Bajaj Electricals (Q3 FY13)

India Infoline News Service | Mumbai |

Bajaj Electricals (Q3 FY13)

CMP Rs191, Target Rs203, Upside 6.6%
 

Net sales for Q3 FY13 at stood at Rs8.7bn, a growth of 10% on yoy basis. Robust 22% yoy growth in consumer durable segment was offset by 18% yoy decline in the E&P segment.. Operating profit margin (OPM) for Q3 FY13 contracted by 404bps on yoy basis to 4.1%.


Within segments, E&P business reported worst performance with revenue witnessing a sharp decline of 18.5% on yoy basis. At EBIT level E&P segment reported a loss of Rs400mn. Management attributed loss to the cost overruns incurred on closure of older sites outstanding, wherein the revenue recognition is negligible while costs are high. At the beginning of FY13, 22 such sites were outstanding. During the year the management expects to close down 13 sites leading to substantial reduction of cost over-runs. However, performance for the segment to remain weak for the next 2 quarter and the company strives to improve profitability thereafter.


Consumer durable reported strong performance with robust 21.9% yoy revenue growth led by 28% and 43% growth, in appliances and Morphy Richards respectively. Depreciation in rupee and resultant increase in price of products translated into slowdown in demand growth. EBIT margin for the segment stood at 11.8%, 70bps expansion on yoy basis. 


Revenues for the lighting in Q3 FY13 increased by modest 10% on yoy basis as strong growth in lighting product of 17% is offset by modest 7% growth in luminaire sales. The segment reported EBIT margin of 6.8%, expansion of 126bps yoy, for Q3 FY13.


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 two quarters. The company is planning to undertake projects with minimum 6-8% profit margin going ahead. We do not foresee recovery in the E&P segment before 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. We have lowered our estimates for the segments revenue growth and margin assumptions. Further we downgrade the valuation for the company on account of poor visibility and deteriorating fundamentals in the E&P segment. Based on our revised estimate, we arrive at a target price of Rs204 and assign a market performer rating on the stock.

 
Results table
(Rs m) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Net sales 8,730 7,936 10.0 7,338 19.0
Material costs (262) (569) (54.0) (228) 14.9
Purchase of traded goods (6,343) (5,368) 18.2 (5,483) 15.7
Personnel costs (396) (341) 16.1 (527) (24.8)
Other overheads (1,370) (1,011) 35.6 (857) 59.9
Operating profit 359 648 (44.5) 243 47.6
OPM (%) 4.1 8.2 (404) bps 3.3 80 bps
Depreciation (35) (29) 22.9 (34) 2.9
Interest (169) (152) 11.3 (169) -
Other income 27 21 26.3 36 (25.3)
Extra ordinary items - - - 247 -
PBT 182 488 (62.8) 323 (43.7)
Tax (57) (160) (64.1) (54) 6.7
Effective tax rate (%) 31.5 32.7 -120 bps 16.6 1490 bps
Other provisions / minority etc          
Reported PAT 124 328 (62.1) 269 (53.8)
Adj. PAT margin (%) 1.4 4.1 (271) bps 3.7 (224) bps
Ann. EPS (Rs) 5.0 13.2 (62.1) 10.8 (53.8)
Source: Company, India Infoline Research
 
Cost analysis
As a % of net sales Q3 FY13 Q3 FY12 bps yoy Q2 FY13 bps qoq
Material costs 3.0 7.2 (417) 3.1 (11)
Purchase of traded goods 72.7 67.6 502 74.7 (206)
Personnel Costs 4.5 4.3 24 7.2 (264)
Other overheads 15.7 12.7 296 11.7 402
Total costs 95.9 91.8 404 96.7 (80)
Source: Company, India Infoline Research
 
Segmented results
(Rs mn) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Revenues          
Lighting 2,215 2,002 10.6 2,017 9.8
Consumer Durables 5,044 4,138 21.9 3,987 26.5
E&P 1,469 1,793 (18.1) 1,327 10.7
BSE 470.50 18.75 (4.15%)
NSE 467.85 16.55 (3.67%)

***Note: This is a NSE Chart

 

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