Bajaj Electricals (Q1 FY14)

India Infoline News Service | Mumbai |

Net sales for Q1 FY14 stood at Rs7.8bn, a healthy 17.6% growth on yoy basis. Revenues for E&P and consumer business witnessed robust growth of 53.6% and 12% respectively.

CMP Rs154, Target Rs150, Downside 2.9%
  • Net sales for Q1 FY14 stood at Rs7.8bn, a healthy 17.6% growth on yoy basis. Revenues for E&P and consumer business witnessed robust growth of 53.6% and 12% respectively. Revenues in the Lighting division reported modest 3.3% yoy growth in Q1 FY14. Operating profit margin (OPM) for Q1 FY14 contracted by 261bps on yoy basis to paltry 2.6%.


  • Within segments, E&P business continued to report mediocre performance in terms of profitability despite robust 53.6% growth of revenues on yoy basis. At EBIT level E&P segment reported a loss of Rs259mn. Management attributed loss to the cost overruns incurred on closure of older sites outstanding, wherein the revenue recognition is negligible while costs are high. The current order book for the segment stands at Rs9.2bn of which ~Rs3bn is pertaining to slow moving loss incurring sites. Performance for the segment is expected to remain weak for the next 2 quarters and management is confident to turn the segment profitable in FY15.


  • Consumer durable reported strong performance with robust 11.8% yoy revenue growth led by robust 17.2% and 7.8% growth in appliances and fans respectively.  Morphy Richards business grew by modest 4.2% yoy on account of high base of Q1 FY13 (led by some large institutional orders). Lower imports and price hikes helped the company to mitigate cost pressure on account of depreciating rupee resulting into expansion in EBIT margin by 83bps on yoy basis.


  • Growth of 6.4% in the lighting division was offset by 1% decline in revenues of luminaire division translating into muted 3.3% growth in the overall lighting and luminaire segment. EBIT margin for the segment remained flat on yoy basis for Q1 FY14 at 4.9%.


  • We expect strong growth in revenues for the consumer durable and lighting segment to continue and believe that performance of E&P segment will remain mediocre for the next four quarters. Management expects to break even in the E&P segment in FY14. Huge losses in the E&P segment for the past two quarters has resulted into poor visibility for the segments earnings for the next 2 years. Post the sharp correction in the stock price we have revised our rating from Sell to Market Performer with target price of Rs150.

Results table
(Rs m)
Q1 FY14
Q1 FY13
% yoy
Q4 FY13
% qoq
Net sales
7,835
6,662
17.6
11,137
(29.7)
Material costs
(74)
151
(149.3)
(933)
(92.0)
Purchase of traded goods
(6,149)
(5,299)
16.0
(8,214)
(25.1)
Personnel costs
(402)
(352)
14.3
(398)
1.0
Other overheads
(1,008)
(816)
23.5
(1,461)
(31.0)
Operating profit
202
346
(41.5)
132
53.1
OPM (%)
2.6
5.2
(261) bps
1.2
140 bps
Depreciation
(40)
(32)
25.2
(43)
(5.6)
Interest
(164)
(164)
(0.1)
(161)
1.8
Other income
19
33
(42.2)
82
(76.7)
PBT
17
183
(90.6)
10
68.6
Tax
(11)
(63)
(83.1)
(4)
171.8
Effective tax rate (%)
61.6
34.3
-
38.2
-
Reported PAT
7
120
(94.5)
6
4.8
PAT margin (%)
0.1
1.8
(172) bps
0.1
3 bps
Ann. EPS (Rs)
BSE 491.80 10.10 (2.10%)
NSE 491.25 9.05 (1.88%)

***Note: This is a NSE Chart

 

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