Report by- Sabyasachi Bhattacharya
Bajaj Consumer Care Q3 result; let’s take a look at their performance –
Bajaj Consumer Care’s Q3 FY19 earnings reflected a sequential improvement from Q2, which was marred by channel clearance on account of Almond Drops Hair Oil (ADHO) relaunch as well as weak offtake in rural wholesale channels. Management commentary on Q3 result sounds quite assuring on improving demand and successful execution of product re-launches. Operating performance was mainly led by 9.4 percent year-on-year volume growth of ADHO. The latter’s market share in light hair category has inched up to 60 percent in November 2018 compared to 58.4 percent last year, partially aided by a relaunch campaign. Another key product for the company, No Marks’ restage has also been successful, with sharper rise in offtake, leading to an 8.6 percent market share in the anti-marks cream category (versus 7.6 percent last year). Strong hold was visible in its key market Uttar Pradesh, wherein its urban market share is about 12 percent. The management pointed out that raw material prices are seeing a softening trend and is expected to turn favourable from Q4 onwards. It keeps raw material inventory till February and hence gross margin improvement would be apparent thereafter. After witnessing weak offtake in wholesale channel towards the end of Q2, it has rebounded strongly in the quarter under review. This suggests that rural growth is still intact for the company. This is interesting because Bajaj Consumer Care was among the few in Q2 report to caution about a possible weakness in rural demand. Among others, launch of a smaller Rs 10 pet jar pack for ADHO has been instrumental in better penetration in the hinterland. Overall volume growth was seven percent, which implies weaker performance of other hair oil categories. While other hair oil categories constitute a very small part of company’s portfolio, meaningful growth traction is awaited for products like Coco Jasmine, which has so far been at the pilot stage. Traction on Brahmi amla hair oil is not as per expectations. While international sales (three percent revenue share) growth revived, volume growth remains bleak (-2 percent YoY). Over the last two-and-a-half years, the company has lowered wholesale channel contribution to 33 percent from 60 percent. While part of the impact is due to implementation of the Goods & Service Tax, the company aims to increase share of direct reach, which stands at 4.92 lakh outlets. By FY19 end, the management is targeting a reach of 5,4 lakh outlets. Canteen Stores Department (CSD) channel has been a key contributor of growth in Q3, with 4 percent revenue share and 35 percent sales growth. However, on account of uncertainties with respect to government policy on CSD little can be said about future prospects. Successful relaunches of key products of the company — ADHO and No Marks — along with better rural offtake have been the salient takeaways from the result. Softening raw material prices are supportive of margin and give it headroom for brand focused campaigns. The stock has corrected 27 percent from its 52-week high and is currently trading at 21 times FY20 estimated earnings. This makes it among the cheapest FMCG stocks available. Given the improved business context for its existing portfolio, participation in rural growth and prevailing stock price, we have turned constructive. But given the competitive intensity and limited diversification, we expect it to trade at discount to the median trading multiple of the FMCG sector.
Source-MoneyControl, Purple Trades Research Department
Indian markets witnessed a pullback for the 4th consecutive day-
Chart source- Upstox
Indian markets had a Bearish day today as Nifty showed a lot of volatility. As you can see BEARS dominated at regular intervals. As you can see the markets had a gap up opening today. After the open gap up opening the markets moved downwards. It consolidated a little before actually moving upwards at the end of the day. The first candle of 5 minutes shows how much the index fell and that was the main reason why the index lost so many points today. This large movement was anticipated after the Q3 result of Infosys. Even Infosys had a major Gap up opening after which it started to move downwards. At the end of the day equities have ended the session on a negative note, but are off low points. The Nifty closed below 10,750-mark. Among sectors, banks, infrastructure and metals were the big losers, while Nifty Pharma has ended higher. The Nifty Midcap has ended 0.39 percent lower. At the close of market hours, the Sensex was down 156.28 points or 0.43% at 35853.56, and the Nifty down 57.40 points or 0.53% at 10737.60. The market breadth was negative as 1053 shares advanced, against a decline of 1477 shares, while 168 shares were unchanged. Yes Bank and Infosys were the top gainers, while Larsen & Toubro, IndusInd Bank, Wipro and GAIL lost the most.
Let’s take a look at the performance of major Indices-
Global markets had a bearish day today. European Indices CAC, DAX and FTSE were all seen in the RED. US index NASDAQ along with Asian Indices were seen in RED. Only NIKKEI was seen in the GREEN
Source- MoneyControl, Purple Trades Research Department
Key Points for Traders to watch out for while trading Nifty tomorrow-
- 10,700 is a short term support for Nifty.
- If Nifty breaks 10,700 then it has the potential to go down.
- 10,760 is a short term resistance for Nifty.
- If Nifty breaks 10,760 then it has the potential to go up.
Top sectors that moved the market today- Data source- Moneycontrol
Top Gainers for today- Data source- Moneycontrol
Top losers for today- Data source- Moneycontrol