'Cheap, but unexciting stock': Should you buy this FMCG share post Q3 results?

Bajaj Consumer Care reported a flattish revenue growth for the December quarter, in line with Street estimates. Its Ebitda and net profit, however, declined 27-30 per cent for the quarter, missing forecasts.

Stock analysts said the FMCG company took price hikes of 5 per cent in the December quarter and a similar hike in early March quarter. They noted that higher copra prices and staff cost dented Bajaj Consumer Care's Ebitda margins by 388 basis points (bps) YoY to 11.2 per cent in Q3. A few believe the stock is available at cheap valuations, but is unexciting.

ICICI Securities said it has cut its earnings estimates by 6-11 per cent for FY25E and FY26, modelling in revenue, Ebitda and PAT CAGR of 5 per cent, 5 per cent and 5 per cent over FY24-27, respectively. It maintained 'Buy' with DCF based revised target price of Rs 220 against Rs 240 earlier.

Over reliance on a single brand – Almond Drops Hair Oil (ADHO) and higher-than-expect commodity inflation and failure of new product launch are key risk for the stock it said.

ICICI Securities said the company has taken multiple initiatives to strengthen ADHO, though results are yet to be seen. Diversification of product portfolio are steps in the right direction, it said.

Antique Stock Broking said urban markets and general trade continued to be under pressure and that ADHO revenue continued to be weak, falling by low single digits. Post Q3, this brokerage has cut its estimates by 14-17 per cent for FY25-27 factoring in the delayed recovery. Due to an undemanding valuation of 15 times PE on FY27 estimates, it maintained 'Buy' recommendation with a revised target of Rs 239 (previously Rs 284), based on 20 times PE on FY27E earnings.

"Factoring in weak consumer sentiment and margin pressure, we are slashing FY25E/26E/27E EPS by 9 per cent each. This yields a revised target price of Rs 274 from Rs 300; retain ‘BUY’," said Nuvama.

Nuvama said Bajaj Consumer Care believes Ebitda margin of 11 per cent was an aberration and, thus, guided for 15 per cent in near term. It is facing an urban slowdown and expects demand to recover due to budget relaxations, Nuvama said while calling the stock cheap but unexciting.

Bajaj Consumer Care recently acquired a 100 per cent stake in Banjaras’s brand— a South India based natural brand in personal care for Rs 120 crore (EV/Sales 2 times).