Hello Sir,

Hope you are doing well.

I am sure you might be well aware of Bajaj Almond Drops Hair Oil (ADHO). It's a leading brand in the light hair oil segment and the company behind the same is Bajaj Consumer.


Bajaj Consumer has a bad track record in terms of wealth creation for the shareholders. However, recently there have been some changes at the top level management. Further, the company has also been working on reducing dependence on ADHO and expanding product pipeline. The company has also been aggressively pushing its brands through advertisement and sales promotion.

We decided to check out what the management has to say and their guidance for the next 2-3 years. Below, we have shared notes from Q2 FY 23 concall of the company.

Hope you find the insights useful for your own investments or to add the stock to your watch list.


Before that, recently, we released our New Stock Recommendation for Alpha and Alpha + Members

It's a food processing company, virtually debt free, compounded profits at 20% + consistently, maintained returned ratios like ROE and ROCE at 20% +, doubled its market share in exports in its segment in the last 6-7 years and yet available at less than 7 times Pre-tax earnings.

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Bajaj Consumer - Notes from Q2 FY 23 concall

General points

  • We continue to witness unprecedented inflation impact the disposable income and as a result, consumer spending adversely. This is more pronounced in rural as compared to urban
  • While there has been some easing of commodity prices and supply chain pressures, most commodities, except copra, remain volatile and at elevated levels compared to historical averages
  • Despite tough market conditions, both in terms of demand scenario and inflationary pressures, the company posted a healthy top line growth of 7.2% for the quarter (volume growth of 5.8%) and 11.1% for H1, aided by an expanding portfolio
  • The company's gross margin continued to remain adversely impacted due to high dependency on both LLP and RMO. Prices for LLP for the quarter were higher by 51% for the same period last year
  • In spite of pressure due to reduced gross margins, the company continues to make marketing investment in both its existing products as well as new launches to support its long-term growth aspiration to build significant brands in a diversified portfolio
  • The A&P spend for the quarter was at 18.2% of sales, which was higher by 22.2% over the same period last year
  • The company now operates with a diverse portfolio in hair oils covering 83% of the total addressable hair oils market
  • Amla portfolio of the company grew by mid-single digits in H1 over the same period the previous year. Share of Amla portfolio remained steady in mid-single digit at all India level
  • Steady progress is seen in Bajaj 100% pure coconut oil. Bajaj's Coco Onion saw good traction in modern trade and e-commerce while distribution expansion continues in general trade
  • The almond drop soap launch in the last quarter is supported with TV media as well as digital and continues to receive positive and encouraging feedback from consumers
  • Almond plus Argan Oil with serum under the Almond Drop extension portfolio has been live on e-commerce and will drive off-takes in the coming quarters
  • Nearly 12% of our contribution is now coming from our new products, which is a pretty substantial improvement from where we were. And this is something that we would like to keep on growing because ADHO will remain restricted and limited in terms of growth


  • ADHO's share of revenue was 83%, 17% comes out of non-ADHO
  • ADHO had a value growth both in this quarter (2%) as well as in H1 (3%). Volume was slightly negative
  • Urban was double digits positive. Rural was double-digit negative

New Products (NPD)

  • NPD is what we define as any product that has been launched in the last three years. That includes, starting from the Amla, Aloe Vera, Sarso Amla, the Bajaj coconut, the Coco Onion, the digital-first brands and the Almond drop extensions which are soaps, Serum and Argan oils
  • At this moment, we stand at 12% (NPD contribution), and our expectation over a longer-term period is to take this number to about 40% or even higher depending upon what kind of portfolio we build
  • The Amla portfolio has started to come out well. The soaps have started adding to our portfolio and the entire almond drop extension portfolio, which is with the Serum and the Argan oil added this year and two more products, which will come up next year
  • And the coconut portfolio with value-added coconut, as well as pure coconut, has also started tracking there

Price increase

  • Bajaj Almond - if you look at in the last six quarters, we have taken about a 7% price increase. And in the last four quarters, we have -- that is about 4% overall. And in the last three months, we have not taken a price increase given the market conditions

Raw material price

  • In terms of mustard, if you look at, clearly, there has been some correction that we have seen. So mustard crop is a bumper crop. So we expect a downward price that we are seeing in mustard to continue
  • LLP clearly is unfortunately not showing a similar trend. It has still been upward. In Q2 specifically, we faced the brunt of it because between Q1 and Q2, we had about a 18% increase in terms of our consumption price

Path to 20% EBITDA margin?

  • Two clear drivers. One is today, you see far higher elevated investments that we are making for the future as far as the brands are concerned.
  • At this moment, as I said, we'll keep at 18%, 18.5% closer to 19% (of sales). We expect it to come down to average 15%, 16% over 2-3 years
  • The other is, obviously, we'll have to wait for the LLP correction or the demand conditions to become better. One of the two, either we are able to take a price increase to offset the increasing raw material prices or expect the raw material prices to come down itself. So, expecting another 3%, 3.5% from our gross margin aspect




Disclaimer: This is not a recommendation to buy/sell Bajaj Consumer. These notes are as announced by the companies on exchanges and only for the purpose of information and education.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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