Bajaj Consumer Care: Nuvama lifts target after meeting MD Naveen Pandey

Nuvama Institutional Equities has reiterated its bullish stance on Bajaj Consumer Care following an interaction with Naveen Pandey, the company’s new managing director. The brokerage highlighted that the hair oil maker is targeting double-digit revenue growth over the medium term, supported by mid-to-high single-digit volume growth in its flagship Almond Drops Hair Oil (ADHO) portfolio over the next five years. The company also aims to restore EBITDA margins to the early-twenties from 13.2 per cent in FY25.

Nuvama’s confidence in the stock rests on three key factors: GST reductions across the personal care sector, Bajaj Consumer’s focus on strengthening ADHO and expanding smaller pack sizes, and a supportive macro environment. The entire portfolio, excluding coconut oil, has moved from the 18 per cent GST slab to 5 per cent. This, according to Nuvama, will significantly improve affordability and consumption, especially at the bottom of the pyramid. The company is scaling up its presence in Rs 10–20 packs, whose shelf life has effectively been extended by five to eight years due to the GST cuts. Alongside, grammage levels are expected to revert to pre-2018 standards, which should further boost value perception.

Bajaj Consumer is also working to improve its distribution effectiveness, targeting 0.7–0.8 times levels in the next five years from the current 0.5 times, narrowing the gap with larger competitors. From a category perspective, the Rs 17,500 crore hair oil industry offers Ebitda margins north of 20 per cent. Marico leads with nearly 30 per cent market share, while Bajaj Consumer has about 8 per cent. ADHO has consistently commanded a price index of around 1.8 times versus Parachute for the last 25 years, supported by stronger penetration in the Hindi-speaking belt. With the recent acquisition of Banjara, Bajaj Consumer now plans to deepen its reach in the southern states.

On margins, Nuvama notes that the company’s profitability had previously touched 30 per cent but has since slipped to the mid-teens. The management is targeting a recovery to early-twenties margins through improved mix, calibrated pricing, and better realised value from pack-price architecture. Advertising and promotion spends will be maintained at current levels, but ADHO’s share in the total spend is expected to rise by 50 basis points.

At the macro level, Nuvama expects GST cuts, a normal monsoon, softening inflation, and rising disposable incomes to trigger a revival in consumption. Lower entry barriers due to affordable unit packs should shift households from non-consumption to entry-level consumption, particularly in staples and personal care categories.

Rolling forward valuations, Nuvama values Bajaj Consumer at 19 times FY28 estimated earnings. It has trimmed its FY26 and FY27 earnings estimates by 7 per cent and 10 per cent respectively to account for lower other income post buyback. Nevertheless, it maintains a ‘Buy’ rating with a revised target price of Rs 307 (earlier Rs 291).