Bosch Ltd (Q2 CY13)

India Infoline News Service | Mumbai |

Bosch Ltd reported a decent quarter in terms of sales growth and profitability wherein it grew its net sales by 5.9% yoy, and expanded its operating profit by 10.5% yoy.

CMP Rs8,392, Target Rs10,324, Upside 23.0%

  • Bosch Ltd reported a decent quarter in terms of sales growth and profitability wherein it grew its net sales by 5.9% yoy, and expanded its operating profit by 10.5% yoy. Revenues at Rs23.1bn came in higher than our estimates, led by robust growth in exports. While domestic revenues grew by 3.8% yoy, exports clocked in healthy growth of 14.2% yoy led by the startup generator division.  On a business segment basis, automotive revenues, the predominant chunk of Bosch ltd’s top-line registered a growth of 3.7% yoy. The non-auto segment revenues grew by 14.7% yoy.   
  • Margin performance was largely steady with OPM at 15.7% indicating 65bps improvement on yoy basis. However on a qoq basis there was a sharp decline of 177bps. This decline was largely attributed to increase in employee costs and purchases. While the commodity prices continued to cool off, sharp rupee depreciation against US$ led to sharp rise in purchases on a qoq basis (+260bps) leading to some pressure on margins. Additionally employee costs (as % of net sales) looked higher by 33bps qoq owing to salary increments and change in certain retiral benefits. 
  • On the segmental EBIT performance, automotive EBIT margins remained steady at 15.4% (+116bps yoy). In the non-auto segment, it recorded a marginal loss of Rs5.3mn at the EBIT level.
  • While the operating profit grew by 10.5% yoy, higher depreciation expense (+13.6% yoy) restricted the PBT growth to 7.1% yoy. Depreciation expense came in higher owing to the heavy capex incurred over the year. Largely led by the positive beat at revenues, PAT at Rs2.5bn came in 5% ahead of our estimates. Going ahead, Bosch Ltd continues to keep its focus on investments to prepare for the emission cycle change and maintained its capex guidance of Rs6bn in the current year.
  • Bosch Ltd’s strong parentage has enabled it to bring in path-breaking technologies consistently and maintain its monopoly in the Indian diesel FIE business. Its strategy has been localization and it is already putting in huge capex to remain most competitive with the Indian OEM’s and stave off future competition. Monopoly position, high return ratios, focus on localization and a parentage having a very strong R&D pipeline make us confident of sustenance of Bosch Ltd.’s dominance in the Indian market. Additionally continual march towards stricter emission norms will structurally drive up earnings. Historically the company has traded with premium valuations with last 2-year average P/E being ~25x. We assign a similar multiple to its CY14 earnings and maintain BUY with a 9-month target price of Rs10,324.
Cost Analysis
As a % of net sales Q2 CY13 Q2 CY12 bps yoy Q1 CY13 bps qoq
Material costs 31.6 34.0 (243) 32.7 (109)
Purchases 23.6 22.7 84 21.0 260
Personnel Costs 13.3 11.4 192 13.0 33
Other overheads 15.8 16.8 (98) 16.1 (30)
Total costs 84.3 84.9 (65) 82.7 155
Source: Company, India Infoline Research

Result table
(Rs m) Q2 CY13 Q2 CY12 % yoy Q1 CY13 % qoq
Net sales 23,070 21,783 5.9 22,094 4.4
Material costs (7,286) (7,408) (1.7) (7,218) 0.9
Purchases (5,440) (4,954) 9.8 (4,636) 17.3
Personnel costs (3,065) (2,475) 23.8 (2,862) 7.1
Other overheads (3,648) (3,659) (0.3) (3,559) 2.5
Operating profit 3,630 3,286 10.5 3,819 (4.9)
OPM (%) 15.7 15.1 65 bps 17.3 (155) bps
Depreciation (864) (761) 13.6 (842) 2.6
Interest (1) (1) 60.0 (3) (72.4)
Other income 898 894 0.4 894 0.5
PBT 3,663 3,419 7.1 3,867 (5.3)
Tax (1,146) (944) 21.3 (1,269) (9.7)
Effective tax rate (%) 31.3 27.6
32.8
Adjusted PAT 2,517 2,475 1.7 2,598 (3.1)
Adj. PAT margin (%) 10.9 11.4 (45) bps 11.8 (85) bps
Ann. EPS (Rs) 320.6 315.2 1.7 330.9 (3.1)
Source: Company, India Infoline Research

Financial Summary
Y/e 31 Mar (Rs m) CY12 CY13E CY14E CY15E
Revenues 84,172 92,926 104,989 117,248
yoy growth (%) 6.2 10.4 13.0 11.7
Operating profit 13,495 15,601 17,843 21,134
OPM (%) 16.0 16.8 17.0 18.0
Reported PAT 9,583 11,212 12,967 15,166
yoy growth (%) (14.6) 17.0 15.7 17.0





EPS (Rs) 305 357 413 483
P/E (x) 27.5 23.5 20.3 17.4
Price/Book (x) 4.7 4.1 3.5 3.0
EV/EBITDA (x) 18.6 15.9 13.6 11.1
Debt/Equity (x) 0.0 0.0 0.0 0.0
RoE (%) 18.6 18.6 18.6 18.7
RoCE (%) 25.2
BSE 19,814.25 [60.55] ([0.30]%)
NSE 19,816.35 [110.95] ([0.56]%)

***Note: This is a NSE Chart

 

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