The company will be evaluated considering a group of 5 peer companies according to the market classifications. shares relative valuation will be done using our 5-10-5 -star rating methodology (5 companies, 10 parameters, Out of 5 stars). From this, we will arrive at a combined peer rating for the company. Companies considered in this analysis are as follows.
- Dabur India
- Godrej Consumer
- Bajaj Consumer
- Jyothy Labs
About the Company:
Bajaj Consumer Care Ltd is part of Bajaj Group which has interests in varied industries including Sugar, Consumer Goods, Power Generation and Infrastructure Development. Bajaj Consumer Care is the second largest company in the Shishir Bajaj Group of companies. The history of Bajaj Consumer Care dates back to 1953 when Mr Kamalnayan Bajaj established Bajaj Sevashram to market and sell hair oils and other beauty products.
Bajaj Consumer Care is one of the leading players in Hair oil category with brands like Bajaj Almond Drops Hair oil, Bajaj Brahmi Amla Hair Oil, Bajaj Amla Hair oil and Bajaj Jasmine Hair oil. Their flagship brand Bajaj Almond Drops Hair oil is the No. 1 hair oil in the Indian market with Premium positioning and commands one of the highest per-unit prices in the industry. Bajaj Consumer Care manufactures and markets other major brands i.e Bajaj Brahmi Amla, Bajaj Amla Shikakai and Bajaj Jasmine Hair Oil and also markets oral care products under the brand name Bajaj Red/Kala Dant Manjan.
Get the Excel Dashboard used for this analysis from below:
1. Market Capitalization (★ ☆ ☆ ☆ ☆)
Market capitalization is calculated by multiplying the total number of a company’s outstanding shares by the current market price of one share. Out of the 5 peer companies, Bajaj Consumer has the lowest market capitalization after Dabur, Godrej Consumer, Emami and Jyothy Labs. This shows the lowest Enterprise Value amongst the peers. Therefore this category gets 1 star in Bajaj Consumer shares relative valuation.
2. Price/Earnings Ratio (★ ★ ★ ★ ★)
The price-earnings ratio is the ratio of a company’s share price to the company’s earnings per share. The ratio is used for valuing companies and to find out whether they are overvalued or undervalued. P/E higher than Industry average means Overvalued and Lower than Industry average means Undervalued. Bajaj Consumer shares have the lowest P/E and its way below the industry average, so its shares are undervalued. Therefore this category gets 5 stars in Bajaj Consumer shares relative valuation.
3. Price/Book Value Ratio (★ ★ ★ ★ ★)
The price-to-book ratio is a financial ratio used to compare a company’s current market price to its book value. Lower than average P/B shows undervalued and higher P/B shows overvalued. Bajaj Consumer shares have the lowest P/B amongst the competitors. Therefore this category gets 5 stars in Bajaj Consumer shares relative valuation.
4.Dividend Yield (★ ★ ★ ☆ ☆)
The dividend yield of a share is the dividend per share, divided by the price per share. This shows how much dividend the company pays out. Dividend yield above-average line is considered good and vice versa. Bajaj Consumer has the 3rd highest dividend yield amongst its competitors. Therefore this category gets 3 stars in Bajaj Consumer shares relative valuation.
5.Price/Sales Ratio (★ ★ ★ ★ ☆)
The price-to-sales ratio calculated by taking a company’s market capitalization (the number of outstanding shares multiplied by the share price) and divide it by the company’s total sales or revenue over the past 12 months. The lower the P/S ratio, the more attractive the investment. Bajaj Consumer has the second-lowest P/S ratio amongst the competitors which makes its shares highly undervalued. Therefore this category gets 4 stars in Bajaj Consumer shares relative valuation.
6.ROCE (★ ★ ★ ★ ★)
ROCE is a financial ratio that determines a company’s profitability and the efficiency of capital use. A higher ROCE implies a more economical use of capital and above-average ROCE is considered a good investment. Bajaj Consumer has the highest ROCE amongst its competitors and it is also above the average line. Therefore this category gets 5 stars in Bajaj Consumer shares relative valuation.
7. Return on Assets (★ ★ ★ ★ ★)
The return on assets shows the percentage of how profitable a company’s assets are in generating revenue. Higher the ROA better is the asset utilization by the company and higher the efficiency. Bajaj Consumer has the highest ROA amongst its competitors and it is also way above the average line. Therefore this category gets 5 stars in Bajaj Consumer shares relative valuation.
8. Price/ FCF Ratio (★ ★ ★ ★ ★)
This is calculated by dividing market capitalization by free cash flow of the company. A lower value for price to free cash flow indicates that the company is undervalued and its stock is relatively cheap. Bajaj Consumer has the lowest Price/FCF ratio amongst its peers and its way below the Industry average line. This shows that Bajaj Consumer shares are highly undervalued. Therefore this category gets 5 stars in Bajaj Consumer shares relative valuation.
9. Earnings Per Share (★ ★ ★ ★ ☆)
Earnings per share (EPS) is a company’s net profit divided by the number of common shares it has outstanding. EPS indicates how much money a company makes for each share of its stock, and is a widely used metric to estimate corporate value. Higher the EPS higher is profitability. Bajaj Consumer is in the 2nd position with EPS also higher than the industry average. Therefore this category gets 4 stars in Bajaj Consumer shares relative valuation.
10.Return on Equity (★ ★ ★ ★ ★)
Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity. ROE is considered a measure of how effectively management is using a company’s assets to create profits. Bajaj Consumer has the highest ROE amongst the Peers and its also above the industry average. Therefore this category gets 5 stars in Bajaj Consumer shares relative valuation.
The overall rating is arrived by taking the average of the above 10 parameter ratings and rounded up if it is above 0.5 and rounded down if it is below 0.5. The stock is undervalued if the rating is above 3 (i.e 4 or 5 stars), it is fairly valued if the rating is around 3 and is overvalued if the rating is below 3 (i.e 2 or 1 star). The ratings are exclusive to each company so more than one company can have the same ratings within the peer group.
Overall Relative Rating:
BAJAJ CONSUMER SHARES (4.2/5)
This means the stock is Under-Valued at the current price levels.
★ ★ ★ ★ ☆
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|Relative Valuation Summary|
|Market Capitalization||★ ☆ ☆ ☆ ☆|
|Price/ Earnings Ratio||★ ★ ★ ★ ★|
|Price/ Book Value Ratio||★ ★ ★ ★ ★|
|Dividend Yield||★ ★ ★ ☆ ☆|
|Price to Sales||★ ★ ★ ★ ☆|
|ROCE||★ ★ ★ ★ ★|
|ROA||★ ★ ★ ★ ★|
|Price/ Cashflow||★ ★ ★ ★ ★|
|Earnings Per Share||★ ★ ★ ★ ☆|
|ROE||★ ★ ★ ★ ★|
|Overall Peer Rating||★ ★ ★ ★ ☆|
(Note: All the research done by me is only for educational purposes and should not be seen as Investment recommendations. I am a Research analyst and not a SEBI registered Investment Advisor. My research completely reflects my personal opinions and not of my employers. Kindly do your own due diligence before Investing)