Centrum Broking: Bajaj Consumer Care Q1; Focus On Performance Excellence Led Improvement 

Centrum Broking Report

Bajaj Consumer Care Q1 FY21 results print was weak, yet above expectations with Revenue/ Ebitda/ Profit after tax declining 17.6%/ 16.5%/ 7.6% YoY. Notably, the decline in company’s flagship product Almond drops hair oil was much higher at 23.5% as the premium hair oil category continued to cede share to economy hair oils (Amla). However, company could recover part of its sales lost in March 20 (Rs 630 million). Further it has focused on economy segment and also launched hand sanitizer (sales approximately Rs 130 million). Nonetheless, lower pace of revenue resulted led in reduction in gross margin (307 basis points). Yet, the company was able to maintain its Ebitda margin at 27.3% over 36 bps led by cutting its advertisement spends by 37% and savings from other overheads by 27%.

On the strategic direction the management alluded that it would come up with preferred strategy soon once complete clarity emerges, as Covid-19 still poses uncertainty. Further, considering the revenue beat and reduction in overheads in Q1 FY21 we increase revenue and earnings estimates for FY21E/FY22E by 4.7%/1.5% and 8.8%/4.2% respectively.

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