (-1% y-o-y; 730 million). Reported PAT (after Nomarks-related amortisation charges) declined 1% y-o-y to 540 million (613 million). Adho volumes declined 4.3% y-o-y (below our estimates of 1% growth; impact of weak market and some market share loss) while Adho revenues were flat y-o-y. Overall hair oil volumes declined a lower 2.6% y-o-y aided by Amla hair oil. Nomarks posted another weak quarter with 51% y-o-y/20% q-o-q decline in revenues to `82 mn impacted by continued SKU rationalisation.
BJCOR posted strong GM expansion of 480 bps y-o-y to an all-time high GM at 67.4% (higher versus our estimates; up 150 bps q-o-q) led by a sharp drop in LLP prices. BJCOR’s 4QFY16 earnings print is a subdued start to the earnings season for the sector and a clear reflection of a still-weak demand environment; we see estimates getting trimmed further.
