Hold Bajaj Corp, target Rs 520: Edelweiss

Edelweiss has a hold call on Bajaj Corp Ltd. with a target price of Rs 520. The current market price of Bajaj Corp Ltd. is Rs 403.05. Time period given by the brokerage is a year when Bajaj Corp Ltd. price can reach defined target. Bajaj Corp Ltd., incorporated in 2006, is a midcap company with a market cap of Rs 6006.94 crore.

Investment rationale by Edelweiss

Bajaj Corp’s Q1FY19 revenue/EBITDA, up 12.1%/14.0% YoY, is in line with expectations while PAT came in slightly below estimate due to lower other income owing to an MTM loss. Overall volumes grew 8.7% YoY (in line with our estimate on a base of -7.8%) largely aided by domestic volume growth of 13.9% YoY. The almond drops hair oil (ADHO) category revived on the back of decent volume growth of 11.2% YoY on a base of -6.6%. After declining for five quarters, Nomarks finally began moving up with growth of 3.8% YoY, albeit on a base of -14.9%. In spite of LLP and vegetable prices spurting 20.3% YoY and 14% YoY, respectively, gross margin (GM) expanded by 145bps YoY. Launches/relaunches and success of the new Nomarks strategy remain critical. Maintain ‘HOLD’.