Bajaj Consumer Care reported 11-12% volume growth in its core hair oil business for Q2 FY27. Following these results, brokerage firm Choice Institutional Equities set a target price of Rs 715 for the stock. The company plans a 5% price increase in the third quarter to counter rising raw material costs and protect operating profit margins.
Brokerage firm Choice Institutional Equities has set a target price of Rs 715 for Bajaj Consumer Care following the company's recent second-quarter performance. The report highlights the company's focus on its core Almond Drop Hair Oil segment as a primary growth driver. In its latest financial update, Bajaj Consumer Care reported an estimated volume growth of 11% to 12%, an achievement the company attributes to successful expansion in distribution and the popularity of smaller, more affordable pack sizes.
To manage the impact of fluctuating raw material costs, the company has outlined a strategy to increase prices by roughly 5% during the third quarter. This planned adjustment is expected to be a combination of a direct price hike of 2% to 3% and a reduction in pack sizes, commonly known in the industry as grammage reduction. By adjusting the quantity provided in a package while maintaining the price point, companies often try to manage inflation without causing significant shifts in consumer buying patterns. Management has also indicated a focus on a leaner procurement model and a reduction in non-essential advertising spending to keep operating profit margins, or EBITDA margins, in the low-to-mid 20% range.
Operating in the competitive FMCG sector, Bajaj Consumer Care faces pressure from established players like Marico and Dabur, which also maintain significant presence in the hair oil category. Because the hair oil market is highly sensitive to commodity prices, particularly those related to oils and packaging, firms often struggle to pass on full cost increases to consumers without hurting demand. Maintaining market share while raising prices is a constant challenge for companies in this space. Investors often monitor these price-hike strategies closely, as they directly impact the balance between sales volume and profitability. If the company cannot maintain its sales growth after the price increase, it could potentially pressure future financial results.
The long-term outlook for the company remains tied to its ability to manage input cost headwinds while sustaining growth in its primary segments. Choice Institutional Equities noted that the target price is based on earnings projections for September 2028, reflecting a cautious but optimistic view on the company's operational efficiency. For shareholders, the key monitorable in the coming quarters will be the company’s ability to execute this pricing strategy without seeing a decline in customer demand for its hair oil products. Tracking the actual performance of these price adjustments, along with the company's ability to maintain its margin guidance, will be essential for understanding the durability of this growth strategy.